Payroll Law (Ontario)

Payroll Law
Presented by:
Wade Farquhar
WiFi code:

 9:00 Seminar begins
10:00 Ten minute break
11:00 Five minute break
12:00 Lunch break
 1:00 Afternoon session begins
 2:00 Ten minute break
 3:00 Five minute break
 3:50 Complete evaluations distributed
 4:00 Dismiss
Today’s Schedule:

Link for this and other
presentations:
www.Slideshare.net/leanteams

Time Sucks:
1 Doing things twice.
2
3
4
5
Accurately tracking accruals.
Staying current and managing information.
Maintaining complete documentation.
Monitoring benefits and allowances.

What would you do with 20%
more time per week?
Manage time sucks,
leverage time multipliers.

Tax withholding and reporting laws.
What we will cover today:
Labour and employment standards related to
payroll processing.
Situations that lead to penalties and interest.
Payroll documentation and record retention.
Legal mandates.
Ensuring that your documentation is sufficient.
2
3
4
5
6
1

Determine worker status.1
Opening a payroll account
Hiring employees
Calculating compensation
Calculating and remitting deductions
2
3
4
5
Payroll Basics
Completing and filing returns
Employer’s
Responsibility
Payroll’s
Responsibility

Federal
• Industries that are inter-provincial or international in scope.
• Includes: banking, transportation, radio and television,
companies doing business in two or more provinces.
Provincial
• Trade unions, hours of work, work comp, paid vacations.
• Relationship between employer and employee.
Territory
• Under federal jurisdiction.
• Administered by the Department of Aboriginal Affairs and
Northern Development.

• Banks
• Marine shipping, ferry and port services
• Air transportation, including airports
• Railway and road transportation
• Canals, pipelines, tunnels and bridges
• Radio and television broadcasting
• Grain elevators, feed and seed mills
• Uranium mining and processing
• Businesses dealing with the protection of fisheries
• Many First Nation activities
• Crown corporations
Federally Regulated Industries

• Canadian employers are either federally or
provincially regulated, but not both.
• The primary industry within which a business
operates determines its jurisdiction.
• Industries that are inter-provincial and/or
international in scope are federally regulated.
• All other businesses are provincially regulated.
Splits in Federal and Provincial Jurisdictions

On all employees keep:
• Hours worked by each employee.
• CPP contributions, EI premiums and taxes.
• Form TD1.
Retention requirement:
• Taxes and payroll-related items: Six years from the
end of the current tax year.
Required Recordkeeping

The Risk Continuum
Danger Zone Neglect
Proactivity Safety Zone

Labour and Employment Issues
Federal Labour Standards
Ontario Employment Standards
Employment Standards Tools
Professional Organizations
Canadian Payroll Association
Tax Issues
Employer’s Guide to Deductions and Remittances
Payroll deductions online calendar
Taxable/Non-taxable gifts and awards source info.
Correcting remittance errors
Employer’s Guide to Benefits and Allowances
Primary Sources for Today’s Discussion

Who should complete this form?
• Have a new employer or payer;
• Want to change amounts from previous claimed;
• Want to claim the deduction for living in a prescribed zone; or
• Want to increase the amount of tax deducted at source;
• Have to complete the federal TD1 and, if more than the basic personal
amount is claimed, the provincial or territorial TD1.
Individuals do not have to complete a new TD1 every year unless:
• There is a change to their federal, provincial or territorial personal tax
credit amounts.
• If a change happens, they must complete a new form no later than
days after the change.
TD1 Form

Which form should be used?
 Employees who claim more than the basic personal amount
have to complete the provincial TD1.
 Pensioners who claim more than the basic personal amount
have to complete the provincial TD1.
 Individuals paid by commissions and who claim expenses can
elect to use Form TD1X, to take into consideration the expenses
the calculation of their income tax.
 Fishers who want to have income tax deducted from their
income should use Form TD3F.
 First Nations who want to determine if their income is taxable
should complete Form TD1-IN.
TD1 Form

Contractor
Or
Employee
Not “contract employees”

CRA 4-point Test:
1. Control
2. Ownership of tools/equipment
3. Chance of profit or risk of loss
4. Integration into the company
Determining Worker Status
Behavioral
Financial Control
Financial Responsibility
Relationship of the parties

