It’s no secret that achieving payroll accuracy is the goal of every payroll professional. Accuracy is often easier said than done, though, as virtually every payroll and HR manager out there knows. Even when you do your best, mistakes happen.
Errors are common enough when your team is familiar with the rules. What happens when you start operating in a new area, such as Canada? Payroll professionals often find they may struggle even more than usual because they’re simply unaware of all the nuance in Canadian payroll.
That’s where a payroll calculator could help. With one, you can avoid some of the most costly errors in Canadian payroll.
Calculate Taxable Income Correctly
One of the most common problems in Canadian payroll is the miscalculation of taxable income. Sometimes, it’s a slip of the fingers. At other times, it’s a misreading of the tax table and the use of the wrong rate.
More often, it’s that payroll professionals are unaware of what counts as taxable income and what doesn’t.
A payroll calculator is helpful here. Not only will it make sure you have the right rates plugged in for each tax bracket, but many calculators allow entries for different kinds of taxable income. Seeing a slot for taxable income such as bonuses, commissions, and vacation pay will remind your team to add these amounts to their calculations.
Since the calculator applies the right rates to different kinds of income, you can be sure your calculations will be more accurate. The CRA charges penalties for incorrect amounts, so you can avoid needing to pay both more tax and the penalty.
Report Taxable Benefits More Often
It may be difficult to know what counts as a taxable benefit and what doesn’t. Therefore, adding these benefits in during each pay period might slow your team down.
The temptation to calculate taxable benefits such as life insurance at the end of the year is high, but you should be deducting and reporting these benefits for each pay period in the calendar year. Doing so ensures you’re in compliance with the CRA’s rules.
A payroll calculator makes it easy to figure out the deductions and report them for each and every pay period. With the calculator, your team can finish even the most complex of payroll calculations sooner.
Extra Pay Periods Cause CPP Havoc
Did you know that, because of the way the days fall, you’ll sometimes find an extra pay period? Every 11 years, organizations with biweekly payroll will find they have 27 pay periods, not the usual 26. For organizations that pay weekly, this situation occurs every seven years, when there are 53 pay periods.
This situation can also arise if your company decides to move a January 1 pay date back to December 31. This pay period is now for the previous fiscal year, creating an “extra” pay period.
When you’re deducting Canada Pension Plan (CPP) amounts from your employees’ salaries, you must be very careful not to exceed the maximum CPP contributions.
The CRA publishes tables to assist employers with this situation, and some payroll calculators will also have this scenario built-in.
Calculating Bonus Tax
Whether you pay bonuses within a certain pay period or outside of a pay period, the fact of the matter is they increase an employee’s earnings for the year. Depending on the employee’s salary and the size of the bonus, this could change the employee’s tax bracket. You’ll also need to keep CPP deductions in mind as well.
A payroll calculator will help you correctly gauge taxes on bonuses, including those CPP contributions.