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Employing Canadians? You'll need to Understand these Payroll Taxes!

Posted by Ray Gonder

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Oct 7, 2014 7:30:00 AM

Payroll Taxes in Canada resized 600Without an understanding of payroll tax laws in Canada, you'll have a hard time operating your business. Payroll taxes are one of the most fundamental aspects of legally employing people in Canada. As soon as you hire people to work for you, you have responsibilities to pay them properly, and that includes paying payroll taxes.

Personal income taxes, both at the federal and provincial levels, are the most significant revenue sources for Canadian government. Payroll taxes account for over 40% of Canada's tax revenues, and employers pay an integral part in the government's collection of these taxes.

Canadian employers are required to register an account with the CRA, collect information about their employees, calculate deductions, and then remit various types of payroll taxes applicable for the jurisdiction, or jurisdictions, where the work was done. Here's a basic list of payroll taxes applicable using the example of two of Canada’s largest provinces:

Federal

  • Canada Pension Plan (CPP)
  • Employment Insurance (EI)

Ontario

  • Employer Health Tax

Quebec

  • Quebec Pension Plan (QPP)
  • Health Services Fund
  • Quebec Parental Insurance Plan
  • Compensation Tax
  • Workforce Skills Development and Recognition Fund
  • Commission des nores du travail

Workers' Compensation Premiums

  • All provinces will also have you needing to pay premiums into that province’s Workers’ Compensation program, for example WSIB in Ontario.

For each person in your employ, the proper amounts need to be calculated for each of the above, applicable funds (not all employees will have to pay all of these taxes). These amounts can be found by referring to the published tables for each tax or by using the CRA's online calculator. Then, you must hold the funds in trust until it's time to remit to each of the agencies.

As an employer, you will probably have to answer payroll tax questions, including the question of what all these taxes are for. Let's take a brief look at each one.

Canada Pension Plan.

Established in 1965, this payroll tax funds Canada's social insurance program, which helps to fund Canada's public retirement income system. All Canadian workers who are 18 years of age and over are required to contribute to the CPP. However, there are certain rules around CPP deductions for those workers who have reached retirement age. There is a maximum amount of CPP that each employee pays per year so once that threshold is reached you no longer have to deduct the tax for the remainder of that year. Employers match workers' contributions to increase funding to the pension plan.

Employment Insurance.

Formerly called Unemployment Insurance, this payroll tax provides benefits to workers if they lose their jobs. Canadian employees pay a percentage of their salaries into the insurance fund; the amount they receive if they lose their jobs depends on their previous salaries, the length of their employment, and the unemployment rate in their local jurisdiction.

Workers' Compensation.

Like Employment Insurance, Workers' Compensation is a form of insurance for workers who face unexpected hardship in the form of wage replacement and medical benefits. This was Canada's first social program because both workers' groups and employers hoped it would reduce lawsuits. It's still managed by local jurisdictions, as it has been since the early 20th century, and it's still funded by employers based on their payrolls. Each province has different rate groups based on the risk of the work being done. The bigger the risk, the higher the premiums the employer will pay. These rates have a tendency to change on a yearly basis across each province.

Ontario Health Tax.

Introduced in the 2004 Ontario Budget, the Ontario Health Premium contributes around $3 billion to the health care system each year. The payroll taxes remitted to the Ontario Health fund are invested directly into the health care system, and only those who are residents of Ontario must pay this tax.

For more information about payroll tax questions, especially how they vary from province to province, contact us at The Payroll Edge. Whether you have difficult questions from your employees that need to be answered or you need help becoming compliant with payroll tax laws and guidelines, we can get you the help you need. A third-party payroll tax expert can make all the difference in the way your company operates.

This article was originally posted on August 1, 2013. 

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Topics: Canadian Payroll Deductions, Ontario

Employee in Ontario? Changes to ESA to Safeguard Families

Posted by Karen McMullen

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Jun 11, 2014 9:32:00 AM

Gavel American and Canadian Employment Law resized 600The Proposed Bill 21 “The Employment Standards Amendment Act (Leaves to Help Families) 2014” passed legislation on April 29, 2014 and will take effect on October 29, 2014. This new minimum standard set by the ESA will entitle Ontario workers to three new job protected leave of absences:

Family Caregiver Leave

All Canadian employees, regardless of their length of employment will be eligible for up to eight weeks per calendar year to provide care and support to a family member including children, siblings, parents and grandparents.  Family members must be certified as having a serious medical condition by a qualified health practitioner (physicians, nurses and psychologists). The eight weeks of leave will apply to each family member described in the section and does not have to be taken all at once.

