| Payroll and Its Compliance _ Environment Learning Objectives: Upon completion of this chapter, you should be able to: identify four uses of the term ‘payroll’ describe payroll’s objectives pe describe who payroll’s stakeholders are differentiate between federal and provincial/territorial jurisdictions explain how each stakeholder affects payroll processes and procedures apply the Canada Revenue Agency’s factors for determining whether an individual is an employee or self-employed a4 aw Communication Objective: Upon completion of this chapter, you should be able to explain how the employee- employer relationship is determined. (© The Canadian Payroll Association ~ Payroll Compliance Legislation Vs 140 Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Chapter Contents Introduction. Payroll Objectives and Definitions Requirements of a Payroll Practitioner. Payroll Content Knowledge Technical Skills.. Personal and Profes ‘al Skills Behavioural and Ethical Standards The Canadian Payroll Association’s Code of Professional Conduct. Content Review Review Questions .. Payroll Stakeholders . Government Stakeholders Federal Government... Provincial/Territorial Governments . Legislative Change: . Legislative Compliance Self-Assessment. Internal Stakeholders .. External Stakeholders .. Content Review. Review Questions The Employee-Employer Relationship. Contract of Service .. Contract for Service Factors used to determine the type of contract Control .... Tools and Equipment. Subcontracting Work or Hiring Assistants Financial Risk Responsibility for Investment and Management, Opportunity for Profi Content Review. Review Questions Chapter Review Questions and Answer: Scanned with CamScannerChapter 1 Environment Payroll and Its Compliance \d offers many opportunities for in both scause it is dynamic @ II practitioners can expand their knowled tion with these departments in the at the skills and knowledge Il-related definitions, terms and roll practitioner has to deal roups and Payroll is an exciting career choice be personal and professional growth. Payro human resources ice through their int performance of their po chapter we will look required of a payroll practitioner, as well as some basic payro! concepts. We will also discuss the various stakeholders the pay swith and their compliance requirements. These stakeholders include individuals, eencies, both intemal and external, that have an interest in payroll = organization that has employees, as each employee form. While the amount of maximum remuneration ated by any government (unless the ), there is legislation in place at aspects of processing mployees Payroll is a necessary function in every expects to be paid for the work they pert that an employee receives for their work is not legis employee is a federal or provincial/territorial civil servant both the federal and provincial/territorial levels that governs many employees” pay, their taxable benefits and observing their Fights 3 © is course deals with payroll, the function of paying employees cers or contractors, who submit It is important to note that thi for work performed for employers. Self-employed wor ‘ent through accounts payable and not invoices for the work they perform and receive paym« payroll, are not employees. This chapter illustrates how °0 determine if an employee~ Einployer relationship exists. Once an employee-employer relationship ha: the correct method of payment for services can be determined. rovide factors that can be used to determine 4s. It is crucial to know how to detet ion and to ensure that he Québec governments P! Joyer relationship exis 's between the worker and the organizati Both the federal and t! whether an employee-emp! type of relationship that exist any payments made comply with legislation. Scanned with CamScanner s been established, srmine theChapter 1 Payroll and Its Compliance Environment Payroll Objectives and Definitions The primary objective of the payroll function in every organization is to pay employees accurately and on time, in compliance with legislative requirements, for a full annual payroll cycle. Every employee expects to receive their pay on the day it is due in the manner arranged with their employer, either by cheque or direct deposit, In addition to ensuring that employees have been paid, payroll practitioners must also be able to communicate payroll information to all stakeholders. Payroll Compliance Legislation refers to the following concepts. Payroll is the process of paying employees in exchange for the services they perform. The term payroll can refer to: * the department that administers the payroll Example: The payroll department in Chambers Inc. has three full-time employees. * the total number of people employed by an organization Example: Chambers Inc. has 78 people on payroll. * the wages and salaries paid out in a year Example: The total 2020 payroll for ‘Chambers Inc. was $4,250,000.00, Allis of employees to be paid and the amount due to each Example: Chambers Inc, — cue December 20, 2019 payroll — (Partial details are Provided in this Adams, Fred : 83 Berlin, Kelly 33 Boon Matthews, James Perley, Olive 2 fsa Total Payroll $157 Tee ©The Canadian Pagaiy 0 yl Cor Han Payroll Associa i I Scanned with CamScanner__Chapter 1 Payroll and Its Compliance Environment Legislation refers to laws enacted by a legislative body. In Canada there are many legislative sources that payroll practitioners must comply with at two separate levels — the federal and the provincial/territorial governments. Later in the chapter we will explore the compliance requirements for the various pieces of legislation from these sources. Compliance is the observance of official requirements. For payroll practitioners, this means performing payroll functions according to federal and provincial/territorial legislative and non-governmental stakeholder requirements, The legislative requirements are termed statutory. This means they are enacted, created, or jovernment.. Fines and regulated by statute, a law enacted by the legislative branch of penalties can be imposed if an organization is not in compliance with the legislative requirements in each jurisdiction. When dealing with federal and provincial/territorial government agencies, payroll practitioners must know the many pieces of legislation that regulate their work and the compliance requirements associated with each. Payroll practitioners are responsible for ensuring their organization is compliant with all payroll related legislation, thus eliminating the potential for any fines or penalties. In payroll, there are also compliance requirements from other non-government stakeholders, for example, union collective agreements or group insurance policies. Payroll practitioners must therefore ensure the organization is compliant with all stakeholder requirements. 1 © The Canadian Payroll Association — Payroll Compliance Legislation Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Requirements of a Payroll Practitioner Those who work in payroll need specific information and skills to assist them in their role as effective payroll practitioners, as illustrated in the following diagram. Diagram 4-1 ~ Payroll Pra‘ itioner Knowledge INFORMATION SKILLS * Payroll Compliance . Technical Skills © Payroll Processes © Personal Skills «Payroll Reporting «Professional Skills PAYROLL PRACTITIONER KNOWLEDGE The responsibilities of the payroll practitioner will differ depending on the size of the organization, the number of jurisdictions in which they pay, the reporting structure under which they work, and whether there are other related departments, such as human resources, finance and administration in the organization. ‘Small and medium-sized organizations may have payroll practitioners whose positions include other functions that, in a larger organization, would fall under other departments, This payroll practitioner may be required to handle multiple tasks, such as employee recruitment, human resource policy development, benefits administration, accounts payable, accounts receivable, budgets and/or administration. These practitioners must have excellent knowledge of all areas for which they are responsible and be aware of the resources available to provide advice and information. Larger organizations may have a distinct payroll department with specific payroll positions, in addition to separate human resources, accounting and administration groups. Even in a ulti departmental organization, payroll practitioners must have knowledge of the various eee ae Ie eyele of an employee. From hiring through termination of employment, stag. cl Fl aaa iges will impact how to produce the employee's pay and prepare required (© The Canadian Ba ian Payroll Association — Payroll Compliance Legislation re Scanned with CamScanner mmm meee eeece nevv Ue Chapter 1 Payroll and Its Compliance Environment The payroll department in a large organization may have: * payroll administrators who are responsible for entering