$85k/
year
TaxTotal Income
Employee: IT Manager
Disposable
Income
Transport PhonesHousing VacationUtilitiesFood

TaxIncome Disposable
Income
Transport PhonesHousing VacationUtilities Food
Contractor: IT Consultant
Personal
Expenses


Independent Contractor
• Contract for Services
Agreement
• Proof of bona-fide
business
• Invoices or cash
• Tax Reports and
deposits (if applicable)
Employee
• Employment Agreement or
Contract or job description
• TD1 or TP1015.3-V
• Time or tracking records
• Payroll records of payments,
withholdings, remittances
• T4 slips
Recordkeeping Requirements

• Work schedule: 8 hours per day, 48 hours per week.
• Averaging work time: Allowable with permission.
• Pay (minimum wage): $11/hr.
• Termination: One week notice or pay per year (up to 8).
• Vacation: 4% of gross wages.
• Overtime: Calculates on a weekly basis over 44 hours.
• Holidays: 9 mandatory public holidays.
• Leaves: 2 new leaves introduced last year.
• Exempt Industries: Healthcare, manufacturing, construction,
mining, hospitality, sales, transportation, agriculture, fishing,
building services, professional services.
Employment Standards Summary

• Minimum wage: $11.00
• Most employees must be paid at least minimum
wage for all hours worked in a pay period.
• For special industry wage differences click here.
• All employees must keep an accurate time record.
• For information about other provinces see the
Minimum wage database.
Minimum Wage

•Managers, superintendents, and employees
who carry out management functions are
exempted from hourly remuneration (50% rule
applies).
•Architects, dentists, engineers, lawyers, and
other specialized positions are also excluded.
Who Is Allowed To Be Salaried Without Overtime?

Hiring and termination of employees.1
Managing work output of other employees.
Creating or interpreting policies.
Making budgetary decisions.
Committing the company’s financial resources.
2
3
4
5
Management Duties:

Employee is paid salaried but does not qualify for overtime
exemption.
• Employee salary is for all non-overtime hours up to 40.
• Sharon’s salary is $500 per week. One week she works 46
hours.
• $500 ÷ 40 = $12.50
• $12.50 x 1½ = $18.75
• $18.75 x 6 = $112.50
• $500 + $112.50 = $612.50
Salaried – with Overtime (Purple
Squirrel)

• Minimum 3 hours at the greater of either the employees wage or
minimum wage.
• 48 hours per week maximum, but over 44 is overtime.
• Cannot exceed 60 hours per week.
• May average if agreed upon by employer and employee
 Must state exactly what schedule will be
 Cannot provide for more than 44 hours per week
 If schedule is violated – reverts to 8 hour a day rule
• Meal period: 30 minutes for 5 consecutive hours of work
• Rest periods: 24 hours per work week or 48 every two weeks.
• For information exemptions from overtime rules click here.
Hours of Work Rules:

Sun Mon Tues Wed Thurs Fri Sat
Hours 9 7 8 9 7 7
Regular 9 7 8 9 7 4
1½ 3
Total hours worked in the week: 47
Hours paid at time-and-a-half: 3

 With Averaging Agreement – hours of work to be averaged over a
period of one, two, three or more weeks.
RULES:
• Be in writing.
• Specify number of weeks over which hours will be averaged.
• Specify work schedule for each day.
• Specify number of times agreement may be repeated.
• Specify start and end date of agreement.
• Be signed by employer and employee before start date.
• Apply for a permit from Employment Standards here.
Hours scheduled must not average more than 44 per week over the
period of the agreement
Averaging Agreements

• Commuting time is the time it takes an employee to get to work from home and vice-
versa. This is not counted as work time for the purposes of the ESA.
• However, there are a number of exceptions to this rule:
• If the employee takes a work vehicle home in the evening for the convenience of
the employer, the work time begins when the employee leaves home in the
morning and ends when he or she arrives home in the evening.
• If the employee is required to transport other staff or supplies to or from the
workplace or work site, time so spent must be counted as work time.
• If the employee has a usual workplace but is required to travel to another location
to perform work, the time traveling to and from that other location is counted as
work time.
Time spent travelling during the course of the workday is considered to be work
Travel Time