Critically Ill Child Care Leave

Canadian employees who have been employed for at least six consecutive months will be eligible to take up to 37 weeks of unpaid leave to provide care or support to a critically ill child of the employee (again as certified by a qualified health professional). Employees who are eligible for this leave may also be qualified to receive Employment Insurance benefits from the federal government (known as special benefits for Parents of Critically Ill Children) for the duration of their leave. As with the Family Caregiver Leave, written notice must be provided to the employer and the employer is entitled to request a copy of the certificate that qualifies the employee for the leave.

Crime-Related Death or Disappearance Leave

Canadian employees who have been employed for at least six months and have a child who dies and it is probable, considering the circumstances, that the death was the result of a crime, are eligible for up to 104 weeks of leave. In addition, where it is probable that an employee’s child has disappeared as a result of a crime, that employee would be entitled to a leave of up to 52 weeks. Similar to the Critically Ill Child Care Leave, employees may also be eligible to receive income support from the federal government in the form of a grant called ‘Support for Parents of Murdered or Missing Children’.

American and Canadian employers should update their existing employment agreements with their workers in Ontario to reflect and comply with the changes when they take effect in October, 2014.

If you are a U.S. or foreign company looking to hire in Canada, consider an Employer of Record service (similar to an American Professional Employer Organization).  The EOR service offered by The Payroll Edge takes on the responsibility of taxation, payroll, and government compliance for employees in Canada so you can service your clients in the north without the hassle of understanding  foreign policies. Contact us today for more information on how we can help you.

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: Employer of Record Services, Employer of Record, ESA, ESA Compliant, Ontario, American Business in Canada, Bill 21

Use it or Lose Vacation Policies: Not in Canada!

Posted by Stacey Duggan

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May 29, 2014 8:30:00 AM

If you’re an American or foreign employer hiring Canadian employees, you may or may not have heard employee vacation policies are “use it or lose it”. Can it be true? Well, partially.

In Ontario, the Employment Standard Act or ESA for short, states that:

“Most Employees earn at least 2 weeks of vacation time after every 12 months. Employees are entitled to be paid at least 4 per cent of total wages earned as vacation pay.”

Employers are not required to let the worker carry vacation credits forward from one year to the next if they went unused. However, the employer is required to pay the Canadian worker their accumulated vacation pay whether the vacation time was taken off or not. There you go, the “use it or lose it” policy does apply –to vacation time NOT vacation pay!

Vacation Entitlement & Pay by Province The Payroll Edge resized 600

Fast Facts on Canadian Vacation Policies

  • Minimum vacation pay across Canada (excluding Saskatchewan) is 4 per cent of total wages
  • Minimum vacation pay in Saskatchewan is the highest in the country at 6 per cent of total wages
  • Minimum vacation time across the country (excluding Saskatchewan) is 2 weeks after 12 months
  • Minimum vacation time in Saskatchewan is the most generous at 3 weeks after 12 months
  • Quebec is the only Canadian province that includes tips and gratuities’ as part of total wages when calculating vacation pay
  • New Brunswick is the only Canadian province that includes only regular earnings when calculating vacation pay

Save our Canadian Vacation Pay and Entitlement Chart or bookmark this page to track your Canadian workers vacation entitlement and figure out based on province what earned wages includes when calculating the 4 per cent (or more) of vacation pay.

The Payroll Edge answers question like these on a daily basis for our American and foreign clients who employ Canadian workers. We are their Employer of Record (EOR) service provider or Professional Employer Organization (PEO) as it’s called in the United States. 

As specialists in Canadian employment law and compliance, we offer a complete HR management solution that takes the pain out of learning a whole new set of rules and regulations in another country.  

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Topics: US Firms Expanding into Canada, U.S. Business operating in Canada, Ontario, Canadian Employment Laws, vacation policy Canada

Are You Ready for Round 2 of the AODA Requirements?

