1. Implementing Payroll for Canada
  2. Options for Creating Payroll Earnings Elements

Options for Creating Payroll Earnings Elements

Use the element template to create and configure earnings elements and their associated objects. The template prompts you for information that's used to create the necessary payroll objects. You can also edit the objects created by the element template.

You first create an element and then update it so that it's available for all payrolls.

To create elements, use the Elements task from the Payroll area in My Client Groups on the Home page.

Primary classifications control processing, the priority in which elements are processed, and the balances they feed. They are designed to meet legislative requirements and you can't change them. Here are the predefined primary classifications you can choose for Canada:

  • Standard

  • Supplemental

  • Taxable Benefits

  • Nonpayroll Payments

Consider these some components when creating an earnings element for a Canadian payroll.

Tax Withholding Method

The applicable tax withholding options to consider are:

  • Regular - Applicable for all types of earnings; it's the default for taxable benefits and standard earnings.

  • Nonperiodic - Applicable for supplemental earnings or taxable benefits; it's the default for supplemental earnings.

  • Lump sum - Applicable for supplemental earnings only. Limit taxes such as Canada Pension Plan or Quebec Pension Plan and Employment Insurance or Quebec Parental Insurance Plan aren't deducted when this option is selected for the element.

Note: The tax withholding method question doesn't appear for standard earnings.

Commission Earnings

This question is displayed only for supplemental earnings where the tax withholding is set to regular or nonperiodic, and it defines the element as commission earnings. The tax formula doesn't use the commission information unless it's entered on the tax card.

Record of Employment

Employment Insurance (EI) hours are required for Record of Employment (ROE) processing. If the earnings aren't insurable, as determined by the wage basis rules, the answers to the below mentioned two Record of Employment questions have no impact on the earnings.

Note: The two questions given below are independent of each other.

  • EI Hours

    If the hours or earnings associated with the element aren't insurable, it should not be included in the ROE. If the hours associated with the element are insurable, it should be indicated under the Record of Employment section of the template. The hours will only get included on the ROE if the answer to the following question is Yes.

    • Are there insurable hours associated with this element?

      • Yes

      • No

  • Insurable Earnings Allocation

    The insurable earnings for an element must be allocated to a pay period based on the date it's earned or the date when it's paid. If an entry isn't made to the following question, it defaults to allocating the earnings based upon the date earned.

    • If this element is insurable, how are the earnings allocated?

      • Date Earned

      • Date paid

    This question is displayed for all primary classifications of earnings except Nonpayroll Payments. The Wage Basis Rules decide whether the earnings are insurable or not.

Earnings Elements Processing

The processing of the earnings is controlled by these factors:

  • Earnings Processing

  • Proration

  • Net-to-Gross Processing

Earnings Processing

The answer you provide to this question determines how the earning is processed. The options you can choose are:

  • Process and pay with other earnings - The payroll process processes the earnings in the regular run.

  • Process separately, but pay with other earnings - Payroll run calculates and taxes the earnings through a separate payroll action, but it's paid with the other earnings. They appear as single entry in the Statement of Earnings and Payslip. Use this setting for earnings that require special tax rules, such as bonuses.

  • Process separately and pay separately - Each earning is processed in a separate payroll action. They are paid separately from other earnings and appear as separate entries in the Statement of Earnings and Payslip.

Proration

Proration calculates proportionate amounts for recurring elements when payroll-relevant data changes during a payroll period, such as a person joining the enterprise or a mid-period pay increase. Proration creates two payroll run results: one for the payroll period up to the day before the event, and one from the date of the event to the end of the period. When you create an element, you specify its proration event group and the calculation method. The options you can choose are:

  • Calendar Days and Fixed Rate

  • Calendar Days and Variable Rate

  • Working Days and Fixed Rate

  • Working Hours and Fixed Rate

As a guideline you must not prorate:

  • Nonrecurring elements

  • Earnings elements with a calculation rule of unit multiplied by rate, if rate and hours are entered in the element entry

Net-to-Gross Processing

When defining earnings of Standard or Supplemental types, the template provides a question that enables net-to-gross processing. When you create an earnings element, you can indicate that it pays a specified net amount. Use this feature, if you must pay a person a guaranteed take-home pay (net) per payroll period, or a bonus of a specified net amount.

Retroactive Pay

Retroactive pay is when an employee receives an adjustment in the current pay period, but the adjustment must have been effected in a previous payroll period. A recalculation is then required.

If you enable retroactive processing for an element, the retroactive pay event is associated with it and retroactive pay elements are automatically generated. When you enable retroactive processing, it:

  • Rolls back the affected payroll runs.

  • Recalculates them to find the changes.

  • Adjust changes in the current payroll.