• Time spent by an employee in training that is required by the employer or
by law is counted as work time. For example, where the training is required
because the employee is a new employee or where it is required as a
condition of continued employment in a position, the training time is
considered to be work time.
• Time spent in training that is not required by the employer or by law in
order for an employee to do his or her job is not counted as work time. For
example, where an employee hoping for a promotion with the employer
takes training in order to qualify for it, time spent taking the training is not
considered to be work time.
Training Time

The statutory holidays are:
• New Years Day
• Family Day
• Good Friday
• Victoria Day
• Canada Day
• Labour Day
• Thanksgiving Day
• Christmas Day
• Boxing day
Stat Public Holidays

Federal Stat Public Holidays
• New Year's Day
• Good Friday
• Victoria Day
• Canada Day
• Labour Day
• Thanksgiving Day
• Remembrance Day
• Christmas Day
• Boxing Day

Employees qualify for the public holiday entitlement unless they:
• Fail without reasonable cause to work all of their last regularly
scheduled day of work before the public holiday or all of their first
regularly scheduled day of work after the public holiday;
or
• Fail without reasonable cause to work their entire shift on the
public holiday if they agreed to or were required to work that day.
Note: Employees are still entitled to be paid premium pay for
every hour they work on the holiday.
Stat Holiday Requirements

• Qualified employees who are given a day off on a statutory holiday
must be paid holiday pay.
• Qualified employees who work on a statutory holiday must be paid:
• Time-and-a-half for the hours worked.
Plus
• Holiday pay.
• Regular wages earned by the employee in the four work weeks before
the work week with the public holiday, plus all of the vacation pay
payable to the employee with respect to the four work weeks before
the work week with the public holiday, divided by 20.
For more information about general holiday pay click here.
Stat Holiday Pay Requirements

Personal Emergency Leave
• Up to 10 days per year entitlement.
• Employee may not be dismissed, suspended, or disciplined when
sick leave.
• May be with or without pay.
• Only employees that work at employers with >50 employees are
eligible.
Vacation – time off work for vacation.
May be taken in shorter periods.
See appendix for more details (pages 33-39).
Sick, Vacation and Leave Pay

• If agreement exists – may be included on
every cheque.
• Employees accrue 4% of gross earnings.
• Is based on total compensation: bonuses,
earnings, etc.
Vacation Pay Rules:

• Two weeks entitlement every year.
• Employees must take within 10 months of
accrual.
• Employee can forfeit the vacation time
benefit, but not vacation pay.
Vacation Time Rules:

• Pregnancy
• Length of leave – 17 weeks.
• Extension – 6 weeks.
• Seniority/Benefits – included.
• Parental
• Length of leave – 37 weeks, 35 weeks if
pregnancy leave is taken.
Pregnancy & Parental Leave

Family Medical Leave (CCL)
Policy and Procedures:
• Up to 8 weeks to provide care or support to family member for
serious medical condition with significant risk of death within 26
weeks.
• Medical certificate required within 15 days after employee’s return
to work.
• Employees under federal jurisdiction entitled to take CCL
regardless of length of service.
• Cannot suspend, discipline, terminate, lay-off, or demote an
employee for taking CCL.
• Must be reinstated to former position, salary and benefits.

 Leave to care for a terminally ill child.
 Leave for the suspected death or disappearance of a child
related to a crime.
 Organ donor leave.
 Reservist leave.
 Jury duty:
 Can be unpaid leave.
 Employer must grant as protected leave.
Other Leave Requirements

Length of Service Required Notice/Pay
More than 3 consecutive months 1 week
2 years of service 2 weeks
More than 8 years 8 weeks
Termination Chart

 Within 7 days of date of termination or next pay period.
 Must provide written statement of wages:
• Amount of gross vacation pay and
• Gross termination or severance pay,
• Along with how amounts were calculated.
Pay records must be retained for 2 years after
termination
Payment of Wages on Termination

Withholdings:
Government regulated withholdings:
• Employment Insurance (EI)
• Canada Pension Plan (CPP)
• Quėbec Pension Plan (QPP)
• Federal and Provincial Income Taxes
The courts can regulate
• Garnishments
• Maintenance Orders

