During the past few weeks I’ve had a number of clients ask me about the correct payroll deductions for special payments made to employees. Specifically they’ve questioned which payments qualify to have CPP, EI and Tax deductions. A number of these questions came about because they received a PIER report.
PIER is the acronym for Pensionable and Insurable Earnings Review. This report is generated by the CRA after the T4s for the prior year have been processed. The government formulas sometimes disagree with the CPP and EI indicated on the T4 as they relate to the T4 income shown.
The following are 5 payroll deductions required for special payments.
| Special Payments |
CPP Contributions |
EI Premiums |
Tax Deductions |
| Advances |
Yes |
Yes |
Yes |
| Bonuses & Retroactive Pay Increases |
Yes |
Yes |
Yes |
| Employee Profit Sharing Plan (EPSP) |
No |
No |
No |
| Honorariums from Employment or Office |
Yes |
Yes |
Yes |
| Wages in Lieu of Termination Notice |
Yes |
Yes |
Yes |
The 5 above are the ones I’m most frequently asked about but there are many more Special Payments considerations which are described in detail on the CRA website. Please click here to review the information.
To those of you who have received a PIER report, you know how time consuming and detailed the reply to the CRA can be. They want to know right down to the pay cheque detail where the discrepancy occurred. You may think that it’s the government’s way of just getting more money from the employer or a make work project at the CRA office. It actually is quite important that the payroll deductions be as accurate as possible. It ensures the correct CPP benefits are received upon retirement, disability or death. And, the correct EI benefits affect those that become unemployed, take maternity or parental leave, take compassionate care leave or become injured or ill. Those benefits are our safety net provided by the government but paid for by employers and employees alike. As an employer you owe it to your employees to be accurate. If you report insufficient amounts, it could reduce a person’s benefits.
And it’s not only underpayments that the CRA will bring to your attention. If you have deducted more than required for CPP or EI, they will question that also. After the detailed report is completed, the CRA will credit your account or issue a refund for excess contributions.
If you have a specific question regarding these deductions and not sure what the CRA really means after reviewing their chart, send me your question regarding deductions and I will attempt to clarify that information for you.
In the meantime, I’d love to get your feedback! Don’t forget to leave a link back to your own blog too, via the commentluv feature here on the site.
Until next time,
Maureen
