Payroll is Serious Business

by Eileen Reppenhagen

6 min read

It’s the law, mandatory to keep records about employees. Employers can’t just write cheques or pay cash and barter is viewed as dubious but may be accepted with sufficient record keeping.

Best practice

Keep a permanent file for each employee, an annual file, both for each employee, with their timesheets and pay related information, and another for accrual calculations; and employer files for the monthly and annual payroll summary reporting.

What payroll records would a CRA payroll TRUST auditor be looking for and have the right to review

Permanent

  1. Contract of employment
  2. Rate of pay
  3. Hiring date, Termination date
  4. Resume, reference letters
  5. Relationship, where employee/shareholder is related by blood or marriage, especially where the employee is a minor, and tax on split income rules might apply
  6. CPT1 Ruling  (See RC4110 for information about employee vs self-employed)
  7. Garnishee orders from official sources, e.g. CRA, Family Support or Maintenance, Court Orders, etc.
  8. Correspondence
  9. ROE’s on termination

Annual

  1. TD1 (federal and province/territory)
  2. T1213 Source deductions changes approved by Canada Revenue Agency in advance of implementation
  3. Timesheets
  4. Paycheques

Accrual

  1. Vacation taken, accrued
  2. Sick leave
  3. Banked Overtime

Employers should also keep records relating to:

  1. Each benefit contract or account with invoices, contracts, reporting and payments for:
    • Union dues
    • Charitable donations
    • Premiums paid by the employer, or withheld to be paid on behalf of employee for provincial medical plans; and/or private benefit programs, health, dental, disability and life insurance, etc.
  2. Source deductions remittances for each period, either weekly, monthly, etc.
  3. Annual reporting to CRA – T4’s, T4A’s, T5018’s, etc. detail and summary
  4. Working paper file reconciling net pay to what was reported to CRA as not everything is reported on a T4

Where can employers find the rules?

Rules about payroll record keeping and reporting is found in a variety of laws in Canada, in each of the provinces/territories, and even municipalities.

There may be guidance to be found in court cases from the many legal jurisdictions in Canada. The federal departments and agencies has a list and each province/territory will have similar lists.

Court cases, legislation and commentary can be found on www.CanLII.org. Learn how the search box works, and you’ll have the latest, most relevant information on any of these topic areas:

  1. Workers Rights in Canada, including the Employment Standards Act(s) are explained on the Service Canada website. Search www.canlii.org – ‘workers rights’ found 138,963 references to cases, legislation and commentary
  1. Worker Safety is administered by agencies in each province/territory under the direction of the Labour Ministry, Canada or in each province/territory, depending on jurisdiction:
    • Labour Canada provides an overview of the federal employee
    • CRA collaborates with WorkSafeBC and has likely been working with other agencies, to share information
    • All corporations and any business with employees are usually required to be registered, and wages and dividends may be assessed
    • There may be optional protection for self-employed individuals
    • The Labour Minister may support employers in their dealings about worker safety and employer responsibilities
    • BC Employers’ Advisers Office
  1. Service Canada is involved in many aspects of employment
  1. Canada Revenue Agency administers the Income Tax Act (federal and provincial/territorial) and has various electronic portals to make taxpayer, business and employer administration easier for employers:
  1. Excise Tax Act – GST/HST may be assessable on benefits and allowances (federal)
  1. Temporary Foreign Worker Program is managed by Employment and Social Development Canada. Find new requirements for employer compliance here.

Employers may also contract with commercial suppliers to provide private benefits, retirement, pension, and other employee programs:

  1. Employee Benefits programs
  2. Employee Stock Option programs
  3. Retirement and pension programs

What role can technology play?

  1. Determining profitability
  • Tracking business performance
  • Calculating ratios for wages, salaries, and benefits as paid
  1. Ensuring correct amounts are calculated to remit source deductions by the due date
  2. Ensuring other liabilities relating to employees are tracked and paid as required
  3. Tracking accruals for vacation, sick leave or overtime liabilities

How can Intuit help?

QuickBooks’ monthly plans include payroll updates. There’s no excuse not to keep proper payroll records.

These are the links to purchase online, download and start today:

Intuit Canada has online learning tools, free training and articles:

Don’t get in trouble with Canada Revenue Agency (CRA)!

Click here to learn more about how payroll works and remember:

  1. Employers are responsible for payroll withholdings
  1. Determine employment status and verify withholdings requirements:
  1. Review all purchases and use of company property and services to identify shareholder and employee benefits, as both cash and non cash benefits must be added to wages, and CPP, EI, WCB/WSIB and GST/HST remittances may apply
  1. Penalties for not filing information returns by the due date are legislated

Other Resources

Important dates for payroll (includes link to information about records retention)

Industry Canada

Download my Sample data file –Payroll Items list has examples of benefits including GST/HST set up per Benefits Chart in T4130 (QuickBooks v2013).

Related Articles

What’s Changed in the New QuickBooks

The new QuickBooks Online bookkeeping software has gone through quite a few changes. As…

Read more

Handling Union Fees

Whether you are employed or self-employed, the Canada Revenue Agency allows you…

Read more

Overtime Rules Canadian Employers Need to Know

Canadian labour laws are set up to protect workers from being overworked…

Read more