PEO CANADA

Did you know…

According to a 2008 survey: 

·         1 in 6 Canadians have been victims of Identity Theft.

·         6.5% of Canadian adults, or almost 1.7 million people were victims of identity fraud in 2007 alone.

·         The victims spent over 20 million hours and more than $150 million to resolve problems associated with these frauds.

What is Identity Theft? 

Identity Theft refers to all types of crime in which someone steals or misuses personal or financial identifiers of someone else by using their credit card, driver’s licence, social insurance number or other personal identification numbers to commit fraud or other criminal activity.

In the words of Frank Abagnale, the fraudster depicted in the film Catch Me If You Can, “I have never seen a crime as simplistic as stealing one’s identification. It’s as easy as 1, 2, 3.” Throughout his career of identity theft, Mr. Abagnale posed as an airline pilot, an attorney, a college professor, and a paediatrician. Mr. Abagnale is now a secure document consultant working with government agencies, law enforcement, and corporations.

What kind of information do identity thieves target? 

·         Name

·         Address

·         Date of Birth

·         Social Insurance Number

·         Driver’s Licence Number

·         Mother’s Maiden Name

·         Bank Account Numbers

·         Credit Card Numbers

·         PIN Numbers

·         Passwords

How does Identity Theft occur?

·         Shoulder Surfing– Thieves may look over a person’s shoulder when they enter their PIN Number at an ATM or during an Interac transaction.

·         Skimming – Thieves can use an electronic device known as a “skimmer” that copies information directly from the magnetic strip on a credit card.

·         Dumpster Diving – Thieves may rifle through a person’s garbage looking for personal information.  Anything thrown in the garbage can end up in the wrong hands.

·         Postal Theft– Credit card bills, tax statements, pre-approved credit card applications, etc. can be stolen directly from a person’s mailbox to obtain personal information.

·         Phishing -   This includes the use of email messages, Web pages and pop-up messages that are replicas of existing, legitimate websites and businesses. These are used to trick users into submitting personal, financial, or password data. These emails often ask for information such as credit card numbers, bank account information, social insurance numbers, and passwords that will be used to commit fraud.

Five ways you can protect yourself:

1.       Shred all your personal documents including things such as pre-approved credit card applications, bank statements, and credit card receipts in a cross-cut shredder.

2.       Be aware of your surroundings and protect your PIN Number at ATMs and during Interac transactions.

3.       Carefully review your monthly credit card and bank statements. Report improper entries as soon as possible.

4.       Do not carry your Social Insurance Number, your passport, or your birth certificate with you unless absolutely necessary.

5.       Obtain and review your credit report annually. Report any incorrect information immediately.

To find out how to further protect yourself against Identity Theft contact Rogers Insurance Group Services, one of the PEO Partners, at 403-296-2700 or toll free at 1-866-335-7325.

I guess we could have all predicted that EI premium rates would increase at some point. When the economic downturn hit causing massive job losses it was only a matter of time. Over a 4 year span from 2011 to 2014 the Parliamentary Budget Officer projects the EI premium rates for the employee will be:

2011 - $1.88

2012 - $2.03

2013 - $2.18

2014 - $2.33

Currently, the maximum allowable EI premium rate is $1.73 per year and will increase to $2.33 (per $100 of insurable earnings) by 2014. That’s only a $0.60 increase over the next 4 years. Just to put these figures into perspective, on average, the projected annual contribution increase per worker would be $535. The employee would pay $223 and the employer would pay $312.

Since the EI premium rate will be increasing over the next 4 years, so will employees maximum insurable earnings. The Parliamentary Budget Officer projects employee maximum insurable earnings will be:

2011 - $44,650

2012 - $45,675

2013 - $46,775

2014 - $47,925

Even though the actual EI premium rates will be set for the next four 4 years by the Canada Employment Insurance Financing Board (CEIFB), employers should still be conscious of these projected figures when planning and budgeting.

If you would like to see the full report on these projected figures, please click on the following link:

http://www2.parl.gc.ca/Sites/PBO-DPB/documents/Projecting_EI.pdf

July 1^st is not just Canada Day for residents in British Columbia and Ontario; it is the first day of the new Harmonized Sales Tax (HST) in both provinces. So what is all the fuss about and how will it affect employers?

What is in effect now?

There are currently two forms of sales tax in both provinces: Provincial Sales Tax (PST) and the Goods & Services Tax (GST). The GST is federally regulated and applies to all Canadian provinces at a rate of 5%. PST is provincially regulated and is 7% in British Columbia and 8% in Ontario. There are many tax-exempt goods and services and many items are subject to only one of the two taxes.

What is the HST?

