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HCM Topic: Compensation and Benefits

A 5-Step Guide to Ensure Payroll Compliance

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Payroll compliance refers to the process of ensuring that a company adheres to all relevant laws and regulations when paying its employees. In Canada, this involves following the requirements set by the Canada Revenue Agency (CRA) and Employment Standards Act (ESA) in each province and territory.

The CRA is responsible for collecting taxes and administering programs such as Employment Insurance (EI) and the Canada Pension Plan (CPP). Employers must withhold these amounts from their employees’ paycheques and submit them to the CRA regularly. They must also provide employees with a T4 slip at the end of each year, which summarizes their total income and deductions for the year.

The ESA sets the minimum wage standards, work hours, and other employment conditions in each province and territory. This includes minimum wage rates, overtime pay, and vacation pay entitlements. Employers must abide by these standards and provide their employees with written notice of their terms of employment, including their rate of pay and any deductions.

How to Ensure Payroll Compliance?

1. Stay Up-to-Date with Payroll Regulations

Keeping up with changes to Canadian payroll regulations is essential. Organizations should regularly check the websites of relevant government agencies to ensure they are aware of any updates or changes.

2. Accurate Record Keeping

Organizations must maintain accurate records of all payroll transactions, including employee salaries, deductions, and benefits. The CRA requires organizations to keep records for six years, so it’s important to have a system in place to keep records up-to-date and easily accessible.

3. Proper Classification of Employees

Organizations must accurately classify employees as either employees or independent contractors to ensure compliance with tax laws and employment standards. Misclassification can result in significant financial penalties, so it’s vital to seek professional advice if there is any uncertainty.

4. Timely Reporting and Remittances

Organizations must report and remit all required payroll deductions, including Employment Insurance (EI), Canada Pension Plan (CPP), and taxes to the appropriate government agencies on a timely basis. Late or incorrect remittances can result in financial penalties, so it’s essential to have a reliable system in place to ensure compliance.

5. Compliance with Employment Standards

Organizations must adhere to the employment standards set out by the province or territory in which they operate. This includes minimum wage, overtime pay, and paid vacation entitlements. It’s essential to regularly review the employment standards to ensure compliance and make any necessary changes to payroll practices.

Payroll compliance is a critical part of running a business in Canada. Employers must follow the requirements set by the CRA and ESA to ensure that they are paying their employees fairly and in accordance with the law. If you need extra help with your payroll compliance process, don’t hesitate to check the National Payroll Institute’s free payroll compliance-related resources.

Are you subscribed to any newsletter to keep up with payroll news to ensure payroll compliance in your daily work? Share it with fellow colleagues in the comments below.


General Minimum Wage Rates in Canada for 2023

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As we know, the minimum wage is the lowest amount of pay that employers are legally required to pay to their employees. The rate of minimum wage varies from province to province in Canada, and as of 2023, it ranges from $15.50 per hour in Ontario to $16 in Nunavut.

Since April 2022, the current federal minimum wage is $15.55, meaning that an employee should be paid at least the federal minimum wage, unless they work in an industry that is not federally regulated – then the provincial minimum wage applies to them. On the other hand, if the rate of the province or territory where the employee usually works is higher than the federal minimum wage, the employer must pay the higher minimum wage.

Consult the current and forthcoming general minimum wage rates in Canada with the table below.

Note: In most jurisdictions, these rates also apply to young workers, but you can consult more information about special rates for young workers here.

Do you think that the minimum wage updates are keeping up with inflation in the province you live in? Tell us in the comments section below.


10 Most Frequent Payroll Errors that Drive Up Costs (and How to Fix Them)

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Payroll errors are a common problem that can have serious and expensive consequences. According to a recent study conducted in the US by Ernst & Young, a company has an 80.15% payroll accuracy rate, meaning around 1 in 5 payrolls have errors. The survey shows that a company makes 15 payroll corrections per payroll period, and fixing each error costs around $291USD.

On average, a company has an 80.15% payroll accuracy rate and makes 15 payroll corrections per payroll period. In the previous fiscal year, each error cost companies, on average, $291 to remedy directly and indirectly.