Posted by Stacey Duggan

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Jul 3, 2013 9:00:00 AM

Payroll

Round 1 was the implementation of the Customer Service Standard piece of the 5 key areas of the Act and companies were expected to file compliance reports in regards to their Accessibility Standards for Customer Service on or before December 31, 2012.

The IAS (Integrated Accessibility Standards) is the next step and refers to the remaining 4 key areas as laid out in the AODA as well as certain general obligations regarding accessibility policies and plans and further employee training. Large private sector employers (over 50 employees) will need to comply by January 1, 2014 and smaller companies of up to 49 employees will need to comply by January 1, 2015.

The 4 key areas are:

1. Transportation

The standard has several requirements that apply to conventional and specialized transportation service providers. For example, both:

  • Must make information on accessibility equipment and features of their vehicles, routes and services available to the public.
  • Cannot charge a fare to a support person when the person with a disability requires a support person to accompany them on the conventional or specialized transportation service.

For conventional transportation services:

  • Providing clearly marked courtesy seating for people with disabilities.
  • Not charging people with disabilities a higher fare than people without disabilities, and not charging for storing mobility aids or mobility assistive devices, such as wheelchairs or walkers.
  • Technical requirements for lifting devices, steps, grab bars/handrails, floor surfaces, lighting, signage, etc.
  • Providing verbal and visual announcements of routes and stops on vehicles.

For specialized transportation services:

  • Developing an eligibility application process including an independent appeal process.
  • Charging fares that are no higher than the fares charged for conventional transit where they are both operated by the same service provider.
  • Providing the same hours and days of service as those offered by conventional transit where they are both operated by the same service provider.

The above are only a few of the requirements for the Transportation Standard.

2. Information and Communication

Organizations will have to:

  • Make their websites and web content accessible according to the World Wide Web Consortium’s Web Content Accessibility Guidelines (WCAG) 2.0.(Note: Organizations with less than 50 employees are exempt from this requirement.)
  • Provide accessible formats and communications supports as quickly as possible and at no additional cost when a person with a disability asks for them.
  • Make feedback processes accessible by providing accessible formats and communications supports when requested.
  • Make public emergency information accessible when requested.

Educational and training institutions must:

  • Provide educational and training resources and materials in accessible formats upon request.
  • Provide educators with accessibility awareness training related to accessible program or course delivery.

Producers of educational or training materials must:

  • Provide educational or training institutions with accessible or conversion ready textbooks and supplementary resources upon request.

Libraries must:

  • Libraries of education and training institutions must make resources accessible upon request.
  • Public libraries must provide access to or arrange access to accessible materials where they exist.

3. Built Environment

The Accessibility Standards for the Built Environment focus on removing barriers in public spaces and public buildings themselves. Enhancements to accessibility in buildings will happen at a later date through Ontario’s Building Code, which governs new construction and renovations in buildings.

Accessibility Standard for the Design of Public Spaces

The standard for the design of public spaces only applies to new construction and major changes to existing features.

Here are the highlights of what the standard covers:

  • Recreational trails/beach access routes.
  • Outdoor public eating areas like rest stops or picnic areas.
  • Outdoor play spaces, like playgrounds in provincial parks and local communities.
  • Outdoor paths of travel, like sidewalks, ramps, stairs, curb ramps, rest areas and accessible pedestrian signals.
  • Accessible parking (on and off street).
  • Service-related elements like service counters, fixed queuing lines and waiting areas.
  • Maintenance and restoration of public spaces.

4. Employment

The Accessibility Standard for Employment will help Ontario businesses and organizations make accessibility a regular part of finding, hiring and supporting employees with disabilities.

Organizations will have to:

  • Let job applicants know that recruitment and hiring processes will be modified to accommodate their disabilities, if requested.
  • Build the accessibility needs of employees into their human resources practices.
  • Create a written process (not applicable to small organizations) for developing and documenting individual accommodation plans for employees with disabilities.
  • Help employees stay safe in an emergency by providing them with individualized emergency response information when necessary.

These are just a few of the requirements. For a free consultation on how the Accessibility for Ontarians with Disabilities Act affects you, contact The Payroll Edge.

