An Introduction to Payroll Administration, 6th Canadian Edition, 6e Alan Dryden (Solutions Manual All Chapters, 100% Original Verified, A+ Grade)
Chapter 1 Dryden: An Introduction to Canadian Payroll Administration, 6e Solutions to Questions Review Questions: 1-1 The criteria are: • What was the intent of the parties in entering the contract. • The degree of control that the payer exerts over the worker • Who provides the necessary tools for the work to be performed • Whether the worker can sub-contract work to others or hire assistants • Whether or not the worker has financial investment in a business to perform the work • The degree of financial risk that the worker has • If there is opportunity for additional profit, or risk of financial loss in performing the contract • The degree of integration of the worker into the payer’s organization 1-2
The employer must receive a Social Insurance Number from the employee within three days of commencing the employment contract, or terminated employment. The Social Insurance Number should be kept confidential and only used in communicating employee information to the government. If the Social Insurance Number starts with the number 9 then it is a temporary number. The employer need to know the expiry date and if the employee cannot provide a permanent number, or evidence of expiry extension then the employment contract needs to be terminated by the expiry date.
1-3
Industries covered by federal legislation include: • banks Dryden 6e: Solutions Manual Chapter 1 . 1
•
• • • • • • • • • • •
inter-provincial marine shipping, ferry and port services air transportation, including airports and airlines railway and road transportation that involves crossing provincial or international borders canals, pipelines, tunnels and bridges (crossing provincial borders) telephone, telegraph and cable systems radio and television broadcasting grain elevators, feed and seed mills uranium mining and processing businesses dealing with the protection of fisheries as a natural resource many First Nation activities most federal Crown corporations private businesses necessary to the operation of a federal act
1-4
Stakeholders for payroll administration within the company are all employees, as well as accounting, human resources and management.
1-5
External stakeholders for payroll administration include the Canada Revenue Agency, Revenue Quebec, provincial/territorial agencies, courts, unions, pension administrators, group benefit insurance carriers, charities and any other party for which there are deductions from the employees’ wages.
Suggested Exercises: 1-1 The seven criteria should be discussed with the class, depending on what personal information the instructor is willing to share. In most situations the instructor will be an employee. 1-2
The different criteria used in Quebec should be compared to the Canada Revenue Agency. Discussions should lead to students to understand that the differences are more semantic than substantive and either set of criteria will likely lead to the same determination.
1-3
The exercise is expected to entice a variety of different opinions to be expressed as to why each industry is of the “national interest”. Responses will vary by class.
Dryden 6e: Solutions Manual Chapter 1 . 2
1-4
As education is provincial responsibility it is expected that all schools will fall under provincial or territorial jurisdiction.
1-5
The employer challenges in administering the Social Insurance Number identified by students will vary widely based on individual experience and work knowledge. Emphasis should be placed on the initial request, monitoring temporary numbers and maintaining confidentiality.
1-6
This exercise will provide for discussion of internal and external stakeholders for the payroll process. Internal parties should include employees, business owners and managers, as well as departments such as accounting, human resources and information technology. External stakeholders list should include the Canada Revenue Agency, Service Canada, courts, unions and benefit providers.
Assessment Questions: 1-1 d) All of the above 1-2 b) The worker can hire assistants 1-3 d) Contact the Canada Revenue Agency for a ruling. 1-4 a) Three days 1-5 c) Request the employee provide card expiry date 1-6 a) Banking 1-7 c) Credit Unions 1-8 d) National retailer 1-9 c) Human resources 1-10 a) Canada Revenue Agency
Dryden 6e: Solutions Manual Chapter 1 . 3
Chapter 2 Dryden: An Introduction to Canadian Payroll Administration, 6e Solutions to Questions Review Questions: 2-1
The criteria used to determine the applicable jurisdiction for employment standards will depend on the employer’s jurisdiction as covered in chapter 1 and the location where the work is performed.
2-2
The most recent employment standards to be introduced in most jurisdictions include reservist leave, organ donation leave, leave of absence when a child has disappeared or dies as a result of a criminal action. Students should also be aware that some governments in 2020 and 2021 have introduced temporary changes to employment standards to accommodate pandemic related workplace challenges.
2-3
Employers may provide for additional employment benefits or betting working conditions than required under employment standards legislation. The legislation provides for the minimum condition or benefit that must be provided to the employee.
2-4
Union agreements may contain provision that are more generous than employment standards and therefore must be honoured by the employer. Should the union agreement provide less benefit to the employee than the legislated standard than the standard must be honoured by the employer.
2-5
If an employer wants to establish a policy that will impact employees in multiple jurisdictions then the policy must meet the most generous standard of the jurisdictions.
Dryden 6e: Solutions Manual Chapter 2 . 1
Suggested Exercises: 2-1
This exercise can be used as a major assignment for each student to be given a different province/territory, or an in-class activity. The following template may be a useful starting point, the answers will vary based on the standards in place when the research is done. Assignment is worth ___% of total grade. The assignment will provide students with an opportunity to research employment standards in a chosen territory or province and provide a comparison to the standards under the Canada Labour Code and the Ontario Employment Standards Act. After selecting a province or territory each student will do independent research and complete a comparison of standards similar to the following based on the employment standards listed in the Microsoft Word template below. This is intended to be a summary comparison and therefore it is not expected that there be any significant of detail for each standard. Expected length is about 3-5 pages including source references.