The HST will combine both the PST and GST into one tax. This is supposed to create a more efficient value-added tax that will reduce the cost of goods thus making manufacturers and exports more competitive. For further information, please follow the links below

BC - Government of British Columbia HST FAQ

Ontario - Government of Ontario - HST Website

What is the fuss about?

Any mention of a new tax brings its fair share of anguish, especially during a recession. There is a general concern that it will simply increase the cost of living for all residents and that consumers will never see the benefits of reduced costs to companies. The general consensus among Canadians is: “What was taxed at 5% will now be taxed at 13% (ON).”      

How will the HST affect your employees?

Both provinces are implementing this tax with the intention of stimulating the economy and are taking approaches to reduce the net effect by instituting rebates, credits, and in some cases, a reduction of income tax rates. As expected with any consumption tax, those who spend more will pay more! According to economists, low to middle income earners will see minimal changes to their cost of living; however, the net results are difficult to judge until the tax comes into effect and there are hard numbers to analyze.  

How should my company respond to employee concerns?

You may get inquiries from employees in Ontario and British Columbia because of the new HST. As always, companies should align wages with their corporate strategy and individual financial situation. Without data supporting a large increase to the cost of living it will be difficult to convince your leadership team that an immediate increase in wages is necessary. For the time being, it will be best to stress patience with your employees in order for the company to evaluate the net impact of the HST on the employee’s current standard of living.

Other Resources:

Questions & Answers - HST - CGA Ontario

Article - HST Won’t Hurt Much

The Canada Revenue Agency (CRA) is advising Canadians to be aware of fraudulent communications that claim to be from the CRA. Taxpayers are being asked by telephone, mail, or email for personal information such as their SIN, banking information and passport numbers.

The communications claim that this personal information is needed so that the taxpayer can receive a refund or benefit payment. Another common scam refers the person to a website resembling the CRA’s where the person is asked to verify their identity by entering personal information. Taxpayers should not respond to such fraudulent communications.

Employees should be advised of the following:

·         The CRA will not request personal information of any kind from a taxpayer by email.

·         The CRA will not divulge taxpayer information to another person unless formal authorization is provided by the taxpayer.

·         The CRA will not leave any personal information on an answering machine.

When in doubt, taxpayers should ask themselves the following:

·         Am I expecting additional money from the CRA?

·         Does this sound too good to be true?

·         Is the requester asking for information I would not include with my tax return?

·         Is the requester asking for information I know the CRA already has on file for me?

·         How did the requester get my email address?

·         Am I confident I know who is asking for the information?

As per fraudulent telephone calls, a telecommunications provider has recently been leaving messages for individuals and businesses to call the CRA at a 1-800 or 1-866 number. On dialing the number, callers are then asked to call another number at a cost to them. These telephone messages are not from the CRA and should be ignored. Taxpayers may verify the authenticity of a CRA telephone number by calling 1-800-O-Canada (622-6232).

Examples of fraudulent letters, emails and online refund forms can be found on the CRA’s website: www.cra-arc.gc.ca/ntcs/bwr-eng.html.

Article taken from the Canada Revenue Agency web site (http://www.cra-arc.gc.ca/ntcs/bwr-eng.html)

You may already know of a few credits, deductions and benefits you are entitled to claim on your tax return, but do you really know all of them? Have you ever looked at your tax situation and researched various tax deductions you may be eligible for? Unless you’re an accountant, many of us just don’t know or take advantage of all the tax deductions possibly available to us. The Canadian Revenue Agency’s web site is a good place to start. With tax season just around the corner it has a wealth of information on various items you could claim on your taxes based on your current tax situation.

For many, 2009 was a rollercoaster of ups and downs due to the economic crunch. We could all use as many tax tips and deductions as we can get this year. Starting January 12, 2010 the CRA will be issuing a variety of tax tips to help you determine which credits, deductions and benefits you may be able to claim on your 2009 income tax and benefits return.

For more information and to find out what you are eligible to claim check out the Canadian Revenue Agency web site:

http://www.cra-arc.gc.ca/nwsrm/txtps/2010/tt100119-eng.html

If you operate a business in Canada, you may have received a notification from Canada Revenue Agency regarding the new Program Identifier (RZ) that attaches to your Business Number. You may be asking yourself; What’s that all about? How does this affect me?

A Canada Revenue Agency Account Number is comprised of 3 parts; a nine-digit Business Number (BN), a two letter program identifier and a four-digit reference number. Each business or legal entity should have one BN.  

