Do your pay statements measure up?

For many employees, payday is the most important day in their work schedule. It puts money in their hands or bank accounts and, for some, makes the daily grind of work worthwhile.

While the focus of payday is often on the money, the pay statement that accompanies it is a vital part of the payroll process.

Whether it is called a pay slip, a wage/pay statement, a pay sheet, or something else, the document is an important part of the employer-employee relationship. It is a key communications tool that allows employers to let employees know not only that they were paid, but the details of the pay.

Employees can use their pay statements to keep track of their earnings and deductions, as proof of employment if applying for loans, or to verify that their employer paid them correctly. Pay statements are such an important part of the employment process that every jurisdiction in Canada has included rules for them in their labour standards laws.

Whether an employer has been using the same pay statements for years or is changing them as part of a move to a new payroll system or payroll service provider, payroll professionals should periodically review their statements to ensure that they comply with legislative requirements and good business practices.

Here is a look at some issues to consider when reviewing pay statements.

When to provide pay statements

Most jurisdictions require employers to provide employees with pay statements when they pay wages. However, exceptions apply in some provinces and territories. In Yukon, for example, even though pay periods cannot exceed 16 days, the Employment Standards Act requires employers to provide pay statements to workers at least once a month.

Even though British Columbia requires employers to give employees pay statements on every payday, it allows for an exception when the statement does not change. The Employment Standards Interpretation Guidelines Manual states that, “No wage statement is required when wages and deductions are identical to those given for the previous pay period.”

Manitoba allows for a similar exception. If the amount an employer is paying an employee will not change over a period of time, the employer may give the employee a statement at the beginning of that time period showing the wages to be paid, the wage rate, deductions, and the net amount to be paid on each payday instead of providing a pay statement with each pay.

What to include on pay statements

Each jurisdiction sets its own minimum requirements for what must be included on a pay statement. The requirements vary from a handful of items to a dozen, depending on the jurisdiction. For example, in New Brunswick, the Employment Standards Act requires pay statements to list only the pay period dates, gross wages for the period, deductions and the reason for them, and net pay.

By contrast, the British Columbia Employment Standards Act requires employers to include at least all of the following items on pay statements:

• the employer’s name and address

• the hours worked

• the wage rate

• the overtime wage rate

• the hours worked at the overtime rate

• money, allowances or other payments

• deductions and the reason for them

• how the employer calculated the wages if the employee is paid other than by the hour or by salary

• the gross and net wages

• the amount of banked time used and amount remaining.

Common items that most jurisdictions require on pay statements include pay period date, rate of pay, hours worked, deductions and the reason for them, and net pay. Other requirements may be unique to a jurisdiction or only required in a few provinces/territories.

For example, Quebec is the only jurisdiction that requires employers to include an employee’s occupation on pay statements. Only British Columbia and Prince Edward Island mandate that pay statements include the employer’s address.

For employers with multi-jurisdictional payrolls, the variation in requirements can mean either using different pay statements in different provinces or designing a statement that incorporates the criteria from all of the locations.

Some jurisdictions allow employers to apply to be exempted from legislated pay statement requirements. This applies in Nova Scotia and Quebec and under the Canada Labour Code.

Even if legislation does not require employers to include certain items on pay statements, payroll professionals may want to add them anyway. In a best practices guide on pay statements, The Canadian Payroll Association (CPA) identifies close to 20 items that it recommends employers include on pay statements to help employees better understand the earnings and deductions used to calculate their net pay.

In Pay Statement Guidelines™, the CPA suggests that pay statements include items such as the employee’s and the employer’s name, pay period date, payment date, pay rate and hours worked at that rate, gross earnings, each type of payment being paid, banked overtime used, each deduction itemized, and net pay. The guide is available on the CPA’s website at payroll.ca.

