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Job Creation Supported with Three Year Freeze on Employment Insurance

Posted by Stacey Duggan

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Nov 13, 2013 9:00:00 AM

government remittancesThe Harper Government announced last month that it will freeze the Employment Insurance (EI) premium rate for employees at the 2013 level of $1.88 per $100 of insurable earnings for 2014, and additionally that the rate will be set no higher than $1.88 for 2015 and 2016.

“While Canada has seen steady job creation since the end of the global recession with over one million net new jobs, significant challenges remain in the global economy. Our Government is freezing EI rates and leaving $660 million in the pockets of job creators and Canadian workers in 2014 alone which will help provide the certainty and flexibility employers, especially small businesses, need to keep growing,” said the Honourable Jim Flaherty, Minister of Finance, at an event hosted by Ottawa Camping Trailers Ltd. “This tax relief will help support Canada’s continued economic recovery and sustained, business-led, long-term growth.”

Since July 2009 employment has increased by more than one million jobs, the strongest job growth among Group of Seven (G-7) countries over the recovery. Close to 90 per cent of all jobs created since that time have been full-time positions, with more than 80 per cent in the private sector and two-thirds in high-wage industries.

The OECD recently projected Canada to lead the G-7 in economic growth for 2013 and the World Economic Form ranked Canada’s financial system as the safest and soundest in the world for a sixth year in a row.

Falling unemployment over the recovery means the EI Operating Account is on track to return to balance, and the premium rate increases previously projected are no longer necessary.

“As payroll taxes like Employment Insurance are particularly challenging for small business, today’s announcement of an EI rate freeze is fantastic news for Canada’s entrepreneurs. This move will keep hundreds of millions of dollars in the pockets of employers and employees which can only be a positive for the Canadian economy. As employers pay 60 per cent of the cost of the EI system, small firms can use these savings to hire, improve wages or help grow their businesses,” said Dan Kelly, President and CEO of the Canadian Federation of Independent Business.

Starting in 2017, as announced in Economic Action Plan 2012, the EI premium rate will be set annually at a seven-year break-even rate. This will ensure that EI premiums are no higher than needed to pay for the EI program over that seven-year period, and will result in sustainable funding, affordable rates, and ongoing predictability and stability.

Government of Canada Site

Canadian Payroll Tax Deduction Calculator

Topics: Canadian Payroll Regulations, Government Compliance, Remitting Taxes, EI, Canadian Businesses, Employment Insurance

Bigger May Not Always Better When it Comes to Payroll Processing

Posted by Karen McMullen

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Nov 1, 2013 9:00:00 AM

Bigger May Not Always Better When it Comes to Payroll ProcessingBusiness owners too often fall for the idea that bigger is always better. The huge payroll processing service with the flashy ad campaign must be great, right? They can afford huge billboards, sharp uniforms, and take up an entire floor of the new office building downtown—so they must be great, right? Of course, if they’re that great, why are they spending so much money and effort to convince you of how great they are? Maybe they do have great products and services, but something is lacking that makes them have to work so hard to attract new clients. Often, with large payroll processing providers, the thing that’s missing is personalized service. In a large office, with so many clients, it can be impossible to get to know each business on an individual basis. If you don’t know the business, how can you ever really know what the business needs?

I’ll Have to Refer You to Our Website

When you have tax or payroll questions, it would be nice to get an answer that’s specific to your business. A generic, one-size-fits-most web document isn’t going to address your particular concerns. You’ll have to read the document, decide what’s relevant to you, and then interpret how it applies to your business. Aren’t you using a payroll processing service to avoid these kinds of hassles?

A large organization isn’t going to take the time to research topics and how they apply to your business. When you call with questions, you’ll get generic answers and a web address for supporting documents. After that, it’s up to you to do the research and apply your findings.

Looks Good Enough to Me

At the end of the pay period, your payroll processing service will take the information you send them, enter it into their system, and cut the cheques. Error checking, if it exists, will only look for obvious arithmetical errors. Mistakes that would be obvious to anyone who knows about your business will be ignored or overlooked. It will be up to you to rectify any errors, and you could be charged extra by the payroll processing service.