Student name: ___________________ Standard
Canada Labour Code
Student #: _______________
Employment Standards Act of Ontario
1. Minimum wages 2. Overtime 3. Hours of work 4. Holiday pay 5. Vacation pay 6. Termination pay 7. Deductions 8. Statement of earnings 9. Minimum age 10. Leaves of absence
Dryden 6e: Solutions Manual Chapter 2 . 2
“Provincial Act”
2-2 ̶ 2-5
2-6
These exercises are intended to provide research practice into employment standards and the format can be flexible. They could be an in-class activity, group or individual assignment. The table show above could be adapted by focussing on minimum wages only and adding columns for the number of desired jurisdictions.
The review of an employer’s policy manual and union contract can be a very interesting exercise for the class. This may be done as group work or instructor led analysis of the documents.
Assessment Questions: 2-1 c) The minimum workplace standards that apply to employment practices 2-2 a) $15.00 per hour 2-3 c) 10% grater than the general minimum wage 2-4 d) All of the above 2-5 a) If hours worked exceed 44 hours a week 2-6 a) British Columbia 2-7 d) Ten 2-8 c) Nine 2-9 d) 2 weeks per year of service, 3 weeks after 5 consecutive years of service, 4 weeks after 10 consecutive years of service. 2-10 b) 2 weeks per year of service. 3 weeks after 5 consecutive years of service 2-11 c) Is applied if more generous than employment standards 2-12 d) Is applied if more generous than employment standards
Dryden 6e: Solutions Manual Chapter 2 . 3
Chapter 3 Dryden: An Introduction to Canadian Payroll Administration, 6e Solutions to Questions Review Questions: 3-1 All earnings and deductions need to be converted to a pay cycle amount. If expressed in annual or monthly amounts convert to annual and divide by the payroll frequency. For example, an annual salary of $52,000 would equal $2,000 on a bi-weekly payroll cycle or $1,000 on a weekly payroll cycle. 3-2
The term salary is defined by the Income Tax Act, which the Canada Revenue Agency administers as “income from office or employment”. Therefore, all types of employment income are included in “salary”.
3-3
Depending on the employer’s policy, vacation pay may be paid with each pay or accrued and paid at a later date. The term accrual is an accounting term to indicate that the expense will be incurred in the period earned, and a liability is set up for future payment.
3-4
Allowances are normally considered taxable unless specifically allowed to be paid without being included in pensionable and taxable income. Non-taxable allowances are considered to be payments to the employee for items that would be of benefit or required by the employer. Examples include safety related clothing, safety shoes, and clothing that could only reasonably be worn during employment.
3-5
Taxable benefits are the value of things supplied without charge, or for a charge less than cost by an employer. Examples include the premiums paid for group life insurance, use of an employer’s automobile for personal purposes, and gifts and rewards greater in value than $500 per year.
Dryden 6e: Solutions Manual Chapter 3 .
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Suggested Exercises: 3-1
3-2
This exercise should reveal an understanding of the wide variety of methods than employers can define as earnings. This list should include salaries, wages, shift premiums, call-in pay, shift premiums, overtime, commissions, allowances, bonuses, etc. This exercise can be used as a total class participation or group assignment to demonstrate how individual employees can earn employment income from a variety of sources, dependent on the employer’s policies and practices.
3-3
Also, a very useful classroom exercise to identify the range of benefits and taxable or not status. Benefits are not paid directly to employees so students may include allowances inadvertently.
3-4
Allowances are amounts that are paid directly to employees and this exercise allows for examination and discussion in-class as how to distinguish the taxable or non-taxable classification.
3-5
This exercise can be used in-class where students suggest scenarios for different employees in different provinces and then display the calculations onscreen.
Assessment Questions: 3-1 3-2 3-3 3-4 3-5 3-6 3-7 3-8 3-9 3-10 3-11 3-12
d) All of the above b) Personal use of an employer’s automobile c) $1,384.62 (52,000 divided by 26) b) $1,500.00 (52,000 divided by 24) d) $360.00 (8 hours at regular, 4 hours at time and a half, 2 hours at double time) a) $80.00 d) b) and c) b) The business owner’s suit c) Uniform advertising employer d) A taxable benefit only for Quebec Pension Plan and income taxes d) All of the above a) Are not taxable
Dryden 6e: Solutions Manual Chapter 3 .
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Chapter 4 Dryden: An Introduction to Canadian Payroll Administration, 6e Solutions to Questions Review Questions: 4-1 Pensionable earnings refer to those that are employee’s amounts that are subject to Canada Pension Plan contribution calculations. The appropriate pay period exemption is subtracted from pensionable earnings to calculate contributory earnings. The rate factor of 5.70% for Canada Pension or 6.15% for Quebec Pension is applied to contributory earnings to calculate the amount with-held from the employee’s gross earnings. 4-2
The following amounts are used to calculate pensionable earnings by starting with gross earnings and then: • subtracting any non-taxable allowances in the gross earnings • subtracting any severance or retiring allowances • adding any taxable benefits for the pay period
4-3
Insurable earnings are calculated by subtracting any of the following from the employee’s gross earnings: • non-taxable allowances • severance or retiring allowances being paid for termination of employment
4-4
Employees may use the TD1 federal and provincial claim forms to calculate the amounts of personal tax claims that they are entitled to use. The employer will use the amount claimed to apply the proper table amounts for the calculation of income taxes to be with-held from the employee’s pay. The employee may also use the form to request additional taxes to be deducted, or to have no claim used for personal exemptions. Dryden 6e: Solutions Manual Chapter 4 . 1
4-5
The five available reductions from gross to net taxable income are: • Employee contributions to a Registered Pension Plan (RPP) • Employee contributions to a Registered Retirement Savings Plan (RRSP) • Union Dues, but are not permitted to be used to calculate Quebec income taxes. • Amounts that an employee claims on their TD1 for living in a Northern Prescribed Zone • Other amounts approved by the Canada Revenue as a reduction to taxable income
Suggested Exercises: 4-1
The use of the Canada Revenue Agency’s Payroll Deduction Online Calculator (PDOC) is very common for employers so this exercise allows for the instructor to demonstrate the tool. The textbook example for Svetlana Tauqir can be used for input and then the slightly more accurate income taxes can be shown and discussed.