For example:

                                                                                   Business Number          Program Identifier          Reference Number

ABC Ltd.                                                                               123456789

        Corporation income tax account                                       123456789                    RC                                0001

        Payroll Account                                                              123456789                    RP                                0001

        Payroll Account (2)                                                         123456789                    RP                                0002

        GST/HST Account                                                          123456789                    RT                                 0001

        Information Returns – T5 Group                                        123456789                    RZ                                 0001

        Information Returns – T5 Group                                        123456789                    RZ                                 0002

        Information Returns – Contract Payments                         123456789                    RZ                                 0003

        Information Returns – TFSA                                             123456789                    RZ                                 0004 

Effective January 1, 2010, you will be required to use your BN with a new RZ account number to file any of the following information returns with CRA:

• T5 – Return of Investment Income
• T5007 – Return of Benefits
• T5008 – Return of Securities Transactions
• T5013 – Partnership Information Return
• T5018 – Contract Payments Information Return
• Registered Retirement Savings Plan (RRSP) Contribution Receipts Return
• The new Tax-Free Savings Account Annual Information Return.

If you employ third party administrators to issue receipts or returns you may not be affected. For example, if your RSP is through a large insurer who usually issues the receipts then the insurer may be responsible for submitting information using the new BZ numbers.

There isn’t a lot of information currently on the Canada Revenue Agency website. There are, however, a couple of sites that maybe useful:

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/fncnvrsn/cctnmbr-eng.html

http://www.cra-arc.gc.ca/E/pub/tg/09-115/09-115-e.pdf

If you are responsible for information returns, I would recommend discussing this with your accountant/accounting department and any third party administrators to ensure that you are in compliance with the new requirements. Keep watching the CRA website as there maybe more bulletins posted as they receive more inquiries.

Happy Reporting!

In recent years we have seen an increase in employee pregnancies in our company and I’m sure that most of you have seen the same. This can be tough on employers as Canada has one of the most generous maternity leave policies in place. Combined maternity and parental leave is a total of 52 weeks. That is one year!! This is extremely nice for a family but hard on an employer as you have to fill that gap for that year.

First, you cannot fire or demote an employee because they are pregnant. Even if that employee has not worked for you for 52 weeks, you still cannot fire them. You must accommodate your pregnant employee’s needs for the time that they are pregnant. They must still have access to all benefits, such as overtime, seniority and vacation time. You also cannot tell your employee when they are to start their leave. As long as that employee is up to it, they can work right until the day the baby is born. Pregnancy is a valid health reason to be away from work for appointments and such but it is in no way considered an “illness” or “disability”. Employers must be very cautious as to how they approach their pregnant employees as any misguided comment could become a labour standards issue.

Once an employee is off on Maternity leave, you are not obligated to provide any additional salary to them. New mothers can apply for Employment Insurance benefits as long as they are eligible. To receive maternity benefits, an employee is required to have worked for 600 hours in the last 52 weeks or since their last Employment Insurance claim. A mother can start collecting these benefits up to 8 weeks prior to their due date. It is the employee’s responsibility to advise their employer as to the start of their maternity leave. This should always be completed in writing and depending on the province of employment, an employee must provide anywhere from 2 – 4 weeks notice of their leave.

Upon completion of an employee’s maternity/parental leave, employees must provide their employer with a letter indicating the date of their return. A returning employee must be reinstated to their former position or to a position that is comparable with the same rate of pay and benefits that they had when they left. It is always best to consider hiring someone for a contract position so that when the employee does return to work, the contract person is aware that their position is complete. In addition to that, if the employee decides not to return, the contract can be extended for that current employee, without having to train someone new….again.

On that note, I sign off on my last blog as I too, will be on maternity leave as of December 31, 2009. Happy Holidays to everyone!

Employees and employers must pay into the Canada Pension Plan (CPP) and Employment Insurance (EI). Most earnings are taxable, pensionable and insurable. As there are too many to list, you can find this information on the CRA website.

Certain factors will make an employee exempt from Canada Pension Plan. Employees under 18 are exempt from paying CPP. However, once they turn 18, an employer must start deducting CPP the month after the employee turns 18. As with the employee contribution, the employer must also match the CPP contribution. On the other side, once an employee turns 70, and employer must stop deducting CPP the first month after the employee’s birthday. This means that the employer does not have to contribute as well. Once an employee applies for their CPP retirement pension, the employer must stop deducting CPP contributions the month before the employee receives their first payment. An employer may not be notified in time to stop the CPP deductions, therefore internal adjustments would have to be made.

Employment insurance has its own set of rules. ALL working employees, regardless of age must contribute to the employment insurance. As with CPP, there are certain earnings that are insurable and a list of these can also be found on the CRA website. The calculation for EI is different from CPP as well. The employer must contribute 1.4 times the amount that is deducted from the employees’ remuneration. Contributions to EI will be waived if one owns 40% or more of the company or if the employee is related to the employer. This would be considered “arm’s length”. In order to determine whether an employee falls under the “arm’s length” rule, I would always suggest a ruling from Canada Revenue Agency.