payroll data into the system and making required payroll remittances * payroll coordinators who are responsible for preparing the payroll journal entries and reconciling the payroll related accounts * payroll managers who manage the payroll function, the payroll staff and represent Payroll at the management level Payroll Content Knowledge Payroll practitioners should know the following to effectively perform their duties: * Payroll Compliance Legislation: the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act, Employment/Labour Standards, privacy legislation, Workers’ Compensation and provincial/territorial payroll-specific legislation * Payroll Processes: the remuneration and deduction components of payroll and how to use these components to calculate a net pay in both regular and non-regular circumstances * Payroll Reporting: how to calculate and remit amounts due to government agencies, insurance companies, unions and other third parties. In addition, payroll reporting includes accounting for payroll expenses and accruals to internal financial systems and federal and provincial/territorial year-end reporting. Technical Skills -d by payroll professionals include proficiency in computer programs such as payroll software and financial systems, spreadsheets, databases and word processing. Organizations often change their payroll and business systems to meet new technology requirements and corporate reporting needs. It is important for payroll personnel to have the ability to be adaptable to changing systems. As a payroll practitioner, you must be prepared and willing to embrace continuous learning. a Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Personal and Professional Skills The following personal and professional skills will assist payroll practitioners in dealing with the various stakeholders involved in the payroll process: «written communication skills, such as preparing employee emails and memos, ‘management reports, policies and procedures and correspondence with various levels of government verbal communication skills, to be able to respond to internal and external stakeholder inquiries ‘© the ability to read, understand and interpret legal terminology found in documents such as collective agreements, benefit contracts and government regulations # excellent mathematical skills to perform various calculations «problem solving, decision-making, time management and organizational skills, Behavioural and Ethical Standards Behaviour and ethics are two areas that build on the skills that an effective payroll practitioner must have. Effective payroll professionals should be: «trustworthy, as the potential for fraud is ever present ‘© conscientious, with a keen attention to detail * discreet, due to the confidential nature of information being handled + tactful in dealing with employees who can be very sensitive when discussing their financial issues perceptive, able to understand all sides of an issue * able to work under the pressures of absolute deadlines . oe to use common sense in order to recognize problems quickly and apply sound solutions * able to remain objective and maintain a factual perspective when dealing with questions and inquiries © The Canadian Payroll Association Py ayroll Compliance Legislation Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment The Canadian Payroll Association’s Code of Professional Conduct Given the significant impact of payroll on organizations and the high potential for ethical issues in this area, the Canadian Payroll Association has created its own Code of Professional Conduct to guide members and ensure the integrity of payroll. The Code of Professional Conduct provides the minimum standards of professional behaviour that apply to all members and students, and addresses issues around personal ity and integrity. The Code reflects the Association's values of community, accountabi professionalism and authoritative knowledge, and holds Association certification holders, members and students to a high ethical standard. The Code of Professional Conduct is available on the Association's website, www.payroll ca. 9 The Canadian Payroll Association ~ Payroll Compliance Legislation Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Content Review tive of the payroll function in every organization is to ‘urately and on time, in compliance with legislative requirements, for a full annual payroll eyele: Payroll is the process of paying employees in exchange for the services they perform Legislation refers to laws enacted by a legislative body. Compl nce is the observa ail requirements Payroll practitioner knowled legi ‘onsists of information on payroll compliance ation, payroll processes and payroll reporting as well as technical, personal and professional skills The Canadian Payroll Association ~ Payroll Compliance Lagislavon isi Scanned with CamScannerChapter 1 Invironment Payroll and Its Compliance Review Questions 1. What is the primary objective of the payroll department? 2. List four definitions of payroll. ‘© The Canadian Payroll Association ~ Payroll Compliance Legislation Ln Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Payroll Stakeholders Stakeholders are the individuals, groups nncies, both internal and external to the organization, who share est in the function and output of the payroll department. Stakeholders can be ¢: customers of the payroll department and payroll practitioners ‘can take a proactive customer service approach to serving these individuals and groups. holders are the federal and provincial/territorial governments, the keholders, Internal stakeholders include employees, the organization. External stakeholders include benefit carriers, pension providers, charities, third party administrators and ‘outsource/sofiware vendors. The stakeholders of the payroll function are illustrated in Diagram 1-2. Payroll management si internal stakeholder Diagram 1-2 - Payroll Management Stakeholders 12 Scanned with CamScannerChapter 1 nee Environment Payroll and Its Compli Government Stakeholders Government legislation provides the rules and regulations that the payroll function must administer with respect to payments made to employees. For this reason. it is important for the payroll practitioner to understand both the scope and the source of payroll-related legislation. Canada is ruled by a federal government with ten largely self-governing provinees and three territories controlled by the federal government. Payroll practitioners have to be compliant not only with the federal government legislation, but with the provincial and territorial nas well. governments’ legislat As a result, payroll practitioners and their organizations are affected by the enactment of legislation at both the federal and provincial/territorial level The federal parliament has the power to make laws for the peace, order and good government of Canada. The federal cabinet is responsible for most of the legislation introduced by parliament, and has the sole power to prepare and introduce tax legislation involving the expenditure of public money. The provincial/erritorial legislatures have power over direct taxation inrthe province or territory for the purposes of natural resources, prisons (except for federal penitentiaries), charitable institutions, hospitals (except marine hospitals), municipal institutions, education, licences for provincial/territorial and municipal revenue purposes, local works, incorporation organizations, the creation of courts and the administration of justice, I Laws. of provincial/territo fines and penalties for breaking provincial/territo Both the federal and provincial/territorial governments have power over agriculture, immigration and certain aspects of natural resources. Should their laws conflict, federal law prevails, In the case of old age, disability, and survivor's pensions, again both the federal and provincial/territorial governments have power. In this instance, if their laws conflict, the provincial/territorial power prevails. The federal government cannot transfer any of its powers to a provincial/territorial legislature, nor can a provincial/terrtorial legislature transfer any of its powers to the federal government. The federal government can, however, delegate the administration of a federal act to a provincial/territorial agency, and a provincial/territorial legislature can delegate the administration of a provincial/territorial act to a federal agency. Example: Asalll provinces and territories (except Québec) have delegated the administration of the collection of income tax deductions to the federal government, the Canada Revenue Agency (CRA) collects income tax withheld from employees under both federal and provincial/territorial requirements. Québec collects its provincial income tax directly. ‘© The Canadian Payroll Association ~ Payroll Compliance Legislation Scanned with CamScanner —Chapter 1 Payroll and Its Compliance Environment Federal Government The Constitution Act of 