Written authorization is required if:
• An employer may also deduct money from an employee's wages if the
employee has signed a written statement authorizing the deduction.
• An employee's written authorization must state:
• The specific amount of money to be deducted;
Or
• Provide a method of calculating the specific amount of money to be
deducted.
• An employee's verbal authorization ("blanket authorization") that an
employee owes money to the employer under certain circumstances is not
sufficient to allow a deduction from wages.
Deductions From Pay

Even with a signed authorization, an employer cannot make a deduction if:
• The purpose is to cover a loss due to "faulty work." For example,
"faulty work" could be a mistake in a credit card transaction, work that
is spoiled or rejected, or a situation where tools are broken or
company vehicles damaged;
Or
• The employer has a cash shortage or has had property lost or stolen
when an employee did not have sole access and total control over
cash or property that is lost or stolen. A deduction can only be made
when the employee was the only one to have access to the cash or
property, and has provided a written authorization to the employer to
make the deduction.
Deductions From Pay

Tangible Property or Gift Card or Cash
• A gift (either in cash or in kind) from an employer to an employee is
a benefit derived because of the individual's employment.
• When the value of a gift commemorating a wedding, Christmas or
similar occasion does not exceed $500 and is tangible property –
non taxable.
• This practice will only apply to one gift to an employee in a year,
except in the year an employee marries in which case it will apply to
two gifts.
Cash and near-cash are taxable (special rules apply for near-cash)
Gifts

Award - Must be given for an employment-
related accomplishment to be nontaxable
 Outstanding service, employees’ suggestions, or meeting
exceeding safety standards.
 It must be recognition of an employee’s overall contribution
the workplace –not recognition of job performance.
Reward – given to employee for
performance-related reasons - taxable
Awards vs. Reward

Awards
 Must be employment-related accomplishment.
 Long-service award rules:
 Value up to $500 – tangible property only - non-taxable.
 Must be for a minimum of five years of service.
 Must be at least 5 years since you gave the employee
the last long-service or anniversary award.
 Is not included in other gift or award benefits.

Example 1: You give your employee a $100 gift card or gift
certificate to a department store. The employee can use this to
choose whatever merchandise or service the store offers.
Gift is taxable benefit because there is an element of choice.
Example 2: You give employee tickets to an event on a specific
date and time.
Gift is non-taxable because there is no element of choice.
Examples of Gifts and Awards

Prize Draws and Social Committees
Taxable:
• Item given to one employee by an employer via a prize draw.
• Item paid for by the employer and given via a draw to an employee
a high-performing team.
Nontaxable:
• Item paid for by a social committee and given via a draw
• Committee must be entirely funded by the employee
• If funded by employer – taxable.
• If funded by both – employer percentage is taxable – employee
percentage is nontaxable.

Automobile Allowance
Personal use of company vehicle is taxable.
• Use “stand-by charge” method calculation (available on
CRA website: Auto benefits calculator pub. T4130).
Reasonable per-kilometre allowance – nontaxable.
• 54₵ per kilometre for the first 5,000 kilometres driven and
48₵ per kilometre driven after that
• Cannot be averaged at the end of the year to keep
nontaxable
• Flat rate allowance - taxable

Cellular Phone Service
Personal use of company cell phone is taxable
• Employer has responsibility to determine FMV (fair market value)
of personal use.
• Must justify calculations.
Exception to the rule (all must apply):
• The plan’s cost is reasonable.
• The plan is a basic plan with a fixed cost.
• Your employee’s personal use of the service does not result in
charges that are more than the basic plan cost.

Internet
 Personal use of company internet service at home
is taxable benefit based on FMV calculation.
 Employer must prove calculation numbers.

Education Benefits
Allowances for children – taxable (some exceptions apply).
Scholarships, busaries, tuition and training.
Employment-related training – for benefit of employer – not
taxable.
Personal interest training – taxable.
Family member – post-secondary education – reported on
T4A slip for the family member.

Air Miles.
3 Different Scenarios.

Airline Bonus Points
 Your employees may collect loyalty points, such as
frequent flyer points or air miles, on their personal
credit cards when travelling on business trips, even
though you reimburse them for the amounts they
spend.
 Usually, these points can be exchanged or cashed in for
rewards (goods or services, including gift cards and
certificates).