4-2
The calculated amount of Canada Pension Plan contribution and Employment Insurance premium is identical to the manual calculation demonstrated in the end of chapter example as both methodologies use the same mathematical approach. However, there is a slight difference in the amount of federal and provincial taxes as the PDOC tool uses a mathematical calculation on net taxable earnings while the manual method will use the mean of the range in the table for the row used for looking up the employee’s net taxable income. Both methods are correct, the Canada Revenue Agency regards the PDOC as simply being more accurate.
4-3
To calculate Canada Pension Plan contributory earnings the following calculations are applied to gross earnings: • Subtract non-taxable allowances • Subtract any amounts being paid for severance or retiring allowances • Add taxable benefits • Subtract the pay cycle amount for the CPP annual exemption of $3,500.00 Dryden 6e: Solutions Manual Chapter 4 . 2
4-4
Insurable earnings for Employment Insurance and Quebec Parental Insurance Plan premiums have the following calculations are applied to gross earnings: • Subtract non-taxable allowances • Subtract any amounts being paid for severance or retiring allowances
4-5
Net taxable earnings for the Canada Revenue Agency is calculated by adjusting the gross earnings by the following: • Subtract non-taxable allowances • Add taxable benefits • Subtract any deductions for this pay cycle for employee contributions to a Registered Pension Plan • Subtract any deductions for this pay cycle for employee contributions to a Registered Retirement Pension Plan • Subtract any union dues being deducted for this pay cycle • Subtract any amounts claimed by the employee on their TD1 for living in a prescribed zone • Subtract any amounts approved by the Canada Revenue Agency for this year for the employee, converted to the pay cycle frequency Note that for employees in Quebec union dues are not deducted for Quebec income tax calculation.
4-6
This exercise is probably best done in-class. The TP.1015-3-V can be accessed at: https://www.revenuquebec.ca/en/online-services/formsand-publications/current-details/tp-1015.3-v/
4-7
This is another exercise than can be used for in-class discussion using the web link shown in the textbook.
4-8
This exercise is an individual exercise for students and the results will vary significantly based on personal situation and province chosen.
Dryden 6e: Solutions Manual Chapter 4 . 3
Assessment Questions: 4-1 a) 0, age exempt 4-2 b) $450.00 4-3 c) $460.15 4-4 a) 0 4-5 d) $628.92 4-6 b) $580.00 4-7 d) $34.54 4-8 b) $6.96 4-9 b) $2.87 4-10 c) $585.08 4-11 d) $628.92 4-12 b) $30.40
Dryden 6e: Solutions Manual Chapter 4 . 4
Chapter 5 Dryden: An Introduction to Canadian Payroll Administration, 6e Solutions to Questions Review Questions: 5-1 Legal payroll with-holdings are from the following sources: • Court orders in general • Garnishment orders, the normal form of court order • Canada Revenue Agency Direction to Pay • In some provinces a Credit Union Assignment of Wages 5-2
The general maximum for legal with-holdings is 20% of net pay for debts and 50% for family support payments. Net pay for this purpose is determined by subtracting only statutory deductions from gross earnings.
5-3
Employers may require with-holdings for union dues and benefits that require all employees participate in contributions as par of the employment contract.
5-4
Employers may not use payroll deductions for disciplinary purposes or arbitrary penalties for damages to, or loss of employer property.
5-5
An employer is not required to make payroll deductions based on an employee’s request.
Suggested Exercises: 5-1 Instructors may find this to be a good in-class exercise if a student has a statement of earnings or if the instructor is willing to disclose deductions on their own statement of earnings. If used as an individual exercise, then answers will vary. 5-2
The notes for Suggested Exercise 5-1 also apply to this exercise. Dryden 6e: Solutions Manual Chapter 5 . 1
5-3
The general steps when a Garnishment Order is received is to: • Verify that the person named is a current employee, if not contact the court office for clarification. • If a current employee, make a copy of the order and confidentially give the copy to the employee • Follow the instructions of the order explicitly, if unsure of how to process then discuss with court office • If an employee is terminated, laid off or goes on unpaid leave the notify the court that payment will not be paid
5-4
This exercise is a best done in class and the results will vary based on the knowledge and experience of the students.
5-5
The exercise is intended to provide students with an opportunity to develop skills in research and reporting. Results will vary depending on provinces chosen.
