Archive for category: Business Tips

 

As your business starts to grow you may need additional help around the office or the shop. Hiring an employee comes with obligations to the government that surprises many small business owners. This post will address these obligations, and help you better understand what having an employee means for your business. As a disclaimer, this only covers the general Canadian obligations and rules in Alberta, you will need to check if your province has specific rules for payroll taxes.

 

CRA Deductions

When you get an employee the CRA requires that you take deductions off their paycheques and remit it based on your assigned schedule. This is a major consideration of having employees, and can come with the heftiest fines if you ignore it. The CRA will levy 10 to 20% penalties if you are even a couple days late with your remittances. The reason the CRA is this strict with payroll deductions is because it is not considered the companies money, you are simply holding it in trust for the government.

 

There are three taxes that you generally must take off an employees paycheque, Canada Pension Plan (CPP), Employment Insurance (EI), and Income Taxes. The employer must contribute to both CPP & EI and remit both the employee and employer portions of all taxes to the CRA. While CPP is 1:1, the employer must remit 1.4 times the EI. There are ways to reduce this liability with providing a short-term disability plan for employees that meets the CRAs criteria. You can find information about that here.

 

To determine that you are taking the correct amount of income taxes off your employees paycheque, you need them to fill out both a federal and provincial TD1. Once you have filled out this form, you must follow their claims code when providing payroll services. Both the federal and Alberta 2019 TD1s are linked to below for your reference.

Federal TD1

Alberta TD1

 

Do these three taxes always apply to payroll items?

Payroll is not always simple and straightforward. There are many items that an employee can be paid for that are not just their wages. All of these different payroll items have different rules in regards to taxes. This can get extremely complicated and you have to take extreme care when preparing your employees payroll.

CRA has a helpful chart on what taxes apply to each situation, you can find that chart here.

CRA also provides a payroll calculator that can help your business, you can find it here.

 

Remittance Schedules

 

Based on the amount of your payroll, the CRA has different schedules for when you must make your payroll remittances. The more payroll you have, the more frequently you need to remit to the government. Below are two charts showing the different frequency levels and when those levels need to remit. Both charts are taken from the CRA website, here. 

Remitter Type

Remitter type	Average monthly withholding amount (AMWA)
Quarterly remitters: new small employers	Not based on AMWA. The monthly withholding amount is zero to $999.99 and you have a perfect compliance history.
Quarterly remitters: account opened for 12 months or longer	From zero to $2,999.99, and you have a perfect compliance history.
Regular remitters	From zero to $24,999.99
Threshold 1 accelerated remitters	From $25,000.00 to $99,999.99
Threshold 2 accelerated remitters	$100,000.00 or more

Remitting Frequency

Remitter type	Remitting frequency	Remitting period	Remittance due dates
Quarterly	Quarterly	January 1 to March 31 April 1 to June 30 July 1 to September 30 October 1 to December 31	April 15 July 15 October 15 January 15
Regular	Monthly	Calendar months	15th day of the next month
Threshold 1 accelerated	Up to twice a month	1st to 15th of the month 16th to end of the month	25th day of same month 10th day of the next month
Threshold 2 accelerated	Up to four times a month	1st to 7th of the month 8th to 14th of the month 15th to 21st of the month 22nd to the last day of the month	3rd working day after the 7th 3rd working day after the 14th 3rd working day after the 21st 3rd working day after the last day of the month

 

Even if you fall in the Quarterly remitter section, you can choose to still be a regular remitter. As noted earlier, you need to make sure you are able to make these remittances on time to avoid the penalties. Therefore, choosing to be a regular remitter might help you stay compliant.

 

How do I pay these remittances?

 

There are multiple ways that you can pay your payroll remittance to the CRA. The CRA has compiled a complete listing here. Below are the most popular ways we, as a company, have seen employees use.

 

• Online Banking, you can talk to your bank about the services they provide
• My Payment, allows you to pay with credit card or debit online 
• At the bank
• Mailing in a cheque

 

Contact On-Core if you have any questions about your payroll obligations!

The accounting industry is changing and no longer do you need to come to an office to get bookkeeping and accounting services. Sharing a file is easier than ever and clients can do as much or as little work as they want. This post will briefly cover the advantages of using an online software.

The Software

On-Core is trained in, and works with two online accounting software’s. Below this section are pictures of each logo, you can click on them to be taken to their respective websites.

The first is probably the best known. Everyone has heard a radio ad or seen Danny DeVito on TV talking about QuickBooks Online. If you use QuickBooks Desktop you may have even seen a button for transitioning your desktop file to Online.

Transferring from desktop to online is relatively seamless whether you currently use QuickBooks desktop or not.

