From statutory deductions to health levies, a new year brings changes for payroll
Staying on top of the myriad of payroll-related changes at this time of year can be a challenge. To make it a little easier, here is a rundown of some rate and rule changes for 2018 that payroll professionals should implement if they have not already done so:
Federal updates
CPP:
•Maximum pensionable earnings: $55,900
•Employer and employee contribution rate: 4.95 per cent
•Annual basic exemption: $3,500
•Maximum annual employer, employee contribution: $2,593.80.
EI:
•Maximum insurable earnings: $51,700
•Employee premium rate: 1.66 per cent outside Quebec; 1.30 per cent in Quebec
•Maximum annual employee premium: $858.22 outside Quebec; $672.10 in Quebec
•Employer premium rate: 1.4 times the employee rate unless the employer has a government-approved reduced premium rate.
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, 2018, edition of its Payroll Deductions Formulas (T4127) and Payroll Deductions Tables (T4032). The guides also include provincial/territorial indexing changes for 2018, where applicable.
The 2018 deduction for the Canada Employment Credit is the lesser of $1,195 and the employee’s income for the year, multiplied by 15 per cent, the lowest personal income tax rate.
On Jan. 1, the government eliminated a deduction that employees could claim for taxable home relocation loans that they received from their employer under certain conditions. Employers were required to report the deduction on the employee’s T4.
The following maximum contribution rates apply for 2018:
•Money purchase pension plans: $26,500.00
•Deferred profit-sharing plans: $13,250.00
•RRSPs: $26,230.00
•Defined benefit pension plans: $2,944.44.
Year-end reporting:
Employers who meet specified criteria may now distribute T4s electronically to employees without first having to obtain their consent. To do so, employers must, by Feb. 28, provide employees with a secure portal and site to access and print their T4s and give them the option to receive paper copies of the form if they request it.
Employers who do not meet these criteria will have to continue providing employees with two paper copies of the form unless they already have their written or electronic consent to deliver the form electronically.
Despite the new rules, employers will have to continue using paper T4s if an employee requests it, or if at the time the employer issues the T4, the employee is on an extended leave or is no longer employed by the employer, or the employee cannot reasonably be expected to have access to an electronic T4.
The change applies only to T4s and not to other federal year-end forms. Revenu Québec has implemented similar rules for distributing RL-1s.
Provincial updates
Alberta: On Jan. 1, the government implemented wide-ranging changes to the province’s employment standards rules. For more information, see the article New workplace rules in Alberta, Ontario in this issue.
British Columbia: On Jan. 1, the government implemented a new income tax rate of 16.8 per cent for individuals with an annual taxable income greater than $150,000.
On Jan. 1, the government reduced monthly premium rates for the provincial Medical Services Plan (MSP) from to $75 to $37.50 for a single adult and from $150 to $75 for a couple.
New Brunswick: The province will celebrate Family Day for the first time this year. The new statutory holiday, which falls on the third Monday in February, will take place on Feb. 19.
Nova Scotia: On Jan. 1, the government raised the basic personal amount claimed on a TD1NS by up to $3,000 (from $8,481 to $11,481) for individuals with taxable incomes of no more than $75,000. The full $3,000 increase applies to individuals whose taxable income does not exceed $25,000. For taxable income above $25,000, the $3,000 increase is reduced by six per cent of taxable income over $25,000. The basic personal amount remains $8,481 for individuals with taxable incomes of $75,000 or more.
Ontario: On Jan. 1, the government implemented a number of changes to its employment standards rules. For more information, see the article New workplace rules in Alberta, Ontario. On Jan. 1, the government raised the general minimum wage rate from $11.60 an hour to $14.00. The move is part of a plan to increase the rate to $15.00 by next January. Other minimum wage rates also went up on Jan. 1.
Saskatchewan: On Jan. 1, the government temporarily halted annual indexing of the province’s personal income tax system. The change affects provincial taxable income brackets and personal amounts claimed on a TD1SK. The government said the suspension would remain in effect until the province’s finances improve.
Quebec:
QPP:
•Maximum pensionable earnings: $55,900
•Employer and employee contribution rate: 5.4 per cent
•Annual basic exemption: $3,500
•Maximum annual employer and employee contribution: $2,829.60.
QPIP:
•Maximum insurable earnings: $74,000
•Employee premium rate: 0.548 per cent
•Employer premium rate: 0.767 per cent
•Maximum annual employee premium: $405.52
•Maximum annual employer premium: $567.58.
Income tax:
On Jan. 1, Revenu Québec incorporated into its source deduction tables and formulas a drop in the tax rate for the first taxable income bracket from 16 per cent to 15 per cent. In November, the government announced that the lower rate would apply beginning in 2017, but it would not change employer source deductions until 2018. Individuals will benefit from the lower rate for 2017 when they file their 2017 tax returns.
The change in the lowest tax rate also affects the rates used for calculating lump-sum tax rates and tax credits for volunteer firefighters and search and rescue volunteers. It is now also the rate used for calculating certain tax credits on a Source Deductions Return. Last year, the government announced that it would begin using the rate for the first tax bracket for calculating the tax credits instead of the 20 per cent rate that applies for second tax bracket.
HSF:
On Jan. 1, the Quebec 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 whose total annual payroll is no more than $1 million, the rate is 1.5 per cent for 2018. The government plans to gradually reduce the rate to 1.45 per cent by 2021.
For SMBs in the primary and manufacturing sectors whose total annual payroll is more than $1 million, but less than $5 million, the HSF rate is calculated using the following formula: 0.81 per cent + (0.69 per cent × employer’s total payroll for the year)/$1 million. This will apply from 2018 to 2020.
For other SMBs whose total annual payroll is no more than $1 million, the rate is 2.3 per cent in 2018. The government plans to gradually reduce the rate to 2.0 per cent by 2021.
For other SMBs whose total annual payroll is more than $1 million, but less than $5 million, the rate is calculated using the following formula for 2018: 1.81 per cent + (0.49 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.
Labour standards levy:
For 2018, the maximum remuneration amount (per employee in Quebec) is $74,000. The contribution rate remains at 0.07 per cent.
Note: Government budgets — usually released between February and May — could bring further changes.
