What are statutory deductions?
The statutory deductions are mandatory deductions required to be deducted from employee pay by employers. These include:
- Employment Insurance (EI)
- Canada Pension Plan (CPP)
- Taxes Payable – both Federal and Provincial
Employers submit these deductions to the government on behalf of their employees.
The Employer is also required to match the insurance, pension plan and calculate the taxes payable on behalf of the employee.
How is employee net pay calculated?
Employers arrive at net pay by deducting the following:
- Statutory deductions: EI, CPP and taxes
- Other deductions that are either voluntary or non-voluntary – including pension plan contributions, insurances and union dues
This money is held in trust until the payroll liabilities are submitted to the proper government agencies or other deductions are sent to 3rd parties for health insurance, union dues and pension.
Vacation pay of 4% or 6% may be added to each pay cheque or accrued and paid out when the employee takes vacation.
These statutory deductions are reported on the Information Slip that are sent after February 28 of the following year.
Self-Employed? You can have employment insurance coverage.
As a self-employed person, you can make contributions to EI and collect insurance if you have a break in earnings for parental, pregnancy or family illness situations.
You register with Service Canada, then you can make the payment on self-employment income to Employment Insurance on your tax return.
Additional information about payroll and deductions
Help for calculating payroll – Online Calculator for Payroll Deductions
Information about Canada Pension and Employment Insurance: EI & CPP Explained
Payroll information for a new small business: Payroll information
Plan and maximize your tax savings
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