Airline Points, cont.
• Your employees do not have to include in their income the value of
the rewards they received or enjoyed from the points they collect
on these business trips, unless any of the following applies:
• The points are converted to cash.
• The plan or arrangement between you and the employee
seems to be a form of additional remuneration.
• The plan or arrangement is a form of tax avoidance.
• If any of the conditions above are met, the employee has to declare
the fair market value of any personal rewards he or she received on
an income tax and benefit return.

Exception to the rule:
• If you control the points (such as when an employee uses a
company credit card, you have to report on their T4 slip the
market value of any personal rewards he or she received
redeeming the points.
• You have to include any GST/HST that applies in the value of
this benefit.
Airline Points, cont.

Example 1
Personal credit card
• Pauline's employer allows her to use her personal credit cards whenever possible to
for business expenses, which the employer then reimburses to her. To maximize the
points earned, Pauline used her personal credit cards to pay for various employer
business costs, including travel expenses of other employees.
• CRA views this arrangement as a form of additional remuneration provided to
Pauline would not normally pay for employer business costs other than her own
related expenses, incurred in the normal course of working. She would not normally
cover the cost of business expenses of other employees. Pauline will have to
the fair market value of any personal reward she receives when she redeems the
She will then have to declare the value as income on her income tax and benefit

Company credit card points for benefit of the employee
• Jennifer's employer has a company credit card, under which loyalty points are
Jennifer uses the card for employment-related purchases. The employer is billed,
the credit card charges, and receives the loyalty point statement. The employer
Jennifer to redeem the points for personal rewards.
• In this case, the fair market value of the goods or services received by Jennifer is a
taxable employment benefit, as her employer controls the tracking and
of the points. The employer has to report the value of the goods or services on her
slip in the year that the points are redeemed.
• Alternately, if the employer did not control the tracking and redemption of the
the value of any points redeemed by Jennifer for personal rewards would not have
be included on her T4 slip. Jennifer may have to declare the income on her income
and benefit return.
Example 2

Personal loyalty points card
• Frank has a personal credit card he uses for both personal and work-
expenses. The card offers loyalty points which can be cashed in for travel
rewards, but which cannot be redeemed for cash. Frank decides to
some of the points to take his family on vacation.
• Since Frank controls the points, and this arrangement does not seem to
form of additional remuneration, he does not have to include the value of
the points earned from work-related expenses as income on his income
and benefit return.
Example 3

Supplemental Health Insurance
Where an employer makes a contribution to a private health
services plan in respect of an employee, no taxable benefit
arises to the employee.
Benefits provided to an employee under a private health
services plan are not subject to tax in the employee's hands.
"Private health services plan" is defined in subsection 248(1).
(See also the current version of IT-339, "Meaning of Private
Health Services Plan" and IT-85, "Health and Welfare Trusts
for Employees".)

Employer's Contribution under Provincial Medical Plans:
Where an employer is required, under a provincial hospital
insurance plan, a provincial medical care insurance plan, or
both, to pay amounts to the provincial authority
administering such plan or plans (other than with respect to
the contributions or premiums that an employee is required
make under the plan), the payment of such amounts does
give rise to a taxable benefit to employees.
Provincial Healthcare Plans

Non Taxable as long as
 Expenses are covered as outlined in IT-519.
Taxable
 If used for expenses not allowed in IT-519.
Health Spending Accounts (HSA)

Group Term Life Insurance Policies
Calculating the benefit:
If the premiums are paid regularly and the premium rate for each
individual does not depend on age or gender, the benefit is:
The premiums payable for term insurance on the individual’s
life - plus,
The total of all sales taxes and excise tax that apply – minus,
The premiums and any taxes the employee paid directly or
through reimbursements to the employer.
If taxable it is pensionable but not insurable.

Term Life Calculation
Premiums paid by employer +sales tax –portion paid by employee
= taxable benefit
CPP must be paid on this benefit, but not EI

Parking
Employer-provided parking is usually a taxable benefit for an
employee, whether or not the employer owns the lot.
Exceptions to the rule:
• The parking does not have a FMV.
• There are significantly fewer spaces than there are
employees who want parking and the spaces are
available on a first-come, first-served basis.
• There is no taxable benefit if you provide parking to your
employee for business purposes and your employee
regularly has to use his or her own automobile to do his or
her duties.

