Why Is Payroll Compliance Important?
Payroll compliance refers to the adherence to laws and regulations related to employee compensation and benefits. It includes statutory deductions, tax compliance, and other legal requirements. Non-compliance can result in penalties, fines, and even legal action, which can be costly for businesses.
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Statutory deductions are mandatory deductions from an employee’s pay, such as income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums. These deductions are required by law and must be accurately calculated and remitted to the government on time.
In 2021, the CPP contribution rate increased from 5.25% to 5.45%, with a maximum annual contribution of $3,166.45. The EI premium rate also increased from 1.58% to 1.62%, with a maximum annual contribution of $889.54. It is essential to stay updated on these changes to ensure accurate deductions from employee pay.
Tax compliance is another crucial aspect of payroll compliance. Employers are responsible for withholding and remitting income tax from employee pay to the Canada Revenue Agency (CRA). The amount of income tax to be withheld is based on the employee’s tax bracket and the information provided on their TD1 form.
In 2021, the federal tax brackets and rates have been updated, with the top tax bracket now at 33% for individuals earning over $216,511.
It is crucial to ensure that your payroll system is updated with the latest tax rates to avoid any discrepancies in employee pay.
How Can You Ensure Payroll Compliance?
To ensure payroll compliance, businesses must stay updated on the latest laws and regulations and have a robust payroll system in place. Here are some steps you can take to ensure payroll compliance in your organization.
The first step to ensuring payroll compliance is to stay informed about the latest updates and changes in laws and regulations. Subscribe to newsletters, attend webinars, and follow reputable sources to stay updated on the latest payroll compliance news in Canada.
Use a Reliable Payroll System
A reliable payroll system is crucial for accurate and timely payroll processing. It should be able to handle statutory deductions, tax calculations, and other compliance requirements. Consider using a cloud-based payroll system that can automatically update tax rates and other compliance requirements.
Keep Accurate Records
Accurate record-keeping is essential for payroll compliance. Keep track of employee information, pay stubs, and payroll records to ensure compliance with record-keeping requirements. These records may be required for audits or legal purposes, so it is crucial to keep them organized and up-to-date.
Seek Professional Help
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If you are unsure about payroll compliance requirements, it is best to seek professional help. A payroll compliance consultant or an HR professional can assist you in understanding and implementing the latest compliance requirements in your organization.
Latest Payroll Compliance Updates in Canada
Now that we have discussed the importance of payroll compliance and how to ensure it let’s take a look at the latest updates in Canada.
The COVID-19 pandemic has brought about several changes in payroll compliance requirements in Canada. The Canadian government has introduced various measures to support businesses and employees during these challenging times. Some of the changes include:
- The Canada Emergency Wage Subsidy (CEWS) program, which provides wage subsidies to eligible employers to help them retain employees during the pandemic.
- The Canada Emergency Response Benefit (CERB) program, which provides financial support to employees who have lost their jobs or are unable to work due to COVID-19.
- The Canada Recovery Benefit (CRB) program, which provides financial support to self-employed individuals or employees who are not eligible for EI and have lost income due to COVID-19.
It is crucial to stay updated on these programs and their requirements to ensure compliance and take advantage of any available support for your business.
Changes to the Canada Labour Code
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The Canada Labour Code (CLC) sets out the minimum employment standards for federally regulated businesses. In 2020, the CLC was amended to include new provisions for vacation pay, leaves of absence, and termination and severance pay. These changes may affect your payroll compliance requirements, so it is essential to review and update your policies accordingly.
Changes to the Quebec Labour Standards Act
The Quebec Labour Standards Act (LSA) was also amended in 2020 to include new provisions for leaves of absence, vacation pay, and termination and severance pay. These changes may affect your payroll compliance requirements if you have employees in Quebec, so it is crucial to review and update your policies accordingly.
Payroll compliance is a crucial aspect of running a business in Canada. Staying updated on the latest laws and regulations and having a reliable payroll system in place can help you ensure compliance and avoid penalties and legal issues. Seek professional help if you are unsure about any compliance requirements, and stay informed about any changes or updates in payroll compliance news. By following these steps, you can ensure that your business is compliant and avoid any potential issues.