Ernst & Young
5 Most Frequent and 10 Most Costly Payroll Errors

According to the report, payroll errors related to time/attendance and expenses are the most common, occurring on average more than once per employee per year. Vacation, time off or sick leaves errors followed them. Discover the most common payroll errors and how much they cost their companies:

Payroll Error Category Frequency
(per 1,000 employees)		 Cost in USD
(per 1,000 employees)
Time/attendance and expense 1,139 $248,735
Vacation/Paid time off/sick time requests 721 $219,289
Benefits 503 $139,230
Schedule earnings and deductions 410 $135,294
W-4 and tax allocation changes 229 $134,975
Direct Deposit 159 $44,608

Going deeper into these categories; these are the 10 most costly errors by estimated total (direct and indirect) labour cost per 1,000 employees in USD:

    1. Sick time not entered ($70,335)
    1. Missing time punches ($47,263)
    1. Missing expense/expenses not input ($45,562)
    1. Visa status update error (not made or made incorrectly) – US ($44,382)
    1. W-4 setup error – US ($43,456)
    1. Lunch/cafeteria plan error (not made or done incorrectly) ($40,878)
    1. Vacation/PTO time not entered ($40,661)
    1. Direct deposit setup input error ($35,262)
    1. Vacation/PTO requested that is not available/accrued ($33,660)
  1. Incorrect allocation of employer-controlled earnings (e.g., jury duty, bereavement) ($31,330)
How Can We Reduce Payroll Errors?

To minimize the risk of errors, employers can turn to reputable payroll software providers that offer a range of features to help reduce errors. For example, some providers offer automation of tasks such as tax calculation, compliance updates and direct deposit, which can reduce the risk of human error. Some providers also offer employee self-service portals, where employees can update their personal information, review paystubs, and request time off, which can also reduce the risk of errors. Check the top ten payroll software providers that will help you minimize payroll errors.

The lack of proper training is also a significant contributor to payroll errors. When employees are not adequately trained on how to use payroll systems they are more likely to make mistakes. Some payroll software providers may not provide adequate training or user support, leading to employees not fully understanding how to use the system properly, so making sure your payroll staff is well trained and knows exactly how to use the software is vital.

Ensuring that the company’s payroll systems and software are up-to-date and properly maintained is also essential for reducing errors. As data shows, payroll errors can have serious consequences. Not only can they lead to financial losses, but they can also lead to legal and compliance issues.

Help fellow colleagues by sharing your best tips for reducing payroll errors (& your favourite payroll software vendor!) in the comments below.

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A 4-Step Plan to Design a Successful Employee Total Rewards Policy

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“Total rewards is the combination of benefits, compensation and rewards that employees receive from their organizations. This can include wages and bonuses as well as recognition, workplace flexibility and career opportunities,” defines Garnet.

Every company has employees with different needs and expectations regarding total rewards. While there are many benefits employers can offer, it’s important to acknowledge that companies have different resources. Some organizations have bigger budgets and can give more appealing benefits; others don’t, so they need to be more creative.

In order to properly design a Total Rewards plan that fits your company, you should follow these steps recommended by Indeed.

1. Assess Your Current Compensation and Benefits Strategies

The first thing to do before completely redesigning or introducing a new rewards system is to evaluate your current incentive program. You can build off what the company currently offers as incentives to create something significant for everyone. For instance, if you notice your company offers a monetary bonus to employees who exceed a monthly sales quota, evaluate additional incentive strategies that can make this more meaningful to everyone who contributes to accomplishing company goals.

One approach might be to provide paid training opportunities for both teams and individuals to benefit from their accomplishments. Essentially, you should develop rewards strategies that can fill in where your current incentive program is lacking or can provide additional motivators to keep employees happy and productive.

2. Ask For Input During Planning and Development

As you assess your current incentives and brainstorm new ideas, get input from your teammates. This can give you insight into what is working and needs improvement within your current incentive program, along with new ideas you can implement when you design the rewards strategy.

After using your team’s input and your assessment of your company’s current incentives, you can plan how to implement each incentive within the reward system and identify when team members earn them. Consider specific milestones employees must meet to qualify for compensation and the methods you’ll use to determine when an employee reaches the milestones you set. Additionally, effective rewards strategies combine individual and team incentives to recognize both individual efforts and team achievements.

3. Integrate and Monitor the Total Rewards Strategy

Initiate the new rewards strategy by communicating the changes to your team, supervisors and other professionals in the workplace. Ensure your team understands the expectations and objectives they’ll meet to earn a reward. Additionally, communicate how employees and supervisors will measure team and individual progress.

4. Evaluate and Measure the Effectiveness of the Strategy

Once you’ve initiated a rewards strategy, you need to monitor and evaluate the program’s overall effectiveness. Several key things to look for when evaluating the effectiveness of the strategy include increases in employee performance, productivity and overall growth and achievement of important company objectives. Over time, a meaningful and motivational rewards strategy will show you gains across various processes across the organization.

A well-designed Total Rewards program not only can be used to attract new talent but also will positively impact your current employees’ motivation and retention. If you’d like to know more about what fellow colleagues are offering as benefits and rewards, you can start a conversation in our forum.

Does your company have a Total Rewards program in place? Let us know in the comments how it impacted your organization.

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