Transcript

Host: Welcome to the segment called Deducting Canada Pension Plan contributions and employment insurance premiums, part of the Payroll Information for a New Small Business video.

This segment mentions webpages where you can get more information. You can find links to these webpages in the Related links for this video.

I'm Karen Davis, your host for this segment, and with me is John Kelly. Welcome, John.

Subject matter expert: Thank you Karen.

Host: Can you begin by giving me a little bit of information on the Canada Pension Plan?

Subject matter expert: The Canada Pension Plan, which we call the CPP for short, provides taxpayers with a stable and dependable pension that they can build on for retirement. The CPP also provides taxpayers and their dependants with basic financial protection if they become disabled or die. For more information on CPP benefits, visit servicecanada.gc.ca. If you're an employer with employees in Quebec, you have to deduct contributions for the Quebec Pension Plan, or QPP, instead of the CPP.

Host: Generally speaking, when would an employer deduct CPP from pay?

Subject matter expert: An employer has to deduct CPP or QPP contributions, up to a yearly maximum, from an employee's pensionable earnings if that employee is not considered disabled under the CPP or the QPP and is 18 to 70 years old, even if the employee receives a CPP or QPP retirement pension. In certain circumstances, you may not have to deduct CPP contributions if your employee is 65 to 70 years of age. For more information on the Canada Pension Plan, go to the webpage on that topic.

Host: Are there specific types of situations we should be looking for when deducting CPP?

Subject matter expert: There are. You generally deduct CPP contributions from most amounts paid to an employee including salary, bonuses, commissions, most taxable benefits, certain tips and gratuities, and amounts paid while the employee is on leave. This is not a complete list. Contributions are calculated using the amount of pensionable earnings minus an exempt amount that is based on the pay period. To find out how to deduct CPP contributions, go to the webpage about the CPP.

Host: Are there any exceptions, where you would not deduct CPP contributions?

Subject matter expert: Yes, Karen, there are. The employer may not have to deduct CPP contributions from wages paid to an employee if the employee's earnings are below a set minimum or when the employee is receiving a CPP or QPP disability benefit. For more information, go to the webpage about calculating deductions.

Host: John, a few moments ago you said that an employer would deduct CPP in certain circumstances. So, if their employee is 65 to 70 years old. What did you mean?

Subject matter expert: Employees who receive a CPP or QPP retirement pension may be able to stop paying CPP contributions on their pensionable earnings if they are 65 to 70 years old. To stop contributing, your employee has to fill out Form CPT30, Election to stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election. If your employee does not fill out this form and give it to you, you have to continue to deduct CPP contributions from their pay.

Host: So, let's say that one of my employees is 65 and just filled out Form CPT 30 to stop contributing to the CPP. When will I stop deducting CPP contributions from my employee's pay and how long will this election stay in effect?

Subject matter expert: You have to stop deducting CPP contributions on the first pay dated in the month after the month you received the signed and dated election form from your employee. The election will remain in effect until your employee wants to re-start CPP contributions. More information is available on Form CPT30.

Host: And if I need more information on CPP contributions, what's a good resource?

Subject matter expert: Have a look at chapters 2 and 7 of Guide T4001, Employers' Guide – Payroll Deductions and Remittances. To find out more, go to the webpage on what changes have been made to the CPP contribution rules.

Host: So, as an employer, what do I do with the CPP contributions I deduct from my employee's pay?

Subject matter expert: You should hold these amounts in trust for the receiver general and keep them separate from the operating funds of your business until you remit them to the CRA. We will discuss how to remit payroll deductions in the segment of this video called Remitting payroll deductions.

Host: I heard that as an employer, I may also have to deduct employment insurance premiums. What exactly is employment insurance?

Subject matter expert: Employment insurance, or EI for short, provides temporary financial help to unemployed Canadians who have lost their job through no fault of their own, while they look for work or upgrade their skills. Canadians who are sick, pregnant, or caring for a newborn or adopted child, as well as those who must care for a family member who is seriously ill with a significant risk of death, may also be assisted by employment insurance. For more information on EI benefits, visit servicecanada.gc.ca.

Host: As an employer, when would I have to deduct EI premiums from my employee's pay?

Subject matter expert: You have to deduct EI premiums from your employee's insurable earnings on each dollar earned up to the yearly maximum, if that employee is in insurable employment during the year. Unlike CPP contributions, EI premiums are calculated from the first dollar of your employee's insurable earnings, and there is no age limit for deducting EI premiums. You deduct EI premiums from most amounts you pay to your employee, including salary, bonuses, commissions, taxable benefits paid in cash, certain tips and gratuities, and certain amounts paid while the employee is on leave. This is not a complete list. For more information on deducting EI premiums, go to the webpage on that topic.

Host: Are there any exceptions, where you would not' deduct EI premiums?

Subject matter expert: Yes. You might not have to deduct EI premiums from payments for casual employment that's not directly related to your normal business, payments for employment when the two parties don't deal with each other at arm's length, and employee pension plan payments. This is not a complete list. More information is available on the webpage about CPP and EI as well as in chapter 3 of Guide T4001, Employers' Guide – Payroll Deductions and Remittances.

Host: Are there any other special situations in terms of EI that employers might need to know about?

Subject matter expert: Yes, special situations apply to barbers, hairdressers, and drivers of taxis or other passenger-carrying vehicles, to name just a few. For information on special EI situations, go to the webpage on calculating deductions.

Host: And as an employer, what do I do with the EI premiums that I deduct from my employee's pay?

Subject matter expert: You would hold these amounts in trust for the receiver general and keep them separate from the operating funds of your business until you remit them to the CRA. We will discuss how to remit payroll deductions in the segment of this video called Remitting payroll deductions.

Host: And if I need more information on EI, what's a good resource?

Subject matter expert: Have a look at chapters 3 and 7 of Guide T4001, Employers' Guide – Payroll Deductions and Remittances. You can also find out more on the webpage about EI.

Host: John, tell me, are there any specific rules for employers, depending on which province or territory they are in?

Subject matter expert: The rules are the same for all provinces and territories except Quebec. As mentioned earlier, employers with employees in Quebec must deduct contributions for the Quebec Pension Plan instead of the Canada Pension Plan, if the employment is pensionable under the QPP. These employers also have to take deductions for the Québec Parental Insurance Plan in addition to federal EI premiums. Employers should have their employees use federal Form TD1 and Quebec provincial Form TP1015.3, Source Deductions Return.

Host: So, if my place of business is in Quebec or I have employees who work in Quebec, how do I calculate my payroll deductions?

Subject matter expert: To find out more, go to the Revenu Québec webpage on that topic and download the program called WinRAS. For federal deductions, go to the webpage on calculating deductions.

Host: And what do employers with employees in Quebec do with those deductions?

Subject matter expert: They remit the provincial deductions to Revenu Québec and send the federal deductions to the CRA.

Host: And where can I find more information on what may be required if my business is in Quebec?

Subject matter expert: If your place of business is in Quebec or you have employees working in Quebec, visit revenuquebec.ca or call 1-800-567-4692.

Host: Thanks, John.

This concludes the segment called Deducting Canada Pension Plan contributions and employment insurance premiums, part of the CRA's Payroll Information for a New Small Business video.

Thank you for watching.