1. Implementing Payroll for Canada
  2. Options for Creating Pretax and Voluntary Deduction Elements

Options for Creating Pretax and Voluntary Deduction Elements

Elements are created using the predefined element templates.

The primary purpose of the element template is to provide an intuitive user interface so that you can easily create element types and their associated objects such as balances, formulas, links, and so on that are necessary for payroll processing.

Use the Elements task from the Payroll area to create Pretax or Voluntary deduction elements. Here are a few factors you must consider when creating Pretax or Voluntary deduction elements for Canada.

Latest Entry Date

An element's latest entry date determines how element entries process after a person is terminated or transferred to another payroll. Select the last standard earning date option, and also select proration for the element. This ensures that the element is processed up to this date, even if it isn't active at the end of a payroll period.

Employment Level

Select Payroll Relationship Level, so as to hold the arrears in a balance so that the payroll run can deduct the deduction amount in a subsequent payroll period. The arrears are held at the Payroll Relationship level. This level is the highest level for accumulating balances and pension and union dues are generally defined at this level.

Arrears or Partial Deduction

When there are insufficient earnings for a deduction and to pay all taxes, the deduction amount must be reduced. Specify whether the payroll run takes nothing or a partial amount in case it can't take the full deduction. These are the options:

  • Don't take a partial deduction or create arrears: This is the default answer.

  • Don't take partial deduction, place all in arrears: An arrears amount is created and it's deducted in subsequent payrolls.

  • Take a partial deduction, but don't create arrears.

  • Take a partial deduction, place remaining in arrears.

Proration

Typically, you don't prorate deductions, especially deductions based on a percentage of earnings.

Retroactive Processing

Retroactive pay is when an employee receives an adjustment in the current pay period, but the adjustment was first incurred in a previous payroll period. A recalculation is required, and this is accomplished through the Recalculate Payroll for Retroactive Changes process.

When you create the element, specify that it's subject to retroactive changes. Select the predefined retroactive event group for the element, or create your own. When an element is subject to retroactive changes, all components for the retroactive element are created automatically.

Registration Number

When creating a deduction element belonging to the primary classification of Pretax and Voluntary Deductions, provide the seven-digit Deferred Profit Sharing Plan (DPSP) or the Registered Pension Plan (RPP) number. This registration number appears on year-end forms and is used to report these components:

  • RPP is a trust established by a company to provide pension benefits to employees. Employee and employer contributions to a registered pension plan are tax deductible.

  • DPSP is an employer-sponsored profit sharing plan that's registered with the Canada Revenue Agency (CRA).