Assessment Questions: 5-1 d) All of the above 5-2 d) All of the above 5-3 a) Carefully follow all instructions 5-4 a) Is responsible to pay amount due to the courts whether or not deducted from employee 5-5 b) Contributions to a company pension fund 5-6 c) Documented, preferably with explicit employee consent 5-7 d) All of the above 5-8 b) May be chosen by the employee 5-9 d) All of the above 5-10 d) Not limited to organization registered with the CRA 5-11 c) Statutory, legal, company compulsory, voluntary 5-12 d) Held in trust by the employer until paid to the third party
Dryden 6e: Solutions Manual Chapter 5 . 2
Chapter 6 Dryden: An Introduction to Canadian Payroll Administration, 6e Solutions to Questions Review Questions: 6-1 The steps are outlined in Exhibit 6-1: Pay Cycle Process Steps: 1. Gather all information for the payroll processing. • Static information for employee • Pay Cycle specific data for employee 2. Calculate taxable benefit amounts needed for calculation of pensionable and taxable income. 3. Calculate Gross Earnings. • Wages/salaries, taxable allowances, non-taxable allowances 4. Calculate Pensionable Earnings. • Gross Earnings less non-taxable allowances less termination payments plus taxable benefits 5. Calculate Insurable Earnings. • Gross Earnings less non-taxable allowances less termination payments 6. Calculate Canada Pension Plan Contributions • Pensionable Earnings less pay cycle exemption times 4.95% 7. Calculate Employment Insurance Premiums • Insurable Earnings time 1.88%. 8. Calculate Gross Taxable Earnings • Gross Earnings less non-taxable allowances plus taxable benefits. 9. Calculate Net Taxable Earnings • Gross Taxable Earnings less employee deductions for Registered Pension Plan, Registered Retirement Savings Plans, Union dues and less any personal exemption for living in a prescribed zone less any other Canada Revenue Agency approved amounts 10. Calculate Federal Income Tax from tables or PDOC 11. Calculate Provincial Income Tax from tables or PDOC. Dryden 6e: Solutions Manual Chapter 6 . 1
12. Calculate Total deductions. 13. Calculate Net Pay. 6-2
All earnings, allowances, benefits and deductions need to be converted to the appropriate pay cycle so that the calculation of net pay is correct for the pay period.
6-3
Employee static information provides us with all of the necessary information to calculate their net pay. The employee pay period information will provide us with the specific information for this particular pay that is an exception from the static, or provides specific amounts to be used to calculate earnings and deductions for this cycle only.
6-4
An employee in Quebec will be impacted as follows: • Quebec Pension Plan contributions will be calculated rather than Canada Pension Plan • Employment Insurance is calculated at a reduced rate • Quebec Parental Insurance Plan premiums are required in addition to the Employment Insurance premiums • Union Dues are not allowed as a reduction of gross taxable income • Group medical insurance premiums paid by the employer are a taxable benefit for Quebec pensionable and taxable income
6-5
The amount of taxable benefit that is attributed to the employee is used to calculate pensionable and insurable income, but is neither paid to or deducted from the employee’s pay. In addition, any allowed reductions in taxable income that the employee is entitled to based on a written authorization from the Canada Revenue Agency or Revenue Quebec is only use for tax calculation purposes.
Suggested Exercises: 6-1 This is an excellent opportunity for class participation and in the author’s experience provides an effective learning of the chapter and course to date contents. This works effectively as a white board exercise giving the students the opportunity to create and then solve the net pay calculations for an employee. Dryden 6e: Solutions Manual Chapter 6 . 2
6-2
The results of this exercise will vary based on the province chosen by the instructor and/or student. It can be used as an in-class or assigned exercise.
6-3
Most students will assume that employers are always correct in net pay calculations. Unfortunately, that is not a valid assumption. This exercise which will vary by student can lead to some interesting class discussion when the net pay appears to be incorrect. The instructor will need patience in assisting students with understanding any apparent errors.
6-4
The amount of the garnishment should be calculated as: 20% of “net pay” ($1,441.04—75.15-22.77-112.45-61.25=1,169.42 which equals $233.88.
Assessment Questions: 6-1 d) $1,682.31 6-2 c) $1,598.46 6-3 b) $16.15 6-4 a) $1,582.31 6-5 a) $83.44 6-6 a) $25.00 6-7 c) $1,598.46 6-8 a) $1,583.46 6-9 b) $123.25 6-10 a) $50.20 6-11 a) $326.12 6-12 b) $1,356.19
Dryden 6e: Solutions Manual Chapter 6 . 3
Chapter 7 Dryden: An Introduction to Canadian Payroll Administration, 6e Solutions to Questions Review Questions: 7-1
Employers must register with: • The Canada Revenue Agency • The provincial workers’ compensation agency in each province where employees work • Revenue Quebec if employees are covered by Quebec legislation
7-2
Employers are required to make contributions to the Canada Pension Plan or Quebec Pension Plan, as well as premiums for the Employment Insurance program.
7-3
Employers of workers covered by Quebec legislation will also pay premiums into the Quebec Parental Insurance Plan.
7-4
The key principles of the Meredith Commission that provide the framework for Workers’ Compensation programs in Canada are: • No-fault compensation • Collective liability of employers • Security of payments • Exclusive jurisdiction of claims • Independent boards of management
7-5
The following provinces assess taxes or premiums on residents to support health care costs: • British Columbia collects an employer tax based on payroll. • Manitoba assesses a payroll-based tax on employers • Newfoundland and Labrador assesses a payroll-based tax on employers Dryden 6e: Solutions Manual Chapter 7 . 1
• Ontario assesses a payroll-based tax on employers, and tax on employment income for employees • Quebec assesses a payroll-based tax on employers Suggested Exercises: 7-1
This exercise is intended to apply the knowledge from Review Question 7-1 to an employer in the province where the student is taking the course. This may be appropriate for an in-class exercise or individual assignment to research. Answers will vary by province or territory.
