Donnelly and Co.
Chartered Accountants
Payroll Deductions : Donnelly

Payroll Deductions

Employers are responsible for deducting income tax, Canada Pension Plan (CPP) and Employment Insurance Premium (EI) from employees’ paycheques. They are also responsible for remitting this money to Canada Revenue Agency, usually on or before the 15th day of the month following the month in which the deductions are deducted.

Employers are responsible for deducting income tax from the salaries, wages or other remuneration paid to employees. Since employees fall into various categories, employers usually need to complete TD1, Personal Tax Credit Return and TD1AB, Alberta Personal Tax Credit Return, in helping employers to decide what to deduct from their paycheque.

Both employers and employees contribute to the CPP. The contribution rate for 2016 is 4.95% (2015 – 4.95%) with an annual basic exemption of $3,500 and maximum pensionable earnings of $54,900 (2015 – $53,600) or maximum annual contributions of $2,544.30 (2015 – $2,479.95).

 Employer’s contribution to EI on behalf of employee is slightly more than the employee’s. The EI premium rate for 2016 is 1.88% (2015 – 1.88%) with annual insurable earnings of $50,800 (2015 – $49,500) or maximum annual contributions of $955.04 (2015 – $930.60).  An employer withholds EI premiums beginning with the first dollar of insurable earnings and stop deducting premiums when reaches the employee’s maximum annual insurable earnings.