Special rules

In addition to general pay statement rules, Ontario has legislated requirements for issuing statements when employment ends. When there is a termination, employers must give the employee a pay statement on or before the date it pays the employee. The statement must include: the gross amount of any termination pay or severance pay, vacation pay and other wages being paid, the applicable wage rate (if there is one), the amount and purpose of deductions taken, room and board amounts, and net pay.

If wages other than termination, severance or vacation pay are being paid, the employer must specify the pay period to which they relate. The employer must also set out how it calculated the amounts for termination pay, severance pay, vacation pay and other wages unless it provides the employee with that information in some other manner.

Ontario also has rules covering vacation statements. The Employment Standards Act, 2000 allows employees to make a written request to their employer for a statement setting out the vacation time and pay information that the act requires employers to record and retain for each employee.

This includes information on the amount of vacation time each employee has earned since being hired but has not taken before the start of the vacation entitlement year, vacation time earned and taken during the vacation entitlement year or stub period, and the amount of vacation time remaining in the year or stub period.

Employers must also keep records on the amount of vacation pay paid to each employee during the year and stub period and how they calculated it.

A “stub” period is the time between the date an employee is hired and the date his first vacation entitlement year begins if an employer uses a 12-month period other than the employee’s date of hire to determine vacation entitlement.

It can also be the time between the end of a standard vacation entitlement year and the beginning of an alternative one if an employer switches from using date of hire to another 12-month period for vacations.

If an employee requests a vacation statement, the employer must provide it within seven days of the request or by the first payday after the request, whichever is later. However, if the request is for the current vacation entitlement year or stub period, the employer has to provide the statement within seven days after the beginning of the next vacation entitlement year (or first vacation entitlement year if there is a stub period) or by the first payday after the stub period or vacation entitlement year ends, whichever is later.

Employers only have to provide a statement once for each vacation entitlement year or stub period.

An exception applies for situations where an employer pays vacation pay on each payday as it is earned. In this case, employers must report the vacation pay being paid separately from other wages on each pay statement or give the employee a separate statement that shows the vacation pay that is being paid.

Some jurisdictions require employers to provide employees with a statement showing how they calculated payments, if the employee requests it. In the Northwest Territories and Nunavut, employers must comply with an employee request for a detailed pay statement showing the way wages, bonuses and living allowances were calculated.

In Alberta, if an employee requests it, an employer must provide the employee with a detailed statement showing how it calculated the employee’s earnings, as well as the method it used to determine any bonus or living allowance paid to the employee, whether or not it is part of the employee’s wages.

Providing electronic pay statements

Almost all jurisdictions in Canada have provisions in their labour standards laws that set out requirements employers must meet if they want to give their employees electronic pay statements instead of paper ones. In jurisdictions without legislative provisions, some boards have an administrative policy that allows employers to provide statements electronically.

To use electronic pay statements, most jurisdictions require employers to ensure that employees have confidential access to the statements and a way of printing them at the workplace. In Ontario, even though the legislation does not specify confidential access, the Employment Standards Board states that, “Confidentiality will be a reasonable expectation.”

Before using electronic pay statements, payroll professionals should consult the labour standards law in their jurisdiction or contact the applicable labour standards board to ensure their statements will comply with jurisdiction-specific requirements. For example, Quebec’s labour standards body notes that whether a pay statement is on paper or electronic, employers must “remit” it to employees and not just “make it available.” 

The Ontario Employment Standards Board points out issues employers must consider when allowing employees to make a paper copy of an electronic statement. In its Employment Standards Act, 2000: Policy and Interpretation Manual, the board lists the following situations as examples that would not comply with the act’s e-statement requirements:

• employees do not have access to computer equipment and software at the workplace to print pay statements

• employees have access to computer equipment and software at the workplace, but are not trained how to use them

• employers do not provide employees with an e-mail account at the workplace

• employees have to ask others at the workplace (other than their manager) to make a copy for them.

These are just some of the issues that payroll professionals should consider when reviewing their pay statements. If a review results in changes to the statements, it is a good idea to notify employees of the changes made and remind them of the importance of checking their statement with each pay.