7-2
The calculations are shown below (2022 rates): $10,000 Pensionable Earnings Rate Employee Contribution Employer Cost
7-3
Canada Pension Plan
Quebec Pension Plan
5.70% $570.00
6.15% $615.00
$570.00
$615.00
The calculations are shown below: $10,000 Insurable Earnings Rate Employee Contribution Employer Cost No reduced rate
Ontario Employer EI 1.58% $158.00
Quebec Employer EI 1.20% $120.00
Quebec Employer QPIP .494% $49.40
$221.20
$168.00
$69.20
Students should note that the total cost to the Quebec employer is $237.20 ($168.00 + $69.20), compared to the Ontario employer cost of $221.20.
Dryden 6e: Solutions Manual Chapter 7 . 2
7-4
Premiums are paid on employee earnings up to a maximum assessable (insurable) annual amount. The premium is calculated on assessable payroll multiplied by an industry rate. For example, an employer in Ontario in the agricultural industry pays premiums of $2.46 per $100 of assessable payroll. If total assessable payroll in a year is $1,000,000.00, the annual premium would be $24,600.00 ($1,000,000 ÷ 100 x 2.46).
7-5
The calculations are shown below: Manitoba Payroll $4,000,000 Exemption $ 0 Taxable $4,000,000 2.15% Tax $ 86,000
Newfoundland $4,000,000 $1,300,000 $2,700,000 2% $ 54,000
Quebec $4,000,000 $ 0 $4,000,000 4.26% $ 170,400
Assessment Questions: 7-1 7-2 7-3 7-4 7-5 7-6 7-7 7-8 7-9 7-10 7-11 7-12
b) Canada Revenue Agency b) $1,00.00 b) $1,000.00 c) $1,400.00 c) $221.20 c) $168.00 c) $69.20 a) Employers a) $330.00 a) Health tax on employers’ payrolls c) $86,000.00 b) $39,000.00
Dryden 6e: Solutions Manual Chapter 7 . 3
Ontario $4,000,000 1,000,000 $3,000,000 1.95% $ 58,500
Chapter 8 Dryden: An Introduction to Canadian Payroll Administration, 6e Solutions to Questions Review Questions: 8-1
A payroll register provides information on how each employee’s net pay was calculated showing all steps related to earnings and deductions. Usually, a separate payroll register is produced for each pay cycle.
8-2
Information included in a payroll register: • Employee name and number • Earnings, with each type calculated and shown separately • Total gross earnings • Each deduction from wages • The net payment for each employee • Totals for each type of earning and deduction as well as total earnings and total net pay to employees
8-3
The summary information from the register is used to prepare the journal entries for input to the accounting system. The register totals will be used to classify expenses and liabilities that result from the payment to employees.
8-4
Journal entries will include other information in addition to the dollar amounts recorded in the register. This will typically also include the date of the entry, information that will provide an audit trail reference to the appropriate register, names and signatures of those employees creating and approving the journal entry.
8-5
As the journal entry information is posted to the general ledger, those accounts are updated with amounts of the transaction and the balance of each account is updated.
Dryden 6e: Solutions Manual Chapter 8 . 1
Suggested Exercises: 8-1
In order for the students to practice preparation of a register it will be necessary to construct one or more situations where there are a few employees. Although manual registers could be used most students will prefer to use an electronic spreadsheet which would be more time efficient. This exercise can be done as an in-class activity with the instructor preparing the register and project it for the class to view while students actively make suggestions. Alternatively, it could be assigned as an individual project.
8-2
The register(s) created in Suggested Exercise 8-1 can be used to create a journal following the format of Exhibit 8-3 of the text.
8-3
The register(s) created in Suggested Exercise 8-1 can be used to create a journal following the format of Exhibit 8-4 of the text
8-4
The journals from Suggested Exercise 8-2 and 8-3 can be used to post entries to general ledger accounts using the format of Exhibit 8-5, or T accounts. The following is a sample assignment that was created to combine Suggested Exercises 8-1, 8-2, and 8-3.
Dryden 6e: Solutions Manual Chapter 8 . 2
Chapter 8 Sample Assignment Payroll Register and Journal For the following employer, prepare an appropriate register and journal entries using an Excel spreadsheet. Ralph’s Enterprise has two salaried and three hourly employees in Toronto, as follows:
Lavare Imran Bilal Elda Yue
TD1 Fed 1 2 3 4 5
TD1 ON 1 1 2 2 3
Pay Rate
Basis
$120,000 $2,500 $18.00 $15.00 $17.50
Annual Month Hour Hour Hour
Hours
Department
90 80 89
Sales Office Office Sales Sales
The payroll is processed for all employees on a bi-weekly basis and this payroll is for the two weeks ending January 8th, 2022. There will be 26 regular pays in the year. Note that the hours are a total for the two-week period and include 8 hours at straight time rate for the New Year’s Day holiday. The business records Statutory Holiday in a separate account than Wages and Salaries expense. Ralph’s Enterprise pays overtime at the minimum Ontario standard. Assume that the hours shown above were spread equally over each of the weeks. The employer pays 4% vacation to hourly employees with each pay and accrues 6% for salaried employees. The employer is not exempt for Ontario Health Tax and estimates current year W.S.I.B. premiums at $2.50 per $100 of assessable earnings. Hourly paid employees are members of a Union with dues per week equal to one hour’s regular rate of pay. All employees contribute $2.00 per pay to the “Sunshine Club” through payroll deduction. All employees are between the ages of 20 and 60. The calculation of statutory deductions should be done by using the CRA Dryden 6e: Solutions Manual Chapter 8 online tables. .
