Ensuring legislative compliance

There are specific laws and regulations that employers must comply with when it comes to compensating employees. Staying on top of regulations is key to achieving compliance. Employers should regularly review the laws and regulations below to ensure they are up-to-date on changes.

Canada Revenue Agency

The Canada Revenue Agency (CRA) is your source for information when it comes to payroll compliance.
The CRA determines what is considered insurable employment and which earnings are insurable or not. Insurable earnings are the portion of an employee’s income that is used to calculate their contributions and their employer’s contributions to Employment Insurance (EI) premiums. Salary/wages, bonuses, paid vacation time, sick time, overtime, and statutory holiday pay are all considered insurable earnings.

Visit Canada.ca's Payroll page to learn about CPP contributions, EI premiums, and income tax deduction, as well as how to calculate the deductions on the amounts paid to employees.

Canada Pension Plan

Organizations are required to submit Canada Pension Plan (CPP) and/or Quebec Pension Plan (QPP) payments to the government for all eligible employees on their maximum insurable earnings, based on a rate table revised annually. A percentage is deducted from the employee’s pay, and a portion is remitted by the employer.

For more information, visit the following pages: Canada Pension Plan and Quebec Pension Plan.

Workers’ Compensation

Workers’ compensation provides income replacement to employees who are injured or became ill on the job. Each province has its own Workers’ Compensation Board, which is funded by employers. Not all employers are required to pay into workers’ compensation; the provinces determine which industries and types of employees must have coverage.

Employers that participate in the workers' compensation system are charged a certain dollar amount per $100 of payroll or “premium.” The money is put into a fund that goes to income replacement and medical and rehabilitation services for injured workers on the job.

Direct links to each provincial compensation board information can be found on HR Intervals, by visiting HR Policies > HR Legislation > Health and Safety Legislation.

Employment Standards

Employment standards legislation sets out the minimum terms and conditions of employment for those who operate federally and for each province or territory. Employers must follow these minimum obligations unless they offer employment terms or conditions that give employees a greater right or benefit.

The specifics found in Employment Standards legislation varies from province to province, however all include guidelines for the following:

  • Minimum wage
  • Hours of work
  • Overtime pay or time in lieu
  • Public holiday pay and entitlement
  • Vacation entitlement and pay
  • Job protected leaves
  • Employee vs. independent contractor status
  • Termination pay

Employers should be aware that when employees take a job-protected leave, they are entitled to return to their same or equivalent job at the same rate of pay and benefit entitlements.

When considering using an independent contractor, it’s important to understand what that term means as defined by the CRA. Courts will often consider an employee who has been employed under a series of fixed contracts to actually be a permanent employee. Other factors that courts take into consideration when deciding if an individual is an employee or an independent contractor are:

  • The level of control the payer has over the worker;
  • Whether or not the worker provides the tools and equipment;
  • Whether the worker can subcontract the work or hire assistants;
  • The degree of financial risk taken by the worker;
  • The degree of responsibility for investment and management held by the worker;
  • The worker’s opportunity for profit;
  • Any other relevant factors, such as written contracts.

Direct links to each province and territory’s employment standards information can be found on HR Intervals, by visiting HR Policies > HR Legislation > Employment Standards.

Pay Equity

Pay equity is defined as “equal pay for work of equal value.” The purpose of pay equity legislation is to eliminate the gender wage gap and ensure individuals receive fair and equal compensation for jobs considered to be of equal value within an organization. Pay equity is currently a legal requirement federally and in some provinces for certain employers. Check your province’s employment standards laws to learn more about the requirements in your jurisdiction.

Employers play a significant role in implementing and maintaining pay equity. This includes conducting regular pay equity assessments, addressing any identified disparities, and fostering a workplace culture that values and promotes equal pay. For more information on how to implement pay equity within your organization, reference the following resource from the Ontario Pay Equity Office: How to do Pay Equity in 7 Steps.

Labour Relations

If you are a unionized employer, it is important to abide by the collective agreement when determining compensation practices for unionized employees. Collective agreements between employers and unions will typically address the following compensation practices:

  • Base salary and hourly wage
  • Salary scales by job classification
  • Annual increases
  • Overtime pay
  • Bonuses
  • Benefits

Compensation is usually a central focus during collective bargaining. Employers and the union need to find a balance to fair and competitive wages while also maintaining the organization’s financial viability.

The federal government, as well as each province and territory, has its own legislation regarding labour relations. These laws outline the rights and responsibilities of both the employer and union.

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