1867 outlined the division of legislative power and authority between federal and provincial/territorial jurisdictional governments. The exclusive legislative authority of the Parliament of Canada extends to all matters regarding: ‘regulation of trade and commerce + Employment Insurance * postal service «fixing and providing salaries and allowances Government of Canada for civil and other officers of the © navigation and shipping ferries between a province and any British or foreign country or between two provinces «criminal law, except the Constitution of Courts of Criminal Jurisdiction, but including ‘The Canada Labour Code is legislation that consolidates certain statutes respecting labour. Part I deals with Industrial Relations, Part If deals with Occupational Health and Safety and Part I/I deals with Labour Standards. The primary objective of Part III is to establish and protect employees’ and employers” rights to fair and equitable conditions of employment. Part III provisions establish minimum requirements concerning the working conditions of employees under federal jurisdiction in the following industries and organizations: © industries and undertakings of inter-provincial/territorial, national, or international nature, that is, transportation, communications, radio and television broadcasting, banking, uranium mining, grain elevators, and flour and feed operations organizations whose operations have been declared for the general advantage of ‘Canada or two or more provinces, and such Crown corporations as Canada Post Corporation, and the Canadian Broadcasting Corporation (CBC) (© The Canadian Pa Payroll Association ~ Payroll Compliance Legislation 1s Scanned with CamScannerChapter 1 vironment Payroll and Tts Compliance Provincial/Territorial Governments Under the Constitution Act of 1867, the exclusive legislative territories exists over: uthority of the provinces and territories the irding property and civil rights, which give the prc © all laws rej authority to enact legislation to establish employment standards for working conditions manufacturing, mining, construction, wholesale and retail trade, * employment service industries, local businesses and any industry or occupation not specifically covered under federal jurisdiction ig divisions between federal and provincial/territorial control impact payroll when islated dealing with employmenv/labour standards. Employment/labour standards are rules | diction that dictate issues such as hours of work, m by each provincial/territorial juri Wage, overtime, vacation pay and termination pay requirements. Example: The Gap is a retail business with stores across Canada. The workers in each store are governed under the employment/labour standards legislated in the jurisdiction in which they Work. For example, the minimum general hourly wage in effect January 1,2019 (which is governed by provincial/territorial employment/labour standards) is higher in Ontario than in Prince Edward Island. An employee working in Ontario would receive a higher hourly minimum wage than an employee with the same position in Prince Edward Island. Employers must follow the employmenv/labour standards legislated by the jurisdiction in which their employees work, unless they are governed by federal labour standards. Federal labour standards apply to certain industries and organizations, regardless of where the employees work The person or persons performing the payroll function must clearly understand under which employment/labour standards jurisdiction the employees of the organization fall Organizations may have some employees who fall under federal jurisdiction and another group of employees who fall under provincial/erritorial legislation. Example: Shipping and navigation employees, including dockworkers, oil-rig workers, etc., fall entirely within the federal jurisdiction. Only seamen working exclusively in one province/territory would be under provincial/territorial jurisdiction. rs (© The Canadian Payroll Association ~ Payroll Compliance Legislation Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Legislative Changes Federal and provincial/territorial legislation, and amendments to existing legislation and regulations, can affect the operations of a payroll department, as the requirement to comply with the new or amended legislation must be satisfied. Legislation determines what the rules are, while regulations determine how the rules are to be applied. Example: ‘The Income Tax Act The legislation: Specifies that employers are required to withhold income tax from employees. ‘The regulation: Specifies the taxation methods that should be used for non-periodic payments such as bonuses, retroactive pay increases, lump sum payments, ete. ‘The methods for calculating income tax deductions are specified by the federal government through regulations. Example: Non-periodic bonus payments ~ Where a payment in respect of a bonus is made by an employer to an employee whose total remuneration (including the bonus) from the employer may reasonably be expected (0 exceed $5,000 in the taxation year of the employee in which the payment is made, the amount to be deducted or withheld by the employer is dictated through a calculation prescribed in the regulation within the Act, Legislative change can prove to be anything but routine, particularly if the change is implemented at a time other than at the beginning of a calendar year, or involves some sort of retroactivity. The change may involve a series of adjustments to individual payroll accounts and extra work for the payroll department to finalize reconciliations and year-end balancing requirements. © The Canadian Payroll Assocation Payroll Compliance Legislation 1-16 Scanned with CamScanner 8 mm @ eG EEEGe.Qe7 VY! CUUUUUE Payroll and Its Compliance Envi [ Example: - The 2017/2018 tax rates as follows ichewan Budget included a reduetion to the 2017 personal income Jan 2017 | July 2017 2017 Average | 11% 10.5% 10.75% | 13% 5 12.75% Over $129,214 15% 14.5% Z 14.15% | | slation, is constantly being changed, 1 to keep up-to-date with the changes In general, legislation, and in particular, labour le amended, repealed or revised. As a result, it is essen in the jurisdiction(s) in which your organization operates. the media, In large organizations, human Changes in legislation are generally publicize resource departments, tax specialists and corporate legal departments often provide this type of information, However, in both large and small organizations, the payroll practitioner should be proactive in keeping abreast of changes and bringing them to the attention of those involved. There are many ways to keep informed of changes that impact payroll. The following are some of the resources available to the payroll practitioner: The Canadian Payroll Association offers a phone and email information service, Payroll InfoLine, for members” payroll related questions. The Association also has a website for members, www.payroll.ca, that contains guidelines, legislative updates and other useful payroll related information. As well, the Association is available on Twitter, @cdnpayroll The Canada Revenue Agency (CRA) produces guides, publications, Income Tax Bulletins, folios and Circulars, posts news bulletins and enables participation on an electronic mailing list with e-mail alerts for new content to the site ~ www.cra- are.ge.ca “The Revenu Québec (RQ) website provides guides, publications, bulletins, forms, . online services and enables participation on an electronic mailing list with e-mail notifications of tax news articles - www.revenuquebec.ca © Employment/labour standards (federal, provincial and territorial) publications and websites. Each jurisdiction has a website providing information on their employment/labour standards. For example, the websites for Alberta and Québec are: Alberta — https://employment.alberta.ca/SFW/1224.html Québec — www.cnt.gouy.ge.ca/en © Employment and Social Development Canada (ESDC) and Service Canada (SC) publications including information regarding the Employment Insurance (El) program and the Social Insurance Number — www. a rir ‘© The Canadian Payroll Association — Payroll Compliance Legislation Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment es of volumes on employment and labour law, © CCH Canada Limited publishes a seri ation with regular pensions and benefits, et. that supplies information on te updates as changes become law — ww © Carswell publishes The Canadian Payroll Manual and offers a phone ani service to subscribers — www.carswell.com id email sh government websites as well as from the printing torial governments. Copies of legislation are available throu offices of the federal, provincial and te Legislative Compliance In addition to payroll’s primary role of paying employes practitioners are also directly or indirectly responsible for Compliance with the requirements of various government compliance (for example, remittance of payroll soure Employment