3 Your printed report should be formatted for single page printing, ensure that your name and student number is shown on the report.
Assessment Questions: 8-1 8-2 8-3 8-4 8-5 8-6 8-7 8-8 8-9 8-10 8-11 8-12
b) Register d) All of the above c) Both a) and b) a) Total amounts from the payroll register columns d) Payroll cheque numbers for each employee d) All of the above c) Employment Insurance employer costs d) All of the above a) Summarize accounting transactions by account d) All of the above a) Contains reference to the source journal information d) All of the above
Dryden 6e: Solutions Manual Chapter 8 . 4
Chapter 9 Dryden: An Introduction to Canadian Payroll Administration, 6e Solutions to Questions Review Questions: 9-1
Manual payroll systems are most appropriate for very small organizations, especially if they do not use computerized systems for other business functions. Manual systems may also be appropriate for small departments or groups of employees where confidentially of earnings is felt to be critical by management.
9-2
Types of available computerized payroll systems are: • Standalone or dedicated payroll software • Fully integrated systems (ERP) • Hybrid integrated systems • Outsourced services
9-3
Integrated systems allow the sharing of data between functions, reducing time lag and errors in re-entering the data. This may also reduce cost in the organization.
9-4
General steps involved in the payroll process include: • Maintaining company policy and procedure manuals • Storing and updating employee information files • Collecting pay cycle information • Calculation of earnings, deductions and payments to employees • Printing of reports
9-5
Some issues to be considered in choosing payroll systems include: • The number of employees • Number of pay cycles to be processed • How many provinces/territories for processing • Complexity of earnings and deductions Dryden 6e: Solutions Manual Chapter 9 . 1
• Capability of in-house staff for systems and payroll administration • Management preferences related to privacy Suggested Exercises: 9-1
A spreadsheet software package facilitates manual software processing by providing the capability of performing the basic mathematical calculations using formulas. This reduces the time required to manually process these calculations and also minimizes errors. Formulas can also be introduced to accumulate year-to-date information to streamline the year end requirements.
9-2
The four different approaches to computerized payroll systems are: • Standalone or dedicated payroll software • Fully integrated systems (ERP) • Hybrid integrated systems • Outsourced services
9-3
Students may suggest other advantages or disadvantages to the key items listed below: Type of System Standalone
Advantage
Disadvantage
Most efficient for payroll
Integrated
Access to data from other modules
Hybrid
Best of each module
Outsourced
Specialized service
Added input, output due to lack of integration Payroll may not be adequate as not prime reason for system Costs maybe higher and integration issues Cost and lack of integration
Dryden 6e: Solutions Manual Chapter 9 . 2
9-4
When an entity uses an integrated system, we expect payroll to interface with human resources for employee information, as well as accounting to export journal information and operations for time and attendance data input.
9-5
The size of the organization may impact the choice of payroll systems based on: • Knowledge and capability of payroll administrators • Computer systems infrastructure within the firm • Complexity of compensation and benefit policies
9-6
The payroll process using software can be described with the following steps: • Structure the company rules in the software • Maintain employee record information as required • Enter/import pay cycle specific information for processing • Process the pay cycle calculations • Export/print payments, registers, accounting information
Assessment Questions: 9-1 9-2 9-3 9-4 9-5 9-6 9-7 9-8 9-9 9-10 9-11 9-12
d) b) and c) d) All of the above d) All of the above a) Integrated systems using different vendor software d) Transfer the data processing activities from employer to service provider b) May reduce data entry d) All of the above c) Company setup, employee data, pay cycle data, issue payment d) All of the above d) Date of birth d) All of the above c) A management evaluation of alternatives
Dryden 6e: Solutions Manual Chapter 9 . 3
Chapter 10 Dryden: An Introduction to Canadian Payroll Administration, 6e Solutions to Questions Review Questions: 10-1
It is important that employees are paid on time, every time to demonstrate the employer’s ability and intent to meet contractual obligations. If employees are not paid on scheduled pay dates then it will significantly impact morale by creating fear, distrust and lack of respect towards the employer.
10-2
In order to ensure that remittances are made when required it is necessary to carefully plan in advance all detailed actions required to make each remittance on time.
