PEO CANADA

In these challenging times we are often asked how it’s possible to cut benefits costs. Most employers use cutting salaries as a last resort, preferring not to affect regular net pays and turn to benefits to help reduce expenses.

If you have to cut, what exactly should you cut?

Here’s a quick reference chart which addresses a few main areas that you could consider and some of the pros and cons in each case:

When undertaking any type of cost containment measure it is important to verify what is specifically stated in employment agreements/offer letters/policy manuals. If the area of cost cutting is addressed in a document then you will need to give sufficient notice to make the change. If you don’t provide sufficient notice then you could have a potential liability situation. So, thorough research into polices and signed documents is a must before making any changes.

While reviewing cost cutting measures, I would also recommend reviewing short and long term incentives. By ensuring that incentives align to corporate strategy and goals you can focus on growth and not just cost cutting. But that’s another blog…

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.

In Canada, it is important to have a Safe Driving Policy in Place.  If you are an employer whose employees are required to drive a company or their own personal vehicle for work purposes, now is the time to review your policies.  Ontario will soon be enforcing Bill 118, an amendment to the Highway Traffic Act.

Bill 118, which comes into effect on October 23, 2009, bans drivers in Ontario from using handheld devices with display screens while operating a vehicle on the road.  Some of the new rules of Bill 118 are as follows:

·         Holding or using a wireless communication device (a cell phone) or a portable electronic entertainment device (iPod) while driving is prohibited.

·         Commercial GPS units along with similar dashboard-mounted devices that provide gauges and displays relating to logistical or navigation uses are fine.

·         Using a cell phone or wireless communication device in hands-free mode, as long as you’re not holding it during use, is fine.

·         Using any device while pulled-over or parked in a way that you are not disrupting traffic, is fine.

·         Violations will carry a fine of $500.

·         Depending upon the violation, police will have the option to also use existing careless driving laws for additional penalties.

To read Bill 118 click here.

Even if you do not have operations in Ontario, the guidelines of Bill 118 are still valid and should be considered when reviewing your Safe Driving Policy.  The purpose of having such a policy is to ensure that your employees are traveling safely thus mitigating potential liability issues.

When was the last time that you reviewed your Safe Driving Policy?