What happens if there’s a data entry error, or somebody forgets to log in or out? Transposition errors could have your janitorial and senior marketing staff switching salaries. A simple, common-sense check of your data would reveal these errors, and correct them before they result in erroneous cheques. A large payroll service isn’t going to have the time, or the familiarity with your business, to catch these errors in time.

Sorry, We Don’t do That

Do you make remittances for any taxes other than the payroll tax? If you’re an employer in Canada you make worker’s compensation remittances and if you’re in Ontario or Quebec you have other taxes as well. Large payroll services typically only provide remittance services to your payroll tax account. This leaves you responsible for all of the others. Even though you’re paying for a payroll processing service, you could still end up doing some of the work you’d expected them to handle.

If you’re handling some remittances, you might as well be doing them all. If you’re outsourcing remittances, they should all be handled by a single provider. Having half of them done in-house, and half done by a payroll processing service is an invitation to errors. Having multiple service providers handling your remittances is also an invitation to disaster. A large agency may not have the time, or interest, in handling remittances to other agencies.

Smaller is Sometimes Better

Individualized attention can be a huge benefit when it comes to payroll processing. Those large agencies may do a lot of things very well, but personalization isn’t one of them.

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

Topics: Payroll Service Provider, Outsourced Payroll Service, Payroll Tax Calculations, Government Compliance, Payroll Calculator, CRA, Payroll Deductions, Remitting Taxes, Worker's Compensation

The Danger of Hiring Nothing But Independent Contractors

Posted by Stacey Duggan

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Aug 20, 2013 11:45:00 AM

Independent ContractorBoth employers and employees can benefit from independent contractor arrangements. Employers like working with independent contractors because they don't have to pay CPP, EI, income tax, pensions, and benefits. The contractors themselves also appreciate the arrangement because they can write off reasonable business expenses and avoid the bureaucratic hassles that accompany working within a business.

Working in an independent contractor framework seems like a win-win situation for both employer and employee, so what's the catch?

The CRA is strict about the definition of an independent contractor because they know that some people use independent contractors to avoid paying taxes and benefits. To draw a clear line on the issue, the CRA has formulated a four-point test to determine whether or not someone is an employee or an independent contractor.

Abiding by this four-point test is critical to you as an employer. If the CRA finds that you're not following the regulations governing independent contractors, you could be subject to back taxes, CPP contributions, and EI deductions for the time spanning your employee's involvement with your company. This is not just an issue for large corporations. Any business, large or small, could find itself facing huge financial penalties if the CRA finds that it hasn't followed its guidelines regarding independent contractors.

The guidelines specifically examine control, ownership of tools, profit/risk, and integration.

1. Control

Essentially, the CRA wants to know who is in control of the work done.  If the employer specifies how the job will be done and directs the worker's daily activities, the worker is an employee, not an independent contractor.

This doesn't mean that the employer doesn't have any say in a project. Of course, the employer can impose reasonable limits. For example, the employer can say, "The brochure needs to be printed by March 22nd," but the independent contractor should be in charge of how the project is accomplished.

2. Ownership of Tools

In most cases, independent contractors must own and maintain their own tools and equipment. If a worker reports to work at a business and uses the business' equipment, that person is an employee. If, on the other hand, the work is done at the independent contractor's office or home on the worker's own equipment, it's much more likely that the CRA will consider this worker an independent contractor.

3. Profit/Risk

Employees don't have many opportunities to take risks or incur profits outside of their agreed-upon wages. Yes, employees incur losses when they travel to work and pay parking fees, but these do not classify as risks in the eyes of the CRA. Also, employees may earn bonuses, but again, this is not what the CRA has in mind when discussing risks.

Profits and risks come into play when an independent contractor can turn down work or choose to take a loss for various reasons such as doing work for charity, trying to secure better contracts, or obtaining a client at a loss to secure future business or gain prestige. Also, independent contractors can set their own rates, even varying their rates for certain projects, which is not a privilege employees usually enjoy.

