There are many terms associated with Payroll. Those who administer payrolls have to be very familiar with these terms. This glossary aims to define essential terms for understanding payroll administration in Canada.
General Terms:
Gross Pay: Total earnings an employee receives before deductions and taxes are withheld.
Net Pay: The amount of money an employee receives after deductions and taxes are subtracted from gross pay (what goes into the employee's bank account).
Deductions: Amounts withheld from an employee's paycheck, such as income tax, CPP contributions, EI premiums, and benefit plan contributions.
Remittances: Payments an employer makes to the government on behalf of their employees, including CPP contributions, EI premiums, and income tax deductions.
Pay Period: The timeframe for which an employee is paid, typically weekly, bi-weekly, or semi-monthly.
Pay Stub: A document that details an employee's earnings, deductions, and net pay for a specific pay period.
T4 Slip: An annual tax information slip provided to employees by their employer, summarizing their income and deductions for the year. It is used to file income tax returns.
Canadian Government Programs:
Canada Pension Plan (CPP): A government program that provides retirement income to eligible Canadians. Contributions are shared between employees and employers through payroll deductions.
Employment Insurance (EI): A government program that provides temporary financial assistance to unemployed workers who meet eligibility requirements. Premiums are paid by employees through payroll deductions.
Taxation:
Canada Revenue Agency (CRA): The federal agency responsible for collecting taxes in Canada, including income tax from employee payrolls.
Taxable Earnings: The portion of an employee's earnings subject to income tax deductions.
Source Deductions: Taxes withheld from an employee's paycheck at the source (their employer) and remitted to the CRA.
Other Important Terms:
Overtime Pay: Pay an employee receives for working hours beyond their regular scheduled hours, typically at a higher rate.
Statutory Holiday Pay: Pay an employee receives for working on a nationally recognized statutory holiday in Canada.
Employee Benefits: Non-cash compensation offered to employees, such as health insurance, dental insurance, or paid time off.
Garnishment: A legal order requiring an employer to withhold a portion of an employee's wages to pay off a debt.
Recordkeeping: Maintaining accurate and complete records of employee payroll information for tax and government reporting purposes
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