For more information on AODA compliance visit the Ministry of Community & Social Services

 What Are You Leaving to Chance by Handling Payroll on Your Own

 

Topics: workforce compliance, Canadian Payroll Service, Ontario

Proposed Payroll Changes to Ontario Employer Health Tax

Posted by Stacey Duggan

|

Jul 2, 2013 9:00:00 AM

Ontario PayrollIn May of this year, the Ontario Government revealed its 2013 Budget. The proposed changes to the provincial Employer Health Tax (EHT) if passed, will have a direct impact on those that carry on business in Ontario as well as those that process payroll for those companies affected.

The budget proposes to increase the EHT Exemption from the current $400,000 to $450,000, beginning January 1, 2014. Thereafter, the EHT Exemption will be adjusted every five years with the Government estimating that the EHT Exemption will increase to $500,000 in 2019. 

This is great news for small to mid sized businesses in Ontario but for those companies with an annual payroll of over $5 million, it is proposed that the EHT Exemption be eliminated all together with only registered charities being the exception.

A recent article on Lexology.com states "The Government estimates that, while small businesses will save up to $975 per year, and approximately 12,000 small employers will no longer have any EHT liability, as a consequence of the EHT changes proposed in the Budget, more than 5,000 large employers and associated groups of employers will be required to remit up to $7,800 per year in additional EHT as a consequence of the proposed EHT amendments. These changes reflect a desire of the Government to shift the EHT burden to larger entities, although the Budget papers project that, on a cumulative basis, the proposed EHT changes will actually cost the Government approximately $5 million in each of the 2014-15 and 2015-16 fiscal years." 

Read the Full Article

Topics: Canadian Payroll, Payroll Tax in Canada, Employee Payroll Deductions, Payroll Deductions, Ontario

MOL Summer Safety Blitz in Ontario - Are You Ready?

Posted by Stacey Duggan

|

May 30, 2013 10:24:00 AM

CanadaPayroll

Each summer in Ontario business owners can count on a Ministry of Labour Safety Blitz. This season is no different as the MOL plans to inspect Ontario workplaces between May 1 and August 31, 2013. The focus again is the safety of young and new workers with a special emphasis on employers in service industries, manufacturing, transportation, farming operations, logging, hotels, motels, film and television. In the health care sector, inspectors will focus on community care services and community care residences.

Young workers are aged 14 to 24. New workers are those who have been on the job for less than 6 months or existing workers assigned to a new job in the same workplace. New workers include both young workers and those 25 and older.

New and young workers in Ontario are three times more likely to be injured during the first month of employment than at any other time.

Between 2006 and 2011, 39 young workers aged 15 to 24 died in work-related incidents, according to Workplace Safety and Insurance Board (WSIB) statistics. During the same period, more than 52,000 young workers suffered injuries resulting in lost time at work, according to WSIB claims statistics.

Many of the injured young workers were employed as labourers in processing, manufacturing and utilities as well as retail salespeople, food counter attendants and kitchen helpers with the majority of lost-time claims occurring when the worker was struck by objects and equipment.

The Ministry of Labour is looking for non-compliance involving new and young workers, including failure of employers to inform, instruct, supervise workers and comply with minimum age requirements. In addition, inspectors will check the internal responsibility requirements are in place such as a written occupational health and safety policy, a workplace Joint Health and Safety Committee (JHSC) or health and safety representatives are appointed and JHSC meetings and workplace inspections take place.

How can you prepare?

  • Ensure your Occupational Health & Safety Manual is up to date with all current policies and procedures.
  • For companies with 6 to 20 workers, one formally trained health & safety representative must be assigned to the group.  For companies over 20 people, a full Joint Health & Safety Committee must be put into place and all regulations followed in order to meet compliance.
  • Ensure that you have put in proper procedures to deal with workplace hazards.
  • Provide workers with written measures and procedures for their protection where required by law.
  • Provide appropriate training and supervision with the understanding that many of these policies are new to these vulnerable workers and first time workers may be uncomfortable asking questions.
  • Ensure that you have met the minimum age and wage requirements set out by the Employment Standards Act.

The Payroll Edge offers a free consultation to those companies unsure of whether their policies and procedures are up to date and has the expertise to ensure compliance today and in the future. Being proactive in the safety & welfare of your workers is invaluable when compared to the fines and penalities that can occur when an MOL audit reveals noncompliance.

Ministry of Labour Backgrounder

Topics: workforce compliance, young workers, Ontario

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