4. Integration

How integrated is the worker into the company? This can be difficult to determine and quantify, but the CRA uses it as one of their criteria for determining a worker's status. Contractors are less integrated than employees in the company's day-to-day affairs. They often come in only occasionally, or they work at the office when handling specific projects.

The Rules Are a Grey Area

It can be difficult to know if you're compliant, as each situation is gauged on a case-by-case basis, based on the personal interpretation of circumstances by the specific CRA Auditor you are dealing with. Rather than running the risk of having independent contractors be assessed as employees, it can be well worthwhile to seek professional advice before getting into any trouble.

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

Topics: Payroll Tax, Payroll Service Provider, Canadian Payroll, Canadian Payroll Deductions, CRA Audit, CRA, Remitting Taxes, Canada Revenue Agency, Independent Contractor, CRA Compliant, CPP, EI

How Payroll Service Providers Remit Taxes

Posted by Ray Gonder

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Jun 7, 2013 1:22:00 PM

How Payroll Service Providers Remit TaxesRemitting taxes. It's about the last detail you want to worry about as a small business owner. Remitting taxes doesn't advertise your goods and services, it doesn't help you to work more efficiently, and it doesn't train or find new employees for you. It just takes up your precious time that could be better spent in other ways.

That's where payroll service providers can help you. With expertise in every aspect of tax law and logistics, a good payroll service can strike tax remittance from your to-do list, leaving you with time for the tasks that actually help to improve and grow your business.  Ensure that when you are choosing a payroll provider you make sure they remit all of your government taxes as some only remit the general payroll taxes but not worker’s compensation or Ontario EHT. A provider that only does half the job can cause more confusion to an already frustrating process.

There’s more to paying your staff than just using a payroll calculator. If you've been unsure about how tax remittance works or you're wondering what's involved, here's a primer based on common questions from Canadian employers.

What do I have to remit?

As an employer of Canadian workers, you're required to remit employee payroll tax, Canadian Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, your employer's percentage of EI and CPP, workers’ compensation, and (in Ontario) Employee Health Tax (EHT). Each of these remittances must be individually calculated for each of your employees, and the calculations depend on the province or territory where your employees report for work. Each of these contributions must be calculated and remitted correctly if you wish to avoid paying fines.

Where do I send payroll remittances?

Most Canadian employers remit to at least three different government agencies each time they calculate payroll. Depending on which provincial and territorial agencies are involved, you may have many different offices to remit to. Follow the instructions on the remittance tables published by the various provinces and territories where you must remit taxes, and send your funds to the appropriate offices.

When do I remit payroll taxes?

This is an important question to answer because you'll be faced with fines if you fail to make your remittances on time. Each governmental agency has a different remittance schedule, and unfortunately, this variation of remittance schedules consumes a lot of time for the average Canadian business. Most agencies have monthly remittance schedules, but your due dates will probably land on different days of the month, causing issues with cash flow and time management.

How can I streamline my payroll duties?

Clearly, staying on top of Canadian payroll is a time-consuming and headache-inducing affair. If you're tired of managing all of these administrative details, turn payroll over to the pros. Instead of looking through tax schedules and charts, get out from behind your desk and meet with customers and clients. Instead of cutting checks and making phone calls to government agencies, pursue your dreams of expansion.

At The Payroll Edge, we have more than 25 years of tax remittance experience. Recognized as a payroll authority even among administrators at the CRA, we are always on top of changing tax laws and regulations. It's our job, and we do it well. We can save you an immense amount of time and frustration when we assume the payroll responsibilities at your company. You'll be amazed at the reduction in stress when you don't have to worry that you've remitted the wrong amounts at the wrong time. You'll have confidence that the job is being carried out by professionals who guarantee their work.

For more information about what The Payroll Edge can do for your company, contact us. We'll be happy to discuss your company's payroll and tax remittance needs.

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

Topics: Payroll Tax, Payroll Service Provider, Payroll Tax Calculations, Payroll Tax in Canada, Payroll Service, Payroll, Payroll Calculator, Payroll Deductions, Payroll Tax Tips, Remitting Taxes, Employee Payroll Tax

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