10-3
As per the information provided in the LO2 section of the text: Remitter Type Quarterly Regular Accelerated 1 Accelerated 2
Frequency Quarterly Monthly Two times a month Four times a month
10-4
Payments are made to the Ontario Workers’ Safety Board based on the annual insurable earnings as follows: • If less than $20,000 annually by April 30 • If greater than $20,000 but less than $300,000 then quarterly by the end of the month following the quarter. • If greater than $300,000 then monthly by the end of the following month
10-5
Remittances timing of employer health taxes are: Dryden 6e: Solutions Manual Chapter 10 . 1
• British Columbia requires quarterly instalments if the prior year tax exceeded $2,925.00. • Manitoba if annual payroll is in excess of $1,750,000 then monthly by the fifteenth of the month following, otherwise annual. • Newfoundland and Labrador monthly by the 20th of the month following • Ontario if annual payroll is in excess of $1,200,000 then monthly by the fifteenth of the month following, otherwise annually by March 15 • Quebec requires health taxes by paid along with source deduction remittances as per Exhibit 10-3 Suggested Exercises: 10-1
This exercise is intended to be used as an in-class quiz for the students to refer to the definitions in the LO2 sections of the text.
10-2
The exercise requires the students to compare the information provided in the LO2 section of the text and arrive at the conclusion that Quebec provides for annual remittances for small employers and otherwise there are only language differences.
10-3
Students may suggest other steps to ensure timely payment of remittances in addition to the following: • Communicate to employees the payroll dates. • Advise other departments or functions of input “cut-off” dates • Plan ahead to ensure that adequate time if allowed for unusual events such as holidays and vacations. • Notify the accounting department of the timing and expected amounts of payroll related payments as soon as known so that they can ensure funds are available. • Make sure that cheque signing officers will be available if required.
Dryden 6e: Solutions Manual Chapter 10 . 2
• Have a detailed contingency plan in place that would provide acceptable alternative arrangements for any possible issues that prevent the processing of payroll. • The payroll administrator needs to manage their personal schedule to ensure that there is adequate time to process, review, and edit the inputs for payroll. • Ensure that any documents are available to request cheques or wire transfers to be processed for payments. • Prepare in advance any reports or other documentation that must be accompany remittances. • Allow for contingency time in making payments whether by mail, at a bank, or electronic funds transfer. 10-4
This is an excellent in-class exercise to stimulate student discussion in exploring potential challenges to being able to process payroll on time. Depending on the size of the class and experience of the students there may be a wide range of suggestions.
10-5
The concept of using a calendar to plan future events should be familiar to students. The complexity of using one for payroll comes from the variety of steps to be considered for each stakeholder in the process. Discussion should consider: • Scheduling of inputs • Processing steps • Payments to employees • Remittances to government agencies • Remittances to other parties including courts, unions, charities, etc.
Dryden 6e: Solutions Manual Chapter 10 . 3
Assessment Questions: 10-1 b) According to the employer published schedule of pay dates 10-2 d) All of the above 10-3 d) All of the above 10-4 b) Remitter Types based on average monthly remittances 10-5 b) By the 15th of the following month 10-6 b) By the 15th of the following month 10-7 d) All of the above 10-8 c) May be scheduled differently for each province and territory 10-9 a) On the same schedule as other remittances to Revenue Quebec 10-10 c) Monthly by the 15th of the following month 10-11 d) Monthly by the 20th of the following month 10-12 c) Monthly by the 15th of the following month
Dryden 6e: Solutions Manual Chapter 10 . 4
Chapter 11 Dryden: An Introduction to Canadian Payroll Administration, 6e Solutions to Questions Review Questions: 11-1
Terminated employees may receive compensation from: • The former employer for outstanding wages and vacation pay along with termination payments, if applicable, for pay in lieu of notice, severance, etc. • From the Employment Insurance program administered by Service Canada
11-2
In order to ensure that terminations are handled correctly it is essential that all required information is available when the final payment is processed along with the Record of Employment filing.
11-3
The Record of Employment form is used by Service Canada to determine: • If the employee qualifies for benefits under the insurance program. • How many weeks that the benefits will be paid • How much will be the dollar value of weekly benefits
11-4
The Record of Employment needs to be filed: • If a manual form is used within five calendar days of the interruption of earnings, or the day the employer becomes aware if greater than five days have transpired • If the form is filed electronically then generally five calendar days after the end of the pay period when the interruption of earnings takes place.
Dryden 6e: Solutions Manual Chapter 11 . 1
11-5
If an employee elects, then an employer may pay into the employee’s RRSP a portion of severance pay without tax deductions. This is limited to: • $2,000 for each year or part of a year before 1996 that the worker was employed by your organization; plus • $1,500 for each year or part of a year before 1989 of that employment in which none of the employer contributions to a Registered Pension Fund or Deferred Profit Savings Plan were vested in the employee’s name.
Suggested Exercises: 11-1
Student may suggest an extensive list of items on a termination checklist but should include: • Final date of work. • Payments due on termination: • Amounts to be withheld for loans or advances • Company property to be returned • Status of benefits to advise the employee of ending dates of coverage or options for employees to assume premium payment. • Process change notification to any insurance carriers or pension administrators. • Cancellation of any authority such as bank signatory. • Change of any password access to computer or telephone systems. • Notification of other employees, customers or vendors as appropriate advising who will be their ongoing contact in the organization. • Preparation and submission of the Record of Employment.
Dryden 6e: Solutions Manual Chapter 11 . 2
11-2
An “interruption of earnings” takes place when an employee does not have insurable earnings or hours for seven consecutive days, or their earnings are reduced to less that 60% of their normal earnings.
11-3
A temporary layoff is for a period less than thirteen weeks. Notice and severance are not required to be paid for a temporary layoff unless it extends beyond the thirteen weeks. Termination of employment indicates that the employment contract has been terminated and there is no ongoing employment relationship.