Insurance premiums, and federal and provin Froome tax deductions) there are financial penalties or the possibility of legal action to encourage compliance. es accurately and on time, payroll supporting and/or ensuring acts, Where legislation requires ‘e deductions, Canada Pension jal/territorial result of audits and legal action. These Fines, penalties and interest charges are typically @ s, fines of $1,000 to $25,000, and in some may result in seizure of bank accounts and/or asset cases, jail sentences up to 12 months. Government departments and agencies responsible for administering legislation employ a variety of systems for tracking compliance. Some systems, such as the monitorins of source Jenction remittances, are ongoing, with regimented reporting time frames that lay down a ceetinual audit trail. Failure to meet the requirements of this legislation will ineur a rapid response that may result in fines and penalties Reporting requirements that do not involve ongoing, regular reporting may not impose an immediate fine but may initiate a visit from an auditor or other official seeking compliance. Example: nee of Employment (ROE) issuance allure to issue a ROE within the established deadlines may result i investigative officer from Service Canada. aan ‘it from an Some complianc mee lane ystems operate quarterly or annually, and the observations raised by these additional information or e3 i in some cases, equest for a supplementary payment and/or a fine. al ‘© Canaan Payoll Association ~ Payroll Compliance Legslaiou nm 04 i 'ayroll Compliance Legislat 118 Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Example: The Canada Revenue Agency's Pensionable and Insurable Earnings Review (PIER) is an sstem utilizes the data provided on the T4. ¢ the amounts of CPP contributions and EL annual compliance review system. TI ion slips issued at year-end to validat Payroll departments can establish internal controls to ensure all legislative requirements are met in a timely manner. To ensure compliance, a checklist can be maintained showing all Payments and reports due for the month, and signed off by the individual responsible. Self-Assessment Both the federal and provincial/territorial tax systems are based on the principle of self- ‘assessment. This means that taxpayers and their agents, including employers, are responsible for calculating, reporting and remitting their contributions and the amounts withheld within the prescribed deadlines, As administrators of the tax system, the Canada Revenue Agency (CRA) and Revenu Québec (RQ must ensure that each individual and organization is compliant and pays all of the amounts owing. Both the CRA and RQ recognize that taxpayers and agents are entitled to plan their affairs so that they pay only the amounts that are legally due. It is acceptable to take advantage of tax rules to minimize the amount of taxes paid. It is not lawful, however, to evade taxes owed by failing to report income, failing to remit taxes due or providing the CRA or RQ with false information. Internal Stakeholders Internal stakeholders are those individuals or departments closely related to the organization that the payroll department is serving. This group includes employers, employees and other departments in the organization Employers - Management may require certain information from payroll to make sound business decisions. Example: Reporting the amount of overtime worked by a certain department may influence decisions regarding staffing availability for upcoming projects and requirements for increased resources. Legislation ro (© The Canadian Payroll Association ~ Payroll Compl Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment ay is received in a timely and accurate manner to Employees — Employees require that their p ‘iso be assured that their personal information is meet personal obligations. Employees must kept confidential. Example: Judy Smith, Payroll Manager of Blown December 3 stating that the pay cheques would be issued on December 20 this year. s advance of the Christmas break. Glass Inc. sent a memo to all employees on that normally would be issued on December 23 so all employees would receive their pay well in [Any changes that will impact an employee’s net pay should be ‘communicated in advance for personal planning purposes. Example: ‘The payroll department of Macrosoft included a notice in the June 7 pay statements that advised employees that an additional $5.00 would be deducted from their pay as of July 5, due to increases in the cost of dental plan insurance premiums. \ Other departments ~ Many departments interact with payroll, either for information or reporting. According to the Canadian Payroll Association’s 2019 National Payroll Week (NPW) Payroll Professional Research Survey fifty-five percent of payroll practitioners report through the finance department and thirty-two percent repor through the human recources department, Information such as general ledger posting, payroll and benefit costs dnd salary information must flow between payroll, human resources and finance in formats needed for their various requirements, In addition, other departments such as contracts and manufacturing often need payroll information for budgeting, analytical and quality purposes. Example: Changes tthe ite for Canada Pension Plan contributions and Employment Insurance rmiums will affect departmental expenses and should be communi 0 n s unica s responsible for the budget process. mies io these (© The Canadian Payn {10ll Association ~ Payroll Compliance Legislation 120 Scanned with CamScannerawe ee ~Payroil and 1S nor internal stakeholders. re neither governme the payroll function. C esponsibility of the payroll departin ‘cheque from accounts pa pliance with external 1. In most cases. ble and send it to yet have a close working relat Makeholder requirements is also e that payroll request compliance will requi the extemal organization along with supporting documentation Benefit Carriers are insurance companies that provide benefit coverage to employers Pay ic responsible for dicing and remitting premiums forthe insurance coverage 10 the loyce enrolment and coverage levels. carriers and for providing reports on emp! Example: Blossom Packaging provides its employees with g1 Consensus Insurance Co. Blossom Packaging remit employer premiums and a listing of current employees © amount of their coverage. ge through \ cand roup insurance cove! ts, on a monthly basis, the employe -overed under the plan with the 1 to accurately deduct and remit amounts ordered to be Courts and the CRA require payrol ments to pay and support Withheld through garnishments, third party demands, require deduction orders. Example: ‘Astor Resorts, an Ontario employer, is required to withhold 30% of James Robinson's net jourt, The organization remits this pay under a Support Deduction Order issued by the c 's and schedule of the order, to the Family Responsibility withholding, according to the term Office. ccurately deduct and remit union dues and initiation fees, and to llective agreement are adhered to. It is estimated that just under ings to a trade union. Payroll professionals must be ie unions and the responsibilities of the employer Unions require that payroll act ensure that the terms of the col one-third of the workforce in Canada belo: familiar with the role and activities of trad and the payroll department in a unionized environment. collective bargaining, the wages, benefits, yyment on behalf of their member agreement, which is a legally binding Trade unions negotiate with the employer, through allowances and other terms and conditions of employ employees. The outcome of negotiations is a collective contract between the employer, the union and the employees. ‘© The Canadian Payroll Association ~ Payroll Compliance Legislation Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Example: Every employee who is a member of the union has signed documentation allowing Mesa ‘Manufacturing to withhold $10.00 per pay for union dues. The organization withholds the dues and remits them to the union according to the schedule in the collective agreement, Pension Providers are third party pension plan providers that may require payroll to provide enrolment reports on participating employees and length of service calculations, and to remit employee deductions and employer contributions. Example: Velars Corp. contributes an amount equal to 5% of each employee's earnings to the organization’s registered pension plan. Each month, paytoll prepares a list of employees enrolled in the plan, their eligible earnings and the organization’s 5% contribution. The detailed list is sent to the pension plan administrator along with the cheque for the contributions. Charities have arrangements with some organizations to facilitate employee donations through payroll deductions. Payroll is responsible for remitting these deductions to the charity. Example: ‘A common charitable donation facilitated