Payroll Glossary

After-tax dollars

The amount of money available after taxes and other statutory deductions have been taken from an employee’s pay.


Amend

Correct, change, for example, to amend a T4, to correct an error on the original T4.


Annual basic exemption

The amount of pensionable earnings (for Canada Pension Plan purposes) that is exempted on an annual basis, or prorated to a pay period amount on a pay period basis, from having contributions to the Canada Pension Plan deducted from it.


Before-tax dollars

The amount of money available before taxes and other statutory deductions have been taken from an employee’s pay; Gross pay.


Bi-weekly

Pay period that occurs every two weeks.


CPP

Canada Pension Plan.


Calendar year

The period from January 1 through December 31, inclusive


Canada Pension Plan

The pension plan established by the Government of Canada and administered by Human Resources and Social Development Canada to provide disability and retirement pensions to qualifying people who work or have worked in the Canadian labour force.


Canada Revenue Agency

The name of the federal government agency responsible for interpretation of tax acts, collection of taxes and duties owing to the federal government.


Canada Savings Bond

Canada Savings Bonds Payroll Savings Plan is available through payroll deduction. The campaign starts in October of each year: There are no fixed denominations for bonds since no bond certificates are issued. Bond owners will receive an annual statement and can access their Plan online at www.mybonds.gc.ca.


Charitable donation

A gift of money given to a registered Canadian charity.


Cheque stub

An attachment to an employee’s pay cheque that provides written details of an employee’s earnings, deductions, net pay, and other information directly relevant to the payment made to the employee.


Contribution

A payment made to a fund for which two or more parties are liable; for example, contributions by employee and employer to the Canada Pension Plan.


Credit

An amount established according to the Income Tax Act or Taxation Act that may be used to reduce the amount of taxes payable to the Canada Revenue Agency, for example, Personal Tax Credit TD1 Form.


Deduction

The amount that an employer subtracts from an employee’s compensation to pay taxes, union dues and other obligations such as benefits and pension.


Direct Deposit

The deposit of an employee’s net pay to his/her account in a Canadian financial institution on a specific date. For pay dates, see Payroll Schedules.


EFT

Electronic funds transfer.


EHT

Employer Health Tax.


EI

Employment insurance.


Eligible

Income, for example a retiring allowance, that meets the conditions of the tax acts and which may be transferred to an RRSP without withholding tax at source.


Employer Health Tax

The name of the tax on an employer’s Ontario payroll imposed by Ontario to raise the funds necessary to support Ontario’s health insurance plan (OHIP).


Employment income

Income that is received as a direct result of employment. It includes all payments to which a person is entitled under company policy including bonuses and under labour law including salary, vacation pay, pay in lieu of notice, and is reported on a T4 Slip.


Employment insurance

Statutory insurance system administered by the federal government and financed jointly by employers and employees to provide income to unemployed persons meeting certain qualifying conditions. Human Resources and Social Development Canada (and its Employment Insurance Commission) administers the program and the