Breaking down Canada’s new payroll laws
January is among the busiest months for payroll. Besides preparing for year-end reporting, payroll professionals have to make sure that they have incorporated new Jan. 1 rates and rules into their payroll systems. Whether payroll is in-house or outsourced, employers are ultimately responsible for complying with payroll-related laws.
To help payroll departments stay on top of changes, here is an overview of important payroll-related rates and rules for 2017:
Federal updates
CPP:
• Maximum pensionable earnings: $55,300
• Employer and employee contribution rate: 4.95 per cent
• Annual basic exemption: $3,500
• Maximum annual employer and employee contribution: $2,564.10
EI:
• Maximum insurable earnings: $51,300
• Employee premium rate: 1.63 per cent (outside Quebec); 1.27 per cent (in Quebec)
• Maximum annual employee premium: $836.19 (outside Quebec); $651.51 (in Quebec)
• Employer premium rate: 1.4 times the employee rate unless the employer has a government-approved reduced premium rate
• The government has reduced the waiting period for EI benefits from two weeks to one week, which may impact employers with reduced EI premium rates and those with top-up benefit plans.
Income tax:
• Federal personal income tax rates remain unchanged from 2017, although due to indexing of the income tax system, the income thresholds for each rate have changed. The Canada Revenue Agency (CRA) has published updated income thresholds in the Jan. 1, 2017, edition of its Payroll Deductions Formulas for Computer Programs (T4127) and Payroll Deductions Tables (T4032). The guides also include provincial/territorial indexing changes for 2017, where applicable.
• The 2017 deduction for the Canada Employment Credit is set at the lesser of $1,178 and the employee’s income for the year, multiplied by 15 per cent, the lowest personal income tax rate.
LSVCC tax credit phase-out:
• Effective Jan. 1, the government eliminated a tax credit for federally registered labour-sponsored venture capital corporations (LSVCCs); however, a federal tax credit for provincially registered LSVCCs still applies.
Provincial updates
Alberta
The government will increase the province’s general minimum wage rate from $12.20 an hour to $13.60 on Oct. 1. Other minimum wage changes are listed on the province’s Employment Standards website (https://work.alberta.ca/employment-standards.html).
British Columbia
Beginning Jan. 1, the government changed the way it sets premium rates for the provincial Medical Services Plan (MSP). It eliminated premiums for children under 19 years of age and set the premium rate that an adult couple pays at twice the rate for single adults. The maximum premium rate for a single adult is $75. For a couple, it is $150.
The government also decreased premium rates for residents who receive premium assistance. Information on premium assistance rates is on the MSP’s website at www2.gov.bc.ca/gov/content/health/health-drug-coverage/msp.
The government is expected to raise provincial minimum wage rates on Sept. 15. Officials say it could rise from $10.85 an hour to $11.25 and the rate for liquor servers could increase from $9.60 an hour to $10.00. The government is expected to confirm 2017 rate changes in March.
Manitoba
As of Jan. 1, the government began indexing the province’s personal income tax brackets and the basic personal amount that employees claim on a Manitoba TD1 to changes in the consumer price index. For 2017, Manitoba is using an indexing factor of 1.5 per cent.
New Brunswick
On Jan. 1, the government implemented amendments to the province’s Employment Standards Act that affect pay statements and employee records. The changes require employers using electronic pay statements to ensure that employees have a way to make a paper copy of them. The amendment applies in addition to other provisions in the act that require employers using electronic statements to provide employees with confidential access to them in the workplace.
The amendments also require employers to make and retain records on the date each employee’s employment ends. The changes are part of Bill 30, An Act to Amend the Employment Standards Act, which the provincial legislature passed last year.
Newfoundland and Labrador
The government raised personal income tax rates as of Jan. 1 to 8.7 per cent, 14.5 per cent, 15.8 per cent, 17.3 per cent, and 18.3 per cent. These are also the pro-rated rates that applied for the last six months of 2016 due to rate changes that took effect in July.
A new tax implemented last July continues to apply for 2017. The Temporary Deficit Reduction Levy applies to provincial residents whose annual taxable income exceeds $50,000. Employers are required to collect the levy from employees through income tax source deductions. The amount deducted depends on the employee’s income. The CRA lists the deduction formulas in its T4127 and T4032 guides. The levy will remain in effect until the end of 2019.