The second is a software from New Zealand, Xero. Xero has recently acquired Hubdoc and is working on transitioning into the Canadian market. Transferring from your current software to Xero is also relatively seamless.

Transferring to either of these is a great opportunity to clean up your file by eliminating accounts, vendors, or customers that are long inactive. However, with both, you will need to keep a copy of your old software as you will not be able to put in the detail of previous years, just opening balances.

Advantages

Paperless

Using online software is a paperless solution to bookkeeping. It can help to eliminate that storage room full of banker boxes that you have! You don’t need to hold onto that gas receipt from 2 months ago until you get to see your bookkeeper. You can simply take a picture, upload it, and toss it! It will be attached to the transaction in your online software and therefore easily accessible to anyone needing to see the backup.  

 

Automation

While not every transaction is able to be automated, these online software’s can eliminate some of the repetitive transactions, saving your company time and money. This is done by linking vendors to their respective accounts. For example, Shell would be automatically be coded to automobile expenses.

 

Instant overview of your business   

If you stay on top of doing your books, which with automation is a snap, you will know where your business stands whenever you need. Traditional bookkeeping only allows you to get monthly reports on your business after the month is over. With online software, you can work with your bookkeeper to know where your business stands at all times.

 

No more paperwork drop offs

With online software you no longer need to make monthly visits to your bookkeepers office. With it being paperless, you can get your bookkeeping done by any bookkeeper and not have the stress of needing to deliver your monthly paperwork to get reports.

 

Disadvantage

 

Can be a little too easy

You may look at that header and think, how can it being a little too easy be a disadvantage? Online software make it easy to do it yourself. However, if you have not had any experience or training in doing your books, this can lead to mistakes being made. This mistakes will be costly to correct.

 

Conclusion

 

Online software is worth adopting. Bookkeeping companies are here to support you in the transition, ensuring that you can reap all the advantages of doing books through online software. On-Core has professionals that have been certified in both of these programs. We can train you on how to use these programs, and offer monthly support.

 

These programs can save you money, and On-Core is here to show you how!

 

In December we did a post on employee gifts that pertained more towards employee gifts for the holidays. In this post we plan on expanding more into the year round rules on giving employee gifts and awards. We know that this subject can be a little dry, but it is vital that an employer understands these rules before giving gifts to their employees.

CRA Definitions

 

Gift – A gift must be for a special occasion, this can include religious holidays, birthdays, weddings, or a child’s birth.

 

Award – an award has to be for an accomplishment of the employee; an example of this includes employee of the year. Usually an award must be exclusive and there may even be a nomination process.

 

If the award is for a performance related reason it automatically becomes a taxable benefit to the employee. An example of this is giving someone a gift for meeting their sales quota.

 

The employee is allowed $500 of tax-free gifts and awards every year.

 

Cash or Cash Equivalent – If you give your employees cash, or something that can easily be converted to cash like a gift card, this is a taxable benefit and must be included in the employees income.

 

Note that everything taxable is also pensionable and therefore CPP applies. However, EI only applies when the gift was cash or a cash equivalent.

 

Long Service Awards

 

An employer is entitled to give their employee a long service award every 5 years of employment. Anything outside of this time-frame is automatically considered a taxable benefit.

Anything over $500 is also a taxable benefit to the employee. The good news is that this does not count towards the employees $500 gift and award allowance.

Social Committee & Events

 

Social Committee – If the employer pays for the social committee, all gifts and draws through the social committee are deemed eligible towards the $500 gift allowance of the employee. However, if the social committee is funded by employees, either with their own money or through fundraisers, everything given out through the social committee with be non-taxable.  

Events – If an employer throws a party or hosts a social event outside of work, the event must be under $150 a person or it becomes a taxable benefit to the employee.

However, if the employer pays for a meal that also corresponds to a work reason, for example networking or an educational lunch, it is not taxable to the employee.

 

Calculation the $500 Limit

 

First, we will note that if you give your employees a small gift of little value you do not need to keep track of it. This can include things like a coffee mug, or a company branded hat.

For everything else your payroll professional will need to keep a list of all the gifts and awards that have been given to the employee. Anything over the $500 will need to be added into the employees income.

 

Example:

Wedding Gift – $300 piece of art

Birthday Gift – $100 gift card

Christmas Gift – $250 watch

5 Year Service Award – $600 golf clubs

 

The $100 gift card automatically needs to go into be added into the employees income as it is a cash equivalent item.

The 5 year service award is a separate item, however it has a value over $500, there $100 would be taxable ($600-$500)

The wedding and christmas gifts are both added together towards the $500 gift limit, $50 would be taxable ($300 + $250 – $500).