Professional Membership Dues
 If you pay professional membership dues for
your employee and you are the primary
beneficiary of the payment, there is no
taxable benefit for the employee.

Health Club Dues
The use of a recreational facility or club is a taxable benefit if:
• You pay, reimburse or subsidize the cost of:
 Membership to recreational facility.
 Membership to a business or professional club.
Non-taxable benefit includes:
• You provide an in-house recreational facility.
• You pay for a company membership at a facility and the
employees are allowed to use company membership.

RRSPs
Contributions the employer makes to an
employee’s RRSP is a taxable benefit.
Administrative fees you pay are considered
taxable and pensionable.
Do not deduct EI.

Uniforms
Non-taxable if the following conditions apply:
• You supply your employee with a distinctive uniform he or
she has to wear while carrying out the employment duties.
• You provide your employee with special clothing designed
to protect them from hazards associated with the
employment.
• Reimbursements with receipts for uniforms and safety gear
is nontaxable.

Detailed method:
 Price on receipts.
Simplified method:
 $17 per meal; not to exceed $51 per
Really Simple Method:
 Use Expensify.
Meal Allowances/Reimbursements

For more
information on
Expensify click here:

No really,
we are almost done.

Overview of the changes:
• All workers aged 60 to 65 have to make CPP contributions—even if
are receiving a CPP or Quebec Pension Plan (QPP) retirement pension.
• Workers who are 65 to 70 years of age and who are receiving a CPP
or QPP retirement pension have to contribute unless they have taken
action to stop their CPP contributions. By continuing to contribute
(which can be done up to and including the month they reach 70 years
age), they will receive more benefits by way of the new post-retirement
benefit (PRB).
CPP Newest Regulations

To stop contributing to the CPP, workers have to be at least 65 years of age and:
 Employees (who may also have self-employment income) have to
CPT30, Election to Stop Contributing to the Canada Pension Plan, or
Revocation of a Prior Election.
 Send the original form to the Canada Revenue Agency (CRA), and give a copy
their employer. The change will take effect on the first day of the month after
employee gives the form to their employer.
 Self-employed workers must complete Schedule 8, CPP Contributions on Self-
Employment and Other Earnings, when they file their income tax and benefit
return. The change will be effective on the first day of the month referenced in
Schedule 8
CPP Newest Regulations

What type of remitter are you?
• Regular remitter
• Quarterly remitter
• Accelerated remitter
 Remitting guidelines are based on amounts of
withholdings to be remitted.
 Updated remittance amounts can be found here.
Withholding Remitting

Penalties Incurred Through PIER
Penalties and Interest
 Based on lateness of remittance,
 Failure to remit,
 Interest can be charged on unpaid penalties in
addition to amounts owed.
 Interest in compounded daily from date
remittance was first due or penalty was first
assessed.

Creditors
Types of Garnishments
Tax garnishments from the CRA
Child support/Maintenance orders
2
3
1

Creditor Garnishments
• Court ordered
• Cannot terminate the employee for garnishment
Fine: $1,000 or face imprisonment with a duration of one year.
• Deduction controlled by federal and provincial laws.

Tax Garnishments from CRA
• Allowed without a court order.
• No limit.
• Usually last resort.

Child Support/Maintenance Orders
• Court may order be paid in periodic payments, lump
sum or both.
• Limits are governed by federal and provincial law.
• Cannot terminate an employee for garnishee.

Employer Liability
If you receive a Requirement to Pay notice and you do not comply with the requirements:
YOUR COMPANY MAY BE HELD
RESPONSIBLE FOR THE AMOUNTS YOU
DIDN’T REMIT!

Special Payroll Concerns
Final Pay
• Calculate the employee’s earnings and deductions
year to date.
• Give employee T4 slip.
• File government copy by the last day of February of
the following year.
• Complete the Record of Employment (ROE).
• Withholding rates for lump sum payments (incl.
retirement allowances).

… AND
YOU’RE
DONE!
Thank you.

Link for this
presentation:
www.Slideshare.net/leanteams
Wade Farquhar

Payroll Law (Ontario)

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