Once an employee reaches the maximum EI and CPP contributions for the calendar year, no more employee deductions and employer contributions are required. These maximums are set each year by the Canada Revenue Agency. A very important note to remember; If an employee changes employers at any time during the year, the CPP and EI deductions start all over again – regardless of how much the employee has already contributed. The employer is required to start the deductions all over again, even if that employee has already reached their maximum for the year with their previous employer. However, the employee would receive their over contribution at year end once they file their T1. Unfortunately for many employees, there is no way to waive that ruling, despite their past employment.

Finally, ensuring that employers have calculated CPP and EI deductions correctly, I would suggest processing a PIER report (Pension and Insurable earnings report) in September of each year. If there are any discrepancies, there would still be enough time to capture any underpayments before year end. Once a new year begins, any deductions for CPP and EI would apply to the new year, so it is very important to ensure that employers have looked after this in a timely manner.

Recently I had a discussion with someone regarding the terms of a layoff, from a large U.S. based Multi-National Corporation. This individual was a Canadian employee, working in Canada, which placed the U.S. based corporation in a position to be bound by Canadian laws.

What was interesting was the use of terminology, which may be appropriate by U.S. Employment Standards, but do not correlate equally into Canadian legislations. The Termination Contract stated that the choice to exercise the option of Salary Continuance that would extend 8 weeks was desired by the U.S. Corporation, but when the pay stub was received by the employee, it had been coded as “severance pay” instead of salary. The individual had then contacted the employer and the response was that it is standard practice to regularly use the terms Severance and Salary Continuance to mean the same thing as they are interchangeable in the US.

However, in Canada, Severance and Salary Continuance are different and they are not interchangeable whatsoever. These are not only completely different terminologies, but they are taxed differently as well. A salary continuance, is not legislated, but can be defined as regular salary, including full company pension and benefits, paid over “x” number of weeks or months upon termination of employment. The employee-employer relationship is still deemed to exist, hence the amount of employment income is subject to CPP, EI and tax and is reported in box 14 of the T4. The ROE is not required until the end of this extended period since both hours and dollars are insurable.

A severance pay is reported on a T4A as a lump sum payment. In addition to that, a severance is not subject to CPP or EI deductions. Income tax on a severance payment is calculated on a fixed percentage as follows:

1)      0 - $5000.00 = 10%

2)      $5000.00 - $15,000.00 = 20%

3)      $15,000.00 and over = 30%

In the case of this individual, not only was the terminology incorrect between contract and payment, but the taxation as stated.

When the individual contacted the U.S. based corporation by email again to point out the errors in calculations, missing accrued vacation pay, (since vacation accrual should have been paid if this was a true severance) improper use of terminology, and various other items, the response was that the corporation was going to discuss it with the internal legal department.

These types of errors in employment and termination contracts are quite common with companies which employ individuals across borders.

By Canadian Labour Law, the contract is held as the agreement to which both parties are bound to legally. There cannot be interchanging of terminology, or exclusions because of standards that are practiced in countries outside of Canada. Situations such as these can become costly endeavours for both the employer and employee. The simplest solution would be to consult a Canadian HR/Payroll organization that specializes in labour law. Utilizing these organizations throughout the process from recruitment, employment, benefits and payroll will reduce cost and create a simple process for cross border employees.

Today, many companies provide an automobile allowance to their employees, as they are required to use their own vehicle for business purposes. Since each company has different requirements from their employees, (the amount of driving they need to do) , the question that is always asked of the payroll specialist is – how much should I be giving my employee for car allowance?

CRA has guides as to what they consider “reasonable”. CRA says that ALL of the following must apply in order for a car allowance to be reasonable, which would make this a non-taxable allowance;

·         The allowance is based only on the number of business kilometres driven in a year;

·         The rate per kilometre is reasonable; and

·         You did not reimburse the employee for expenses related to the same use, except in situations where you reimburse an employee for toll or ferry charges or supplementary business insurance if you have determined the allowance without including these reimbursements.

In my 9 years here at PEO Canada, I have seen many variations of car allowance amounts; anywhere from $200.00 per month to $1000.00 per month. Employers must be careful when providing a non-taxable car allowance. If the amount is too low or too high, then it would be considered taxable.

The other option that most employers use is the flat rate allowance. This is a flat- rate paid to the employee, and is not related to the number of kilometers driven. This however, would be a taxable benefit and should be included in the employee’s income. This will also allow the employee to claim allowable expenses on their return. This becomes the responsibility of the employee to claim these allowable expenses and maintain record to support the claim. They will also have to keep track of the kilometers driven for business.

Each company has different expectations of their employees and the job description of that employee may determine how much time is spent behind the wheel. If the non- taxable allowance is too high or to low, the employee may face a bill from CRA at year end – if they are audited, which could also create a domino effect to a company audit. Getting advice is very important – everyone will be happy in the end!