Therefore in total, the employee has to take $250 in taxable income for the year.

 

 

You can read more about gift giving on the CRA website, here. Or give us a call!

 

This is the second post of our payroll FAQs. A reminder that these are general rules, for more specifics please visit the Alberta website through the links in the post. It is important to note, these are the minimum standards that must be met in Alberta. You are free to give your employees more than what is outlined below.

 

Vacation Pay

Vacation pay is something all employers are required provide for their employees and employees must use their vacation time within 12 months from when they earned it.

Employees are not eligible for vacation pay until they have been employed for a year, however an employer can allow for vacation before the year is over.

Employees earn 2 weeks of vacation for 1-5 years of employment and 3 weeks of vacation for 5 years and over. This time must be given in one unbroken period, unless the employee has requested to have it split up.

Employers can deny vacation time for operational reasons and decide when their employee takes the time. However, an employee must be given 2 weeks notice of the assigned time off.

There are some exceptions for who receives vacation pay and how it is paid. For a full list, you can check out the Alberta government website, here. The most notable exception is Construction Workers. Their employers are not required to give them vacation time, but they do need to pay 6% vacation pay on each pay cheque.

How do you pay it?

Vacation pay can either be A) Paid out on every pay cheque B) Accrued for use when actual vacation is taken. If option B is selected, the employee must receive their vacation pay no later than the first pay period after the vacation has been taken.

For the first 5 years, vacation pay is calculated as 4% of the yearly wages, after 5 years it is 6%.

When calculating vacation pay, the following are not included:

• Overtime
• General Holiday pay
• Termination pay
• Tips
• Expenses and allowances

If an employee is terminated or leaves before the first year, you must pay them 4% of their wages on their final cheque for their vacation pay.

 

General Holidays

What are they?

General Holidays, or as they are more commonly referred to statutory holidays, are paid days off work legislated by the provincial government.

In Alberta there are 9 mandatory statutory holidays and 3 optional ones. Each of these are listed in the chart below for your reference.

General Holiday	Mandatory/Optional	2019	2020
New Years Day	Mandatory	January 1	January 1
Family Day	Mandatory	February 18	February 17
Good Friday	Mandatory	April 19	April 10
Easter Monday	Optional	April 22	April 13
Victoria Day	Mandatory	May 20	May 18
Canada Day	Mandatory	July 1	July 1
Heritage Day	Optional	August 5	August 3
Labour Day	Mandatory	September 2	September 7
Thanksgiving Day	Mandatory	October 14	October 12
Remembrance Day	Mandatory	November 11	November 11
Christmas Day	Mandatory	December 25	December 25
Boxing Day	Optional	December 26	December 26

 

How are they paid?

General holidays are to be paid to most employees immediately upon their employment. However, there are certain situations when you do not have to pay an employee for a general holiday, they are:

1. An employee does not show up to work when they are scheduled to work on the general holiday
2. An employee is absent without the employer’s consent on their regular working days surrounding the general holiday.

When paying an employee for a general holiday, there are 2 situations that can arise:

Did not work on general holiday

Pay the employee Average Daily Wage (5% of Wages + Vacation Pay + General Holiday Pay from the previous 4 weeks)

Worked on the general holiday

Employers can choose one of the below 2 options:

• Pay Average Daily Wage plus 1.5x employees time worked on that day (including overtime)
• Pay regular wages plus provide a future day off paid with their Average Daily Wage

If you chose the second option and the employee leaves the business before they take their day off, you must pay them their average daily wage on the final pay cheque.

 

You can check out the specifics of general holiday pay, here.

As always, if you have any questions about payroll, give us a call today!

 

With the new year comes changes to CPP & EI rates. Below are the new 2019 rates, both have been increased slightly over the 2018 amounts.

 

CPP	2019	2018
Maximum Annual Pensionable Earnings	$57, 400	$55, 900
Basic Exemption	$3,500	$3,500
Maximum Contributory Earnings	$53, 900	$52, 400
Contribution Rate	5.10%	4.95%
Maximum Annual Employee & Employer Contributions	$2, 748.90	$2, 593.80
Maximum Annual Self-Employed Contribution	$5, 497.80	$5, 187. 60

 

EI	2019	2018
Maximum Annual Insurable Earnings	$53, 100	$51,700
Contribution Rate	1.62%	1.66%
Maximum Annual Employee Contribution	$860.22	$858.22
Maximum Annual Employer Contribution	$1,204.31	$1,201.51

 

It is important to remember that both CPP & EI have special rules. Payroll is not always straight forward, and it is best to have it done by a professional.

If you have any questions we have trained payroll professionals ready to help! Contact us today.