Canadian payroll can be confusing with lots of new acronyms and terminology. We’ve created a simple guide to define and explain some common Canadian terms to help you get ready to tackle payroll for your small business.
Deduction: Any amount withheld from an employee’s pay.
CPP: CPP stands for the Canada Pension Plan. The CPP is one of the two arms the Canadian government uses as social insurance, along with the Old Age Security plan. Each Canadian citizen over 18 must contribute a portion of his or her earnings to this government-administered plan.
CRA: CRA stands for Canada Revenue Agency. The Canada Revenue Agency takes care of some important stuff including tax, benefits and ensuring corporate and individual compliance. For all of the details, go to: http://www.cra-arc.gc.ca/.
Calendar year: A year on the calendar, January through December. Simple as that!
EFT: Electronic funds transfer. If you pay your employees by Direct Deposit, that is an EFT.
Gross pay: An employee’s total pay before deductions & taxes have been subtracted.
Net pay: Net pay is the amount you take home after taxes and deductions have been subtracted from your gross pay.
Overtime pay: Payment for hours worked by an employee in excess of 40 in a workweek. More information can be found through the Canadian Labor Program.
Pay stubs: Records for the employee of his or her earnings, deductions, net pay and other relevant details. In Payroll by Wave, employees can pick up their Pay Stubs in their own Wave accounts, under the Personal section.
Payroll: The process of paying your employees, and your tax and administrative obligations to the government. Payroll by Wave helps you calculate and pay your remittances (see below), and pay your employees on time through Direct Deposit.
Remittances: A remittance is the act of moving money to cover an obligation; in the case of payroll, we’re talking about money remitted to the government. An employer must remit employees' CPP (Canada Pension Plan) contributions, EI (Employment Insurance) premiums, and income tax.
ROE: An ROE is a Record of Employment, issued when there is an interruption in an employee’s earnings (like where employment ends or the employee leaves because of pregnancy, injury, illness, adoption leave, layoff, leave without pay, or dismissal). This is a document that you (the employer) fill out for each of your employees upon termination or the employee leaves because of pregnancy, illness, adoption leave, injury, layoff, leave without pay, or dismissal. An ROE includes your employee’s work history, earnings and hours. If you run payroll with Wave, we handle this stuff for you.
Year to Date (YTD): In a payroll context, YTD is the total of employee earning and deductions beginning in the current year until today. In relation to Wave, you might encounter YTD when adding an employee who has received wages this year that were paid outside of Wave. When you add that employee to Wave, you simply enter YTD information for that employee.