Nova Scotia
On Jan. 1, the government implemented rules for employers who wish to give their employees electronic pay statements. The province’s Labour Standards Code now allows employers to use electronic statements as long as they provide their employees with confidential access to the statements and a way to make a paper copy of them at the workplace.
On Jan. 1, the government also enacted amendments to the code affecting employer records, including requirements for employers to keep records on gross earnings, the amount and purpose of each deduction and the net amount paid to an employee each pay period. Previously, the code specified only that employers had to keep a record of each employee’s wage rate and all pay paid to them.
Prince Edward Island
On Jan. 1, the government enacted amendments to record-keeping provisions in the Employment Standards Act passed last year. The changes harmonize rules in Prince Edward Island with those in New Brunswick and Nova Scotia.
With the amendments, the act now requires employers to retain records on statutory holiday pay due or paid to an employee, any period during which an employee was on a leave of absence and the reason for the leave, and on dates of and notices for dismissals, suspensions and layoffs.
Quebec
QPP:
• Maximum pensionable earnings: $55,300
• Employer and employee contribution rate: 5.4 per cent
• Annual basic exemption: $3,500
• Maximum annual employer and employee contribution: $2,797.20
QPIP:
• Maximum insurable earnings: $72,500
• Employee premium rate: 0.548 per cent
• Employer premium rate: 0.767 per cent
• Maximum annual employee premium: $397.30
• Maximum annual employer premium: $556.08
Income tax:
• There are no personal income tax rate changes for 2017, but due to indexing of the income tax system, income thresholds for each rate have changed. Revenu Québec also revised its Source Deductions Return (TP-1015.3-V) to incorporate indexation changes and an increase in the minimum age at which individuals can claim an age amount tax credit from 66 years to 67. The change is part of the government’s plan to gradually raise the eligibility age for the tax credit to 70 years by 2020.
• On Jan. 1, the government eliminated its mandatory health contribution. Provincial residents aged 18 and over were required to pay the contribution (unless exempted) if their income exceeded a specified threshold. Employers no longer have to deduct the contribution from employee’s earnings.
• The threshold for determining whether to use Revenu Québec’s bonus method to calculate income tax source deductions on bonuses and retroactive pay increased from $14,450 to $14,550 for 2017.
Labour Standards Levy:
On Jan. 1, the government lowered the rate used to calculate its labour standards levy from 0.08 per cent to 0.07 per cent. Employers who have employees working in Quebec are subject to the levy, which helps to finance the labour standards component of the Commission des normes, de l’équité, de la santé et de la sécurité du travail (CNESST). The maximum amount subject to the levy increased from $71,500 per employee to $72,500 for 2017.
HSF:
On Jan. 1, the government reduced the Health Services Fund (HSF) contribution rate for small and medium-size businesses (SMBs) whose total annual payroll is less than $5 million.
For eligible employers in the primary and manufacturing sectors, the following HSF rate reductions apply:
• For SMBs whose total annual payroll is no more than $1 million, the HSF rate decreased from 1.6 per cent to 1.55 per cent. The change is part of a plan to gradually reduce the HSF rate to 1.45 per cent by 2021.
• For SMBs whose total annual payroll is more than $1 million, but less than $5 million, partial rate reductions apply. For 2017, the HSF rate is based on the formula 0.8725 per cent + (0.6775 per cent × employer’s total payroll for the year)/$1 million.
For other SMBs, the following HSF rate reductions apply:
• For SMBs whose total annual payroll is no more than $1 million, the HSF rate decreased from 2.7 per cent to 2.5 per cent. The government will gradually reduce the rate to 2.0 per cent by 2021.
• For SMBs whose total annual payroll is more than $1 million, but less than $5 million, partial rate reductions apply. For 2017, the HSF rate is based on the formula 2.06 per cent + (0.44 per cent × employer’s total payroll for the year)/$1 million.
The HSF contribution rate remains 4.26 per cent for employers whose total annual payroll is $5 million or more.
What to watch for this year:
In jurisdictions that index their minimum wage rates, payroll professionals can expect minimum wage changes this year. Nova Scotia and Yukon change their rates Apr. 1, while Ontario and Saskatchewan implement rate changes Oct. 1. Federal and provincial/territorial budgets could bring further changes.
