Session Title: Canadian Payroll Presented by : David Reichert Date: October 13, 2017

1. Session Title: Canadian Payroll Presented by: David Reichert Date: October 13, 2017

2. Presenter David Reichert President PSI Payroll Services Inc.

3. Why Canadian Payroll? • 1 or more employees resident in Canada • US based employees traveling to Canada frequently to work • Canadian residents working in the US and being paid equalization amounts (ex-pat employees)

4. Getting Started with Canadian Payroll • First Steps • Determine if you should establish an entity in Canada • Register with Canada Revenue Agency to obtain a Business Number and the relevant sub-accounts • Register with the provinces where business will be conducted to establish extra-provincial corporation • Register with the provincial Workers Comp agency in provinces where employees will be situated

5. Key Differences Betweenthe US and Canada Key Differences between US and Canada • Employee Status (no exempt/non-exempt) • Statutory Holidays (9 to 10 days/year) • Vacation time (minimum 2 weeks) • Vacation pay (no use it or lose it) • Pay frequency- minimum twice/month in most jurisdictions • Terminations (no at will employment) • Notice period or Pay in lieu • Severance pay / Retiring allowance • Record of employment-required

6. Determining the Province of Employment/Taxation

7. Determining the Province of Employment/Taxation • Employee’s province of employment may differ from their province of residence, the province which they are covered for employment standards and workers compensation • Province of Employment is either where the employee reports to work or where the business is located and from where the employee’s wages are paid.

8. Determining the Province of Employment/Taxation • Employees working in Canada for a company that does not have a business establishment in Canada are considered to be employed “beyond the limits of any province”, taxation code ZZ • Very important with regard to provincial obligations, especially for employees resident in Quebec.

9. Payroll Deductions • Statutory- Government Pension, Employment Insurance, Tax • Mandatory- Garnishments, Company benefit plan, Union • Voluntary- RRSP (401K), Supplementary benefits, etc

10. Calculating Canada/Quebec Pension Plan Contributions (CPP/QPP)

11. CPP/QPP Contributions • Contributions must be deducted if an employee: • Has pensionable earnings • Has reached age 18 and is under age 70. No age maximum in Quebec. • Is between the ages of 60 and 70*, and receiving CPP/QPP retirement pension. (*After 65 an employee can submit a CPT30 form to the employer to elect to stop deductions) • Is not receiving disability benefits from the CPP/QPP plan

12. Employment Insurance

13. EI Employer Premium Reduction • Employer premium rate of 1.4 x employee contribution can be reduced if there is a short term disability program in place that meets certain criteria – including sharing benefit reduction savings with employee. • Will require a second business number to report those employees on premium reduction plan. • Plan no longer needs to be approved annually by HRSDC

14. Quebec Parental Insurance Plan (QPIP) • provides temporary financial maternity, paternity, parental, and adoption benefits to eligible Québec residents who take time off work and have an interruption of earnings. • For Québec residents only, QPIP coverage only applies to the above benefits rather that EI. EI continues to cover other benefits such as regular, sickness and compassionate care.

15. Other Taxation Issues- Employee • Bonus Taxation Method applied to bonuses, pay in lieu of notice, vacation pay- employee’s highest marginal tax rate • Severance/ Retiring Allowance taxed at lump-sum rates (10, 20 or 30%)determined by the size of payment. • Commissions are taxed taking into account expenses eligible for deduction against earned income.

16. Other Taxation Issues- Employer • Provincial Health and Education Taxes in Quebec, Manitoba and Newfoundland • Employer Training ( Quebec Workforce Skills Development Fund) – payroll over $2 million • Employee Medical Premiums in BC- often paid by employers

17. Approximate 2017 Employer Cost • CPP/QPP $2654.10 / $2797.20 • EI Can / QC $1170.67 / $912.11 • QPIP QC only $556.08 • Health Tax Ontario 1.95% of ON payroll over $450,000 • Health Tax Quebec 4.26% of all Quebec payroll • Workers Comp industry and province specific rates

18. Vacation (PTO) • In most cases, employees start at minimum 2 weeks (trend to 3 weeks) • Generally it is accrued the year before they are entitled to take it • In most jurisdictions, pay out of vacation time is discouraged/non-compliant – intent is for employees to have paid time off

19. Statutory Holidays • All employees must be paid normal wages • Employees working an holiday must be paid time and a half, plus holiday pay

20. Statutory Holidays • January 1- New Year’s Day • 2nd or 3rd Monday in February in most provinces • Good Friday • 3rd Monday in May, Victoria Day • June 24, Quebec only • July 1, Canada Day • 1st Monday in August, most provinces • 1st Monday in September, Labour Day • October- Thanksgiving Day • November 11- Remembrance Day- most provinces • December 25- Christmas day • December 26- Boxing Day- Ontario only

21. Other Benefits Supplementary Health, Dental, Disability Etc. • Certain premiums are taxable benefit, eg: group term life, AD&D • All employer paid premiums are taxable benefit in Quebec • No coverage is mandatory

22. Other Benefits RRSP • Tax protected savings plan- similar to 401k • Employer contributions are taxable benefit • Both employee and employer contributions are tax deductible within annual limits • Severe penalties for over-contribution • Employee responsible for monitoring limits

23. Terminations • Rules are similar but do vary by province • Generally 1 week per year of service is minimum notice required • Each province has slightly different rules re timing of final payments • Record of Employment must be issued within 5 days of termination • Minimum payments as set out in Employment Standards may be completely unacceptable if employee chooses legal challenge

24. Employee or Self-employed • Criteria used to decide status: • Subordination in the performance of work • Financial or economic criteria • Ownership of tools • Integration of tasks carried out by worker

25. Year-end Issues • T4 and Quebec Releves must be filed and distributed to employees by February 28 • Provincial Workers Comp annual reconciliations due February 28 except March 15 in Quebec and March 31 in Ontario • Ontario Employer Health Tax annual retrun due March 15

26. Year-end Issues • Expect notifications of any changes for CRA, RQ or Workers Comp remitting schedules or rates by December 1 • If applicable Reduced EI rate for following year will be sent before end of year • Very important to note all of above and advise payroll provider to avoid penalties.

27. Year-end Issues • Beginning with 2017 year-end, T4s and RLs can be distributed electronically without requirement of employee permission

28. Canadian Payroll Overview Presented by David Reichert President 1-866-302-5926 ext 222 dreichert@psipayroll.com

29. Thank You!