11-4
This is an exercise that can be used as an activity for either in class or assigned for individual research. The following site will provide current information: https://www.canada.ca/en/services/benefits/ei/ei-regularbenefit.html Normal maximum benefits in 2022 would be for 45 weeks at $638.00 per week.
11-5
Payments on termination of employment may include: • All outstanding amounts of earnings during employment • Pay in lieu of notice, if applicable • Severance, or retiring allowance if applicable • Any additional amounts per employer policy
11-6
The eligible portion would be calculated as: - For years prior to 1996: 11 years x $2,000 = $22,000, plus - For years prior to 1989: 4 years x $1.500 = 6,000 - Total of $28,000
Assessment Questions: 11-1 11-2 11-3 11-4 11-5 11-6
d) b) and c) d) All of the above d) All of the above c) They are considered to have employment terminated and all payments under termination must be paid d) All of the above d) The departments impacted based on the organization Dryden 6e: Solutions Manual Chapter 11 . 3
11-7 11-8 11-9
d) All of the above b) Within 5 calendar days of the interruption of earnings c) Within 5 calendar days of the end of the pay cycle in which the interruption of earnings takes place 11-10 b) For at least 6 years after issuance 11-11 d) b) and c) 11-12 a) zero
Dryden 6e: Solutions Manual Chapter 11 . 4
Chapter 12 Dryden: An Introduction to Canadian Payroll Administration, 6e Solutions to Questions Review Questions: 12-1
The key filing requirements for the Canada Revenue Agency are: • An individual T4 Information Slip for each employee for the year. • A T4 Summary for the employer for the year.
12-2
The T4 Information Slip contains all of the pertinent information for the employee to use to include employment income and deductions for their personal income tax filing. The T4 Summary provides information for the employer’s account with the Canada Revenue Agency and reports the total number of individual T4 slips issued and the total of the amounts reported to reconcile the employer’s remittances for the year.
12-3
Each province and territory require an annual report to be filed after the T4 summary is available. Although the format and timing vary with jurisdiction it is common that the employer must reconcile T4 summary earnings with assessable wages for the province/territory, the calculation of total annual premiums and a reconciliation to remittances made for the calendar year of coverage.
12-4
The provinces assessing employer health taxes on payroll require a report generally requiring reconciliation of T4 Summary earnings to provincial health tax premiums paid for the calendar year. Quebec does not require a separate report as the payroll tax for health purposes is included on the report with other remittances to Revenue Quebec.
Dryden 6e: Solutions Manual Chapter 12 . 1
12-5
There are many action steps required to prepare for the year-end reporting and start of a new payroll year. Payroll administrators must have all documents in place for the year-end and coordinate with other departments to ensure all amounts are included in year end payroll registers. To start the new payroll year tables must be updated and any amounts owing to employees, such as accrued vacation pay, must be carried forward in the payroll records.
Suggested Exercises: 12-1
This exercise is intended to provide students with research activity related to payroll. The following sites should provide current information: • British Columbia Workers’ Compensation: https://www.worksafebc.com/en/insurance/manageaccount/report-payroll-pay-premiums/date-deadlines • Ontario Workers’ Compensation: https://www.wsib.ca/en/businesses/premiums-andpayment/completing-reconciliation-form • Ontario Employer’s Health Tax: https://www.fin.gov.on.ca/en/tax/eht/index.html • Quebec Health Services Fund tax: https://www.revenuquebec.ca/en/businesses/source-deductionsand-employer-contributions/
12-2
When the Canada Revenue Agency conducts an audit of an employer they do a thorough review of source documents, payroll registers, and accounting records/reports.
12-3
The T4 Summary information is the basic source to reconcile Workers’ Safety Insurance Board and Ontario Health Tax return. The T4 Summary provides national information so this needs to be reconciled on a provincial basis and then to the assessable earnings for WSIB and Health Tax.
Dryden 6e: Solutions Manual Chapter 12 . 2
12-4
Students may suggest many additional items that should be on a year-end checklist but should include: • To be able to complete the current year: o Have taxable company car benefits updated prior to final pay processing. o Ensure that all manual cheques are recorded in the payroll registers prior to final processing. o Ensure all remittances are reconciled with the appropriate government sites or reports • To prepare for year-end reporting: o Have all required forms on hand. o Ensure that all remittances have been reconciled to online account information or statements from each agency and government department. o Co-ordinate with the accountant or accounting department to be able to reconcile financial records to the T4 summary. o Have each reporting date, along with adequate preparation time marked on the calendar. • Prepare for the processing in the new year by: o Having all tables updated for any changed rates. o Any outstanding amounts owed to employees, such as accrued vacation pay should be carried forward in the payroll records. o Communicate to employees the expected impact of changes to tax rates, exemptions or other impacts to net pay.
Dryden 6e: Solutions Manual Chapter 12 . 3
Assessment Questions: 12-1 d) b) and c) 12-2 c) Total year information necessary for the employee to file individual tax returns 12-3 d) All of the above 12-4 c) The final day of February of the following year 12-5 d) Electronic if more than 50 slips, employer’s option if less 12-6 d) b) and c) 12-7 b) Determined by the applicable jurisdiction 12-8 b) Calculated on taxable earnings as defined by the jurisdiction 12-9 b) Calculated on taxable earnings as defined by the jurisdiction 12-10 d) All of the above 12-11 d) All of the above 12-12 d) All of the above
Dryden 6e: Solutions Manual Chapter 12 . 4