Summarizing legislative updates, from statutory deductions to payroll levies
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, below is a rundown of some rate and rule changes for 2019 that payroll professionals should be implementing:
CPP: On Jan. 1, the federal government began implementing contribution rate increases for the plan.
Between 2019 and 2023, the CPP rate will gradually rise from 4.95 per cent to 5.95 for earnings up to the yearly maximum pensionable earnings (YMPE).
In 2024, the government will implement a new contribution rate of four per cent each for employers and employees on pensionable earnings between the YMPE and a new upper earnings limit.
• Maximum pensionable earnings: $57,400
• Employer and employee contribution rate: 5.10 per cent
• Annual basic exemption: $3,500
• Maximum annual employer and employee contribution: $2,748.90
• For employees transferred from Quebec to another jurisdiction during the year, a formula exists to determine CPP contributions.
EI: The following rates and maximums apply as of Jan. 1:
• Maximum insurable earnings: $53,100
• Employee premium rate: 1.62 per cent (outside Quebec); 1.25 per cent in Quebec
• Maximum annual employee premium: $860.22 (outside Quebec); $663.75 in Quebec
• Employer premium rate: 1.4 times the employee rate unless the employer has a government-approved reduced premium rate.
• Federal personal income tax rates remain unchanged from 2018, although due to indexing of the income tax system, the income thresholds for each rate have changed. The Canada Revenue Agency has published updated income thresholds in the Jan. 1, 2019, edition of its Payroll Deductions Formulas (T4127) and Payroll Deductions Tables (T4032). The guides also include provincial/territorial indexing changes for 2019.
• The 2019 deduction for the Canada Employment Credit is the lesser of $1,222 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 tax exemption for non-accountable expense allowances paid to elected municipal officers. Previously, the allowances were excluded from income if they were not more than one-third of an elected official’s salary and allowances.
The following maximum contribution rates apply for 2019:
• Money purchase pension plans: $27,230
• Deferred profit-sharing plans: $13,615
• RRSPs: $26,500
• Defined benefit pension plans: $3,025.56.
British Columbia: On Jan. 1, a new employer health tax (EHT) applies to employers whose annual B.C. payroll exceeds $500,000.
Beginning this year, the province will celebrate Family Day on the third Monday in February (Feb. 18) instead of the second Monday. The government changed the date to align the holiday with similar holidays in other parts of Canada and U.S.
Newfoundland and Labrador: On Jan. 1, the government increased the threshold used to determine which employers must pay the province’s health and post-secondary education tax from $1.2 million to $1.3 million. The tax rate remains two per cent on annual payroll exceeding the threshold.
Ontario: On Jan. 1, the government raised the exemption threshold for the province’s employer health tax from $450,000 to $490,000. It adjusts the exemption every five years using the Ontario consumer price index. Some employers are not eligible for the exemption, including private-sector employers with annual Ontario payrolls over $5 million.
Saskatchewan: The government’s temporary suspension of annual indexing of the province’s personal income tax system continues into 2019. The suspension affects provincial taxable income brackets and personal amounts claimed on a Saskatchewan Personal Tax Credits Return (TD1SK).
Yukon: The 2019 deduction for Yukon’s territorial Canada employment credit is the lesser of $1,222 and the employee’s income for the year, multiplied by 6.4 per cent, the territory’s lowest personal income tax rate.
QPP: Like the federal government’s CPP changes, Quebec is implementing QPP rate increases between 2019 and 2023 for earnings up to the YMPE. As a result, the QPP rate will gradually rise from 5.4 per cent to 6.4.
In 2024, it will implement a new contribution rate of four per cent each for employers and employees on pensionable earnings between the YMPE and a new upper earnings limit.
• Maximum pensionable earnings: $57,400
• Employer and employee contribution rate: 5.55 per cent
• Annual basic exemption: $3,500
• Maximum annual employer and employee contribution: $2,991.45.
QPIP: At the time of writing, Revenu Québec had not announced the 2019 maximum insurable earnings. It is proposed to be $76,500. The following premium rates apply as of Jan. 1:
• Employee premium rate: 0.526 per cent
• Employer premium rate: 0.736 per cent.
Income tax: 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.
HSF: On Jan. 1, the government raised the threshold used to determine whether employers are eligible for reduced rates for the health services fund (HSF) from $5.5 million to $6 million.
It also lowered the HSF rate from 1.75 per cent to 1.7 for employers in the service and construction sectors whose annual payroll is less than $1 million.
Rate reductions exist for those whose payroll is more than $1 million but less than $6 million, based on formulas that incorporate an employer’s payroll size.
There were no rate changes for small and mid-size businesses in the primary and manufacturing sectors.
Last year, the government lowered the HSF rate to 1.25 per cent for employers in these sectors whose payroll does not exceed $1 million if more than 50 per cent of their payroll relates to activities in the primary or manufacturing sectors.
Rate reductions were also implemented for those whose annual payroll was more than $1 million, but less than the annual threshold.
The HSF rate remains 4.26 per cent for employers whose total annual payroll is equal to or greater than $6 million in 2019 and for public-sector employers.
What to watch for this year
Minimum wages: Rates will go up in many areas this year:
• B.C.’s rates will rise on June 1, with the general minimum wage rate climbing from $12.65 an hour to $13.85.
• P.E.I.’s rate will increase from $11.55 an hour to $12.25 on April 1.
• In Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Saskatchewan, and Yukon, rates are indexed to inflation and are generally adjusted every year. Ontario has suspended annual indexing until Oct. 1, 2020.
• It is not yet known if rates will rise in Quebec.
Budgets: Federal and provincial/territorial budgets could bring additional changes.
Governments usually release budgets between February and May, although no jurisdiction other than B.C. is obligated to table a budget on a certain date. B.C. releases its budget on the third Tuesday in February every year.
Elections: With newly elected governments in New Brunswick, Ontario and Quebec, there could be further payroll-related legislative changes this year.
In addition, elections are expected in 2019 for the federal government, as well as for the provincial governments of Alberta, Newfoundland and Labrador, and P.E.I.