1. Implementing Payroll for Canada
  2. Overview of Wage Basis Rules

Overview of Wage Basis Rules

Wage basis rules introduce a way to identify the federal and provincial factors that determine the calculation of balances.

The calculation of balances is based on the references (contexts) selected at the deduction level. Each wage basis rule is associated with a secondary element classification.

Wage basis rules are predefined for all the available secondary classifications. In case you create a new classification, you must create the wage basis rules for the new classification. Wage basis rules are either at the regional level or at the federal level.

Use the Component Group Rules task in the Payroll area to view the predefined rules or create rules. The rules are based on the deduction types. The wage basis rules are date effective.

Contexts for Wage Basis Rules

You can associate a wage basis rule with up to four references that define the context for the rule. Each reference has a number that determines the sequence in which it's evaluated for processing relative to other references.

Contexts or references are defined for each deduction type and each context has a context usage defined. The context usages defined for Canada include:

  • Statutory reporting types or combinations of year end forms

  • The primary and secondary classification of the elements

  • The province associated to the deduction type. This is only applicable to regional component wage basis rules.

Deduction Types and Classifications

The wage basis rules are based on the deduction types.

Oracle Fusion Human Capital Management for Canada delivers the current wage basis rules for federal and provincial levels for a number of secondary classifications. These wage basis rules define if a particular classification of earning is subject to the following:

  • Federal and Provincial Tax

  • Payroll Tax

  • Canada Pension Plan or Quebec Pension Plan

  • Employment Insurance

  • Quebec Parental Insurance Plan

  • Provincial Medical

  • Workers' Compensation

  • Vacation

The wage basis rules also define how earnings contribute to the disposable income for the different involuntary deduction types. For Earnings, a check mark indicates that the earning is subject to that tax.

Regular and overtime earnings are always subject to Federal and Provincial taxes. However, Pretax Deductions, Supplemental Earnings and Taxable Benefits, may be subject to different types of taxes and tax withholding at the federal and provincial levels.

For Pretax Deductions, a check mark indicates that the deduction doesn't reduce the subject wages. If no check mark is present, the deduction reduces the subject wages.

Statutory Reporting Types

You must associate the secondary classification to a reporting type. This enables the element template and the wage basis rules to automatically create the required feeds and contexts so that the correct tax processing occurs. The values for the reporting types are:

  • T4/RL1

  • T4A/RL1

  • T4A/RL2