by payroll is to United Way/Centraide. Employees \will sign up to donate a certain contribution per pay and payroll will withhold and remit the contributions to the charitable organization on a regular basis. Third Party Administrators are organizations that affect the administration of the payroll function. Examples of these external stakeholders are banking institutions or benefit organizations that offer Group Registered Retirement Saving Plans (RRSP). Payroll is responsible for deducting any employee contributions and remitting employer and employee contributions to the plan administrator. Example: Legrand Industries offers a group RRSP to employees, with contributions made through payroll deduction. Employees sign up to contribute a certain amount or percentage of their earnings per pay and payroll will withhold and remit the contributions to the plan ‘administrator on a regular basis, according to the plan document. ‘© The Canadian Payroll Association ~ Payroll Com, iance Legislation a 12 Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Outsource/Software vendors are payroll service providers or payroll software vendors that work with the payroll department to ensure the payroll is being processed accurately and efficiently. Example: Martel Box has hired an external service provider to process thi responsible for ensuring all earning: with government legislation. artel Box is stil ly, in compliance ir pay. and deductions are calculated corre 123 {© The Canadian Payroll Association ~ Payroll Compliance Legislation Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Content Review Stakeholders are the individuals, groups and the organization, who share an interest in the agencies, both internal and external to function and output of the payroll department. © Payroll management stakeholders are the governments, ‘the internal stakeholders, Internal stakeholders include employees, emp! 1e federal and provincial/territorial and the external stakeholders. loyers and other departments within the organization. « Extemal stakeholders include benefit carriers, courts, unions, pension providers, charities. third party administrators and outsource/software vendors. «The federal parliament has the power to make laws for the peace, order at government of Canada. The provincial/erritorial legislatures have power over provinceiterritory for provincialterrtorial purposes. Federal control exists over industries and undertakings of inter-provincial/territorial, tional or international nature and organizations whose operations have been actared for the general advantage of Canada or two or more provinces and Crown nd good direct taxation in the corporations. Provincialterritorial legislation exists over all laws regarding property and civil rights, and employment in manufacturing, mining, construction, wholesale and retail qhade’ service industries, local businesses and any industry or occupation not specifically covered under federal jurisdiction. + Employers must follow the employment/labour standards legislated by the jurisdiction in which their employees work, unless they are governed by federal Jabour standards. + Where legislation requires employer com possibility of legal action to encourage compliance. pliance, there are financial penalties or the (© The Canadian Pay ‘roll Association — Payroll Compliance Legislation 124 Scanned with CamScanneri G G EEA MEE UU GEGY Review Questions 3. List the three types of payroll manay 4. 5. 1 jgement sta jon the following employees akeholders and provi an example of cach. by placing an “X" in the Indicate under which jurisdi appropriate column. JURISDICTION = 4 ROVINCL AN EMPLOYEE OF ... ~ FEDERAL OS UTrORIAL \ Canada Post Corporation — — ‘An insurance company _| ‘A uranium mining compan \ ‘Canadian Broadcasting Corporation ‘A retail department store with locations in every province ‘A chartered bank Explain the difference between legislation and regulation What are two examples of sources of in to-date on payroll compliance changes? List three external st formation that you use (or could use) to keep up- takeholders and explain their compliance requirements. «dian Payroll Association ~ Payroll Compliance Legislation Scanned with CamScannerChapter 1 Payroll an The Employee-Employer Relationship establish whether the relationship between the worker and ‘ker is self-employed. d Its Compliance Environment Inall situations, it is necessary to the organization is one of an employee and an employer oF if the worl gs and the requirement ie oreronship determines the requirement for statutory withho}dip lation, The Canada Revenue Agency (CRA) has established for compliance with related legisl encanto assist in determining whether or not this relationship exists Itis not up to the saver to decide whether of not they are an employee, subject 10 statutory withholdings. «role in communicating the importance of determining the Payroll can take a proactiv i ployer relationship to all areas of the organization existence of the employee-em ationship exists, payroll has a compliance responsibility hich requires that all employees have the appropriate pay and remitted to the government. When an employee-employer rel: related to statutory withholdings, wt statutory deductions withheld from their employer to: Where an employee-employer relationship exists, the CRA requires the swith the Canada Revenue Agency for a Business Number (BN) la Pension Plan (CPP) its paid to register withhold the statutory deductions of income tax, Canad contributions, and Employment Insurance (EI) premiums on amount employees © remit the am contributions and EI pre ‘« report the employees’ income and dedu ive the employees copies of their T4 slips by the end of February of the following calendar year ‘ounts withheld as well as the required employer's share of CPP ms to the Canada Revenue Agency ns on the appropriate information return Information on the factors to consider when determinin; format ig whether an employee-empl relationship exists can be found in the Canada Revenue ‘Agency suide, Einployee or Self Employed? ~ RC4110. The guide is available on the CRA’s website, www cra-are.gc.ca. ‘The factors used by the Canada Revenue Agency and Revenu Québec to determine whether enue Agen vi i 1 venue A termi an employee-employer relationship exists in Québec will be discussed in a later chapter. Contract of Service A contract of service is a is an arrangement whereby an individual (the employee) agrees t 0 work on a full-time or part-tis 's for an employer for a specified o1 ; pal ete} of time, part-time basis for loyer fc ifi determinate perio late pei Under a contra rly serves another in return for a salar; er fot ict of service, one party serves ‘lary or some other ‘© The Canad anadian Payrol roll Association — Payroll Compliance Lagi islation OO eee Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Contract for Service A contract for service is a business relationship whereby one party agrees to perform certain specific work stipulated in the contract for another party. It usually calls for the accomplishment of a clearly defined task but does not normally require that the contr party do anything him/herself, A person who carries out a contract for service may be considered a contract worker, a self-employed person or an independent contractor: Example: Diesan Electronics is located in the Greenbank Busin« company has a parking lot and green space surrounding the building. D Frank Oxford to do landscaping work and snow removal when required. Frank has a team of six workers who perform the work at all his clients’ sites. Frank has a contract for service with Diesan. Park area of Swift Rapids. The an has contracted A business relationship is a verbal or written agreement in which a self-employed individual agrees to perform specific work for a payer in return for payment. There is no employer or employee. The self-employed individual generally does not have to carry out all or even part of the work himself. In this type of business relationship, a contract for services exists. The self-employed individual is required to produce a given result within a period of time in the manner he deems most appropriate. While performing the work, he is not under the orders or control of the person for whom he is doing the work and he can use his own initiative in matters that are not specified or determined at the outset. The payer is not normally involved in the performance of the work and, therefore, has no control over it. Under a contract for service, a self-employed individual assumes the chance of profit and risk of loss. By agreeing, before he is engaged, to establish the overall cost of the work to be done, owning his tools and instruments and being solely responsible for the manner in which the work is done, the self-employed individual assumes all risk of loss resulting from events that occur during the course of the work which were not, or could not, be foreseen when the contract was negotiated. If, on the other hand, the work is completed sooner or more easily than expected, the contractor's profit will be greater. A contract for service is often used when an organization wishes to have work done which does not fall within its usual scope of operations, The relationship between a payer and a self-employed individual and that between an employer and their employees are sometimes quite similar. The main difference between the two relationships is that, in a contract for service, the party paying for the service is entitled to dictate what is to be done or what result is to be achieved; whereas, in a contract of service, the employer is also entitled to stipulate the manner in which the work is to be done. © The Canadian Payroll Association — Payroll Compliance Legislation ne Scanned with CamScannerChapter 1 Payroll and Tis Compliance Environment Under a contract for service, the person for whom the work is being done exercises general Supervision. He can and should sce thatthe work js completed in accordance with the fareement, but itis not up to him to give oners Yo the self-employed individual regarding the veh the work is to be done. The mere fact that a self-employed individual ng the work to be done does ‘manner in whic maseives general instructions from the project manager On en ot mean that he can be considered an employee wo oa ‘An employee-employer relationship is deemed to exist where the organ} ation exercises, OF uo direct control over the individual. If the organization jis unsure as to oO o os thas the right to exe vit ather or not a relationship exists, the Canada Reysii ‘Agency (CRA) form Request for a Ruling as to the Status of a Worker under the ‘Canada Pension Plan and/or the Employment Insurance Act ~ CPTI should be submitted to the CRA. A sample of the CPTI form is provided at the end of this section. o Independent contractors or self-employed individuals are not considered employees of the ou organization provided no employee-employer velationship exists. Persons who are truly self- ad individuals will submit invoices and be paid through accounts payable. However, employ thesubmission of an invoice to accounts payable is ot sufficient to determine if the individual is self-employed. Factors used to determine the type of contract ‘The CRA uses a two-step approach to examine the relationship Perea the worker and the payer for relationships outside the province of Québec. ‘The approach used for relationships in the province of Québec will be discussed in a later chapter. Step 1: ‘The first step isto establish what the intent was when the worker and the payer entered into the working arrangement. Did they intend to enter into an employee-employer relationship (Conc 7 service) or did they intend to enter into a business relationship (contract for service), The CRA must determine not only how the working relationship hi | but why it was defined that way. ° aes Step 2: fie Gea then considers certain factors when determining if a contract of service or a ire ec teeecn In order to understand the working relationship and verify that the cr and the payer is reflected in the facts ill ask a ser ieee ewe eee in the facts, they will ask a series of questions the level of control the payer has over the worker oe i i oe provides the tools and equipment siete ; es al subcontract the work or hire assistants. ncial risk taken by the worker © The Canadi radian Pi ayo Asosaon =P on = Payroll Compliance Lagi ” -gislation a Tae Scanned with CamScannerEFA SIO GE _ 7 oe Chapter 1 a Payroll and Its Compliance Environment * the degree of responsibility for investment and management held by the worker + the worker's opportunity for profit ¥y other relevant factors, such as written contracts The CRA will look at the answers i lependently and then together and consider whether or mot they reflect the intent that was originally stated, Considered individually. the response to each of these questions is not conclusive: however, when weighed tozether, certain conclusions may be drawn. When thete is no common intent, the CRA will decide if the answers are more consistent with a contract of service oF a contract for service Each of these factors will be discussed in the material and indicators showing whether the worker is an employee or self-employed will be provided Control The ability, authority or right to exercise control over a worker concerning how the work is done and what work is done is one of the factors considered, as is the degree of independence held by the worker. Both the payer’s control over the worker’s daily activities and the payer's influence over the worker will be examined. The relevant factor is the payer’s right to exercise control. Whether the payer actually exercises this right is irrelevant INDICATORS THAT THE. | INDICATORS THAT THE | WORKER IS ANEMPLOYEE | _,,, WORKER IS A SELF- te oo ONEMPLOYEE | __ EMPLOYED INDIVIDUAL Control + The relationship is one of | * Individual usually works subordination. independently, does not have + The payer will often direct, anyone overseeing them. scrutinize, and effectively | * ‘The worker is usually free to control many elements of work when and for whom they how the work is performed. choose and may provide their * ‘The payer controls both the services to different payers at the same time. results of the work and the method used to do the work. | * The worker can accept or refuse + The payer determines what work from the payer. jobs the worker will do. * The working relationship between the payer and the worker does not present a degree of continuity, loyalty, security, subordination, or integration. * The worker receives training or direction from the payer on how to do the work. 129 ‘© The Canadian Payroll Association — Payroll Compliance Legislation Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Tools and Equipment Ownership of tools and equipment is not, in itself, a determining factor relating to establishing the type of contract in effect. The fact that workers use their own equipment ‘when performing their work is not sufficient to conclude that they are self-employed Self-employed individuals often supply the tools and equipment necessary to complete & contract, making their ownership commonly associated with a business relationship; however be required to provide their own tools. ‘employees can In an employee-employer relationship, the employer generally supplies the equipment and tools required by the employee. In addition, the employer covers the following costs related to their use: repairs, insurance, transport, rental and operation (for example, fuel). In some trades, however, itis normal for employees to supply their own tools. This is senerally the ease for auto mechanics, painters and carpenters. Similarly, employed computer scientists, architects and surveyors sometimes supply their own software and instruments: Ina business relationship, workers generally supply their own equipment and tools and cover costs related to their use, When workers purchase or rent equipment or large tools that require a major investment and costly maintenance, it usually indicates that they are self- employed individuals as they may incur a financial loss when replacing or repairing their equipment. The relevance of the ownership of tools and equipment is inthe size of the investment along with the cost of repair, replacement and insurance. INDICATORS THAT THE | INDICATORS THAT THE FACTOR | WORKER IS AN EMPLOYEE WORKER ISA SELE EMPLOYED INDIVIDUAL Toolsand —|+ The payer supplies most of | * ‘The worker provides the tools equipment the tools and equipment. and equipment required and is ©The payer retains the right of | fesponsible for the cost of use over the tools and repairs, insurance and equipment provided to the maintenance and retains the right worker. over the use of these assets. * The worker supplies the tools |* The worker supplies his or her and equipment and the payer | Wn workspace, is responsible reimburses the worker for for the costs to maintain it, and their use. does substantial work from that site. Scanned with CamScanner mememeeeeee etPayroll and Tits Compii Subcontracting Work or Hiring Assistants As subcontracting work or hiring a loss, this can help detern tants ean affect a worker's chance of profit or risk of ine the type of business relationship. Chapter 1 ¢ Environment INDICATORS THAT THE INDICATORS THAT THE, FACTOR WORKER IS AN WORKER IS A SELF- EMPLOYEE EMPLOYED INDIVIDUAL Subcontracting | + work or hiring assistants o The worker cannot hire . helpers or assistants. The worker must perform the services personally. “The worker does not have to perform the service personally; they can hire another party to complete the work, without consulting with the payer. Financial Risk The CRA will examine if there are any fixed ongoing costs incurred by the worker or any expenses that are not reimbursed. Employers will usually reimburse employees for any expenses incurred in the performance of their job. Self-employed individuals can have financial risk and incur losses as they usually have ongoing monthly expenses whether or not work is being performed. Both employees and self-employed individuals may be reimbursed for business or travel expenses, however it is the expenses that are not re imbursed that are examined. INDICATORS THAT THE, INDICATORS THAT THE FACTOR | wo 1S AN EMPLOYEE WORKER IS A SELF- aS : |___ EMPLOYED INDIVIDUAL The worker is not usually responsible for any operating expenses. © The worker is not financially liable if he or she does not fulfill the obligations of the contract. + The payer determines and controls the method and ‘amount of pay. Financial risk | + “The Canadian Payroll Association — Payroll Compliance Legislation The worker is financially liable if he or she does not fulfill the obligations of the contract. The worker does not receive any protection or benefits from the payer. The worker hires helpers to assist and pays them. ‘The worker advertises the services offered. 13! Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Respon: y for Investment and Management If the worker is required to make an investmen evidence that a busin contract for service i affect their profits or los in order to provide the services, this relationship may exist. Another factor indicating the existent ® ofa the worker is responsible for making the business decisions that INDICATORS THAT THE INDICATORS THAT THE FACTOR WORKER IS AN WORKER IS A SELF- EMPLOYEE EMPLOYED INDIVIDUAL Responsibility |* The worker has no capital © The worker has capital | for investment | investment in the business: investment, manages his or her and © The worker does not have a staff, hires and pays individuals | management business presence. to help perform the work, and has established a business presence. Opportunity for Profit 'A business relationship likely exits where the worker can realize a profit of incur a loss as this indicates the worker controls the business aspects of the services rendered. Self- employed individuals have the ability to accept contracts as they wish. They can negotiate thevate for their work and can accept more than one contract at the same tm®, In order to tarry out the terms and conditions of their contract, they often incur expenses which they must manage to increase their profit. Employees normally do not have a chance of profit or a risk of loss While some employees who are paid by commission have an opportunity to inerease their earnings based on their sales, this is not a profit as it is not an excess of income o wer expenses. As well, employees tenerally donot share in profits or suffer losses incurred by the business they work for. ‘The CRA will look at the degree to which the worker can control their revenues and expenses. They will also look at the method of payment. Employees are typically guaranteed their earings according to an established rate (hourly, daily, weekly, annual frequency. While self-employed individuals may be paid on an hourly bi a flat rate for the work performed, they incur expenses while performing the services. 1) and pay . if they are paid t generally indicates a business relationship, especially if FACTOR for profi i profit realize a business profit or loss. ‘The worker is entitled to benefit plans that are normally only offered to employees, © The Canadian Py ‘roll Association — Payroll Compliance Legislation a “inpicaTors THAT THE | INDICATORS THAT THE WORKER IS AN EMPLOYEE ale eR SELF. Opportunity |* The worker isnot ina position to | ED INDIVIDUAL The worker is compensated by a flat fee. ‘The worker can hire and pay a substitute. Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Wel Sayre arena” REQUEST FOR A RULING AS TO THE STATUS OF A WORKER UNDER. “THE CANADA PENSION PLAN AND/OR THE EMPLOYMENT INSURANCE ACT {Genera Information ttyou are an enployer and you ar aig fora refund ot CPP contributes or Epronioms et farm P24 stead tun o CPP cortadins ou Sahedl ot orm CRG, wchave a e504 ond Sched 3,4 egptonbie, Aesh ow rat 0 yu adore ax ret ityou are a worker and you ae aking lta ‘eked of promo, iat Schedule 10" form rplymant etuatons, I you are having eeu In decking wheter a worker in an eo not iste rugs or hypoatino ropes tua Rew iomn irseyee oa sl-eloyed nual Canada salnovenusagencyivenieefornepubiialenspublestions. Nn. or ang oso whether a work employrentisprsionsbie Aworer, payer, oan authorized oprotentatve can use his formto ask Sharma ‘Under he Ganada Pension Pan andthe Employmont Insurance Ac, you ean requet a rung before June 20 cl hey Yosrto whch the gus ralalas ‘Fi out form or submat an oning Request CPP! rung using My Accum My Business Account or Representa ert pot, For more formation ge to canada cult logic Incl a copy of relevant documents such ax contract, agreements, ropa, routing sheet, nes, ivoces antes, logs, work Sched ey stp, te ttyour request involves more than one worker, isle a of names, phone numbers (resist business, coll), adresses and _205alinourmee numbers ora workers involves. Mako such after each ferent ype of employment if sepesble, yor, sacha ct business and contact name, adresses, and phone numbers for al payers Fox ormal eventing the CPPIEI Rulngs Dison ine province otertoy ot your restence or place of busines, according tothe Excormal 98 f 9 hyo cf provinces and Teritoree| Fax nurbers| Addresses New Saran TEASE [love nia TSO swear oe Lebar [bxeso, sy conet how Soa tics B36 [Pinoy Ens aret [ater THERHEEATE Emsam Ooaes TSO 7 Ss hora Be [auiteoce aia Ns Fonavak TET SHOR [Seay TSO jonas 1 aseae-1509 180 ove Due Av. Sudtury ON POA ct fara EA aBC STEN [peg TSO Kasra [zs Bray INow est Teritores jtnpep a ac aTs [Sstchenan [Bram cab aaa TS Nansen TS. Ivhon 735 King George Bt [suney 60. S21 ‘Wie wil review you request andl enlosed documents bere contacting the worker and payer by telephone, In wing, orn parson for ‘ssional formation ‘Aner analyzing allot the information, we wllsue «dessin lata tothe workor and tho payer who will have the right appeal our Canada enue (Cetemulsi et epenbi on tangas) ‘© The Canadian Payroll Association — Payroll Compliance Legislation Scanned with CamScanner 133Chapter 1 Payroll and Its Compliance Environment meV sgreegprons protected 8 ten cmp ag To THESTATUS OF AWORKER UNDE REQUEST FOR A RULING A oof Tis EMPLOYMENT INSURANCE act “THE CANADA PENSION PLAN outta she best ct yout Trae engoperonmensna ean? Leese tae ow a rom, R6. jouw aerate sac 7 tr peasants ec oy ene TD aa ATO So ae ama a paper pao rae po ame obo bores Worker ienttiation aoe ain name ord Le S~S eee | aegmn nae Sam gamer onnommen [BSR On ot ated! Pee seaieaioy E ] cE ] alse zi i Toni = Year Wont Day ssc at bet ot krone — watts eoend te at consi a ange Fate wd » ol eae gems es Pn wl ta eco q wtomwncrpee leas os mao eatiene at Seip scien Se cat meters zi aie it tlt ea Seheepeerees ieiaeestareanamnece acca sn cigtaiectrcenaro pic aucsnastegeenasersnceaaies ec dominance hace es Garvan camiota tc om rs Ses Sera nor ema 1 perl enone) Canada (cota ‘The Canad iain Payrol yall Association = Payroll Compliance Legislatior Scanned with CamScanner___ Chapter 1 Payroll and Its Compliance Environment Content Review © Accontract of service is an arrangement whereby an individual (the employee) agrees to work on a full-time of part-time basis for an employer for a specified or indeterminate period of time. agrees to perform A contract for service is a business relationship whereby one party certain specific work stipulated in the contract for another party. ©The CRA uses a two-step approach to examine the relationship between the worker and the payer for relationships outside the province of Québec. . ity, authority or right to exercise control over a worker concerning how the work is done and what work is done is one of the factors considered, as is the degree of independence held by the worker. The relevant factor is the payer's right to exercise control. ‘The relevance of the ownership of tools and equipment is in the size of the investment along with the cost of repair, replacement and insurance. © The CRA will examine if there are any fixed ongoing costs incurred by the worker or any expenses that are not reimbursed * The CRA will look at the degree to which the worker can control their revenue and expenses. ‘© The Canadian Payroll Association — Payroll Compliance Legislation ro Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Review Questions 8, What s the difference between a contract of service and a contract for service? 9, What are the factors that the Canada Revenue Agency (CRA) considers when. determining if a contract of service or a contract for service exists? (© Mh Canal Paral Assocation ~ Payroll Complianse Ly a ITA 7 smpliance Legislatio a 136 Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment 10. Please consider the following scenario. You are a payroll professional working for a large manufacturing company. Your organization has had many change initiatives over the last number of years including three mergers and two large group terminations. Your company endorses the use of rather than growing the number of permanent employees. F, who is the Chief Financial Officer of the company, to ate with the Accounts Payable Department to ensure consultants Write a memo to your supervis explain why your role must coord that these payments are being handled correctly. Please prepare your answer in a separate document. 137 ‘© The Canadian Payroll Association — Payroll Compliance Legislation Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Chapter Review Questions and Answers 1. What is the primary objective of the payroll department? ees accurately and department is to pay employ “oll Jative requirements for a full annual payr ‘The primary objective of the payroll ‘on time, in compliance with the legis cycle. 2. List four definitions of payroll. «the department that administers the payroll 2 the total number of people employed by an organization «the wages and salaries paid out in a year 2 alist of employees to be paid and the amount due to each 4, List the three types of payroll management stakeholders and provide an example of each. lers are government (federal and (employees, employers and other departments) and pension providers, charities, third party Payroll management stakehold provincial/territorial), internal external (benefit carriers, courts, unions, administrators and outsource/software vendors). 4, Indicate under which jurisdiction the following employees fall by placing an “X” in the appropriate column ene es JURISDICTION | MPL 5 PROVINCIAL/ FEDERAL. : - ae TERRITORIAL ‘Canada Post Corporation x | ‘An insurance compan} Xx \ ‘A uranium mining company x Canadian Broadcasting Corporation x ‘A retail department store with locations in every | province x [A chartered bank x 5. Explain i ‘plain the difference between legislation and regulation. Legislation determines what the e ; a ibe seater rules are, while regulations determine how the rules ‘© The Canadian Payroll Asocation ~ Payroll G mpliance Legislation latio ee 1-38 Scanned with CamScannerPayroll and Tis Compliance Environment «< of sources of information that you use (or could use) to keep up- 6. What are two example: to-date on payroll compliance changes? © The Canadian Payroll Association offers Payroll In service for members ey (CRA) produces g1 tions and Income ‘eulars, posts news bulletins and enables .-mail alerts for new content to ada Revenue Ager Bulletins, folios and C ion on an electronic mailing list with e- ions, bulletins, forms, the site The Revenu Québec (RQ) website ovides guides, publi ation on an electronic mailing list with e-mail services and enables partic notifications of tax news articles Employment/labour standards (federal, provincial and territor} ervice Canada (SC) nce (EL) ) publications and websites Employment and Social Development Canada (ESDC) and Si publications including information regarding the Employment Insura program and the Social Insurance Number CCH Canada Limited publishes a series of volumes on employment and labour law, pensions and benefits, etc., that supplies information on legislation with regular updates as changes become law Carswell publishes The Canadian Payroll Manual and offers a phone-in service to subscribers ices of the federal, provincial Copies of legislation are available from the printing offi and territorial governments as well as through government websites. 7. List three external stakeholders and explain their compliance requirements. Benefit Carriers — Payroll is responsible for deducting and remitting premiums for the insurance coverage to the carriers and for providing reports on employee enrolment and coverage levels. Courts and the CRA ~ Payroll must accurately deduct and remit amounts ordered to be withheld through garnishments, third party demands, requirements to pay and support deduction orders. Unions — Payroll must accurately deduct and remit union dues and initiation fees, and ensure that the terms of the collective agreement are adhered to. plan providers may require payroll to Joyees and length of service Pension Providers — Third party pension ployer contributions. provide enrolment reports on participating emp! calculations, and to remit employee deductions and em © The Canadian Payroll Association — Payroll Compliance Legislation Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment fate employee donations to charitable Charities - Some organizations will facilit: Payroll is responsible for remitting these organizations through payroll deductio deductions to the charity. ‘ons that affect the administration of the ‘al stakeholders are banking institutions istered Retirement Saving Plans ny employee contributions and nistrator. ‘Third Party Administrators are or Examples of these ext br benefit organizations that offer Group Re (RRSP). Payroll is responsible for deducting remitting employer and {butions to the plan a J employee cor jders or payroll software vendors ayroll service prov is being processed 1 to ensure the payroll Outsource/Soft work with the payroll de} accurately and efficiently. 8, What isthe difference between a contract of service and a contract for service? ‘dual (the employee) ment whereby an indivi Jloyer for a specified or for an emp! marr: ‘A contract of service is a 24 me or part-time ba: agrees to work on a full indeterminate period of time. ereby one party agrees to a business relationship wh ther party. ik stipulated in the contract for ano} ‘A contract for service perform certain specific wor fa Revenue Agency (CRA) considers when he Canadi service exists? 9. What are the factors that t ff service or a contract for determining if a contract o} fetermining if a contract of service or 2 ‘The CRA considers certain factors when di contract for service exists. In order to understand the working relationship and verify that the intent of the worker and the payer is reflected in the facts, they w ill ek a series of questions that relate to the following factors: the level of ‘control the payer has over the worker ‘whether or not the worker provides the tools and equipment «whether the worker can subcontract the work or hire assistants «the degree of financial risk taken by the worker © the degree of responsibility for investment and management held by the worker «the worker's opportunity for profit «any other relevant factors, such as written contracts ‘The Canadian Pi “The Canadian Payroll Association ~ Payroll Compliance Legislation Scanned with CamScannerSN NSN Chapter 1 Payroll and Its Compliance Environment 10, Please consider the following scenario. ‘You are a payroll professional working for a large manufacturing company. Your ion has had many change initiatives over the last number of years including nd two large group terminations, Your company endorses the use of 's rather than growing the number of permanent employces. Write a memo to your supervisor, who is the Chief Financial Officer of the company. to explain why your role must coordinate with the Accounts Payable Department to ensure that these payments are being handled correctly. Please prepare your answer in a separate document. 141 {© The Canadian Payroll Association ~ Payroll Compliance Legislation Scanned with CamScannerChapter 1 Payroll and Its Compliance Environment Ultra Manufacturing To: Virginia Wolff, CFO From: Sheila Fraser, Payroll Supervisor Accounts Payable Supervisor cc: TomS\ Date: January 12,20XX Re: Contractor Payments .d the increase in the number payable (AP). We have y self- ‘At the last weekly Finance meeting, Tom and I discusse' of contractor invoices being processed through accounts vine concerns as to whether these individuals would be considered ul employed by the Canada Revenue Agency (CRA), or whether the CRA would determine them to be employees. self-employed, then pa} handled by AP. If, however, the worker is employee, they would have to be set up on payroll, as they ‘would be in receipt of sevens from employment, subject to al legislated statutory withholdings. have attached the CRA’s form Request for a Ruling as 10 the Status of a Worker under the Canada Pension Plan andior the Employment Insurance Act ~ CPT! for your information. This form can be completed by the company and sent with xpporting documentation, such as the terms and conditions of the contract, fora ruling from the CRA on the individual's status. ordinate with the Accounts Payable Department to handled correctly. yyment, on submission of an If the worker is considered considered an invoice, will continue to be J think that Payroll must co ensure that these payments are being Tom and I would be pleased to meet with you to ensure yall legislative requirements. Would you be avai the company is in compliance wit able next Friday morning at 10:00 to discuss? Sheila Fraser (© The Canadian Pi ian Payroll Association ~ Payroll Compliance Ley iplance Legislation 2 Scanned with CamScanner