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143 lines
8.4 KiB
ReStructuredText
143 lines
8.4 KiB
ReStructuredText
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CALCULATING GROSS PAY
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Regular and Non-Regular Payments of Employment Income
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Whether the payment is regular or non-regular, and whether it is paid separately from the regular pay, has an impact on the prescribed methods used to calculate statutory
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deductions for Canada/Québec Pension Plan (C/QPP) contributions and income taxes.
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Once you have determined if the payment is employment income, you must establish whether it is a regular or non-regular payment as follows:
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* regular payments have an established frequency, such as weekly-paid salary or wages
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* non-regular payments do not occur each pay period, for example, a bonus or a retroactive adjustment
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.. admonition:: Example
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*Fraser Co. pays all salaried employees every two weeks; this is considered a regular payment.*
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*The company also has a compensation plan where qualified employees are paid an annual bonus. The payment of the annual bonus is considered a non-regular payment.*
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Pay Period Frequencies
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~~~~~~~~~~~~~~~~~~~~~~~
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Employment/labour standards legislation in all jurisdictions, except for federal (*Canada Labour Code, Part III*) and Ontario, requires that employees
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receive their pay according to a specified frequency.
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+--------------------------------------------+---------------------------------------------+
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| Jurisdiction | Minimum Standard |
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+============================================+=============================================+
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| Federal (*Canada Labour Code, Part III*) | On the established regular payday and |
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| | within 30 days of the entitlenet to wages |
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+--------------------------------------------+---------------------------------------------+
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| Ontario | On the established recurring payday |
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+--------------------------------------------+---------------------------------------------+
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| Québec, New Brunswick, | At least every 16 days |
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| Prince Edward Island | |
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+--------------------------------------------+---------------------------------------------+
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As long as an employer meets the minimum standard requirement, they can select the pay period frequency that best suits their organization.
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Some factors that may be considered when selecting a frequency are accounting cycles, payment delay time (the time between the last workday
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of the pay period and the actual date of payment) and pay period frequencies that have been negotiated in a collective agreement.
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The most common pay period frequencies are:
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* Weekly 52 pay periods a year (53 every seven years) - 18% of employers
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* Bi-weekly 26 pay periods a year (27 every eleven years) - 60% of employers
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* Semi-monthly 24 pay periods a year - 15% of employers
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* Monthly 12 pay periods a year - 7% of employers
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An organization can establish different pay frequencies for different groups of employees.
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.. admonition:: Example
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Galaxy Ltd. has three pay period frequencies:
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* Part-time employees Paid every Thursday (weekly)
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* Full-time employees Paid every other Friday (bi-weekly)
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* Executives Paid on the last business day of the month (monthly)
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Employment Income
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----------------------
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An individual working for an employer receives compensation or pay, known as remuneration, for the services they perform. Where an employee-employer relationship exists,
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remuneration is referred to as employment income. Employment income can be categorized into earnings, allowances, benefits and taxable expense reimbursements.
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Earnings
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~~~~~~~~~~
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Earnings are dollar amounts the employer pays an employee for the work they perform. Earnings can be paid as:
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* a salary
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* a rate for each hour worked
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* a rate per piece of goods produced or picked
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* a disability payment for time off work due to illness
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* payment for vacation time
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* premium pay for overtime hours worked
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* premium pay for hours worked on shift
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Deciding which types of earnings are paid and how they are calculated is primarily a decision made by the employer. Earnings are pensionable,
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insurable and taxable, and therefore subject to all statutory deductions.
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Allowances
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~~~~~~~~~~~
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Allowances are additional dollar amounts paid to employees for the use, or anticipated use, of their personal property for business purposes.
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Allowances can also be provided to employees to cover the cost of personal living expenses associated with employment.
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The most common types of allowances cover the costs incurred by the employee for car, meals, uniforms, safety shoes or other particular types of
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clothing for business reasons. Under certain conditions, allowances are not considered employment income and therefore are not subject to statutory withholdings.
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Benefits
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~~~~~~~~~~
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Benefits are dollar values attributed to something the employer has either provided to an employee or paid for on an employee's behalf. Usually, when an employer
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provides an employee with something (for example, a company-leased automobile is given to the employee for both business and personal use) or pays for something on an
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employee's behalf (for example, group term life insurance premiums), it results in a benefit to the employee. There are certain situations where benefits are not included
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in the employment income and therefore are not subject to statutory withholdings.
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Expense Reimbursements
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~~~~~~~~~~~~~~~~~~~~~~~
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Similar to allowances, expense reimbursements are also dollar amounts paid to employees to cover expenses that they incurred while performing their job. For the most part,
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expense reimbursements generally fall outside of payroll because they are business-related and therefore not employment income to employees. These expenses are claimed on an
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expense report, supported by receipts, and usually submitted directly to the accounting department for reimbursement. As such, they are not considered in the calculation of an
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employee's pay. Some organizations choose to reimburse expenses through payroll in which case they are not subject to any statutory deductions; they will, however, affect the
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net pay.
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Any reimbursements made to an employee for personal living expenses are considered taxable to the employee, included in income and subject to statutory withholdings.
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Content Review
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~~~~~~~~~~~~~~~~
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* Remuneration is compensation or pay for services performed.
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* Employment income can be categorized into earnings, allowances, benefits and taxable expense reimbursements.
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* Earnings are dollar amounts the employer pays an employee for the work they perform.
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* Earnings are pensionable, insurable and taxable, and therefore subject to all statutory deductions.
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* Allowances are additional dollar amounts paid to employees for the use, or anticipated use, of their personal property for business purposes.
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* Benefits are dollar values attributed to something the employer has either provided to an employee or paid for on an employee's behalf.
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* Expense reimbursements are dollar amounts paid to employees to cover expenses that they incurred while performing their job; they are not considered in the calculation of an employee’s pay.
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* A regular payment has an established frequency, such as weekly-paid salary or wages.
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* A non-regular payment has no established frequency, for example, a bonus or a retroactive adjustment.
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* Employment standards legislation in all jurisdictions, except for federal (Canada Labour Code, Part III) and Ontario, requires that employees receive their pay according to a specified frequency.
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* As long as an employer meets the minimum standard requirement, they can select the pay period frequency that best suits their organization.
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* An organization can establish different pay frequencies for different groups of employees.
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* The most common pay period frequencies are weekly, bi-weekly, semi-monthly and monthly.
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Review Questions
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~~~~~~~~~~~~~~~~
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#. What are the four categories of employment income?
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#. List five methods an employer can use to pay earnings.
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#. What are allowances? Provide an example of an allowance.
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#. What are benefits? Provide an example of a benefit.
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#. What are expense reimbursements?
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#. List two of the most common types of pay period frequencies.
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Non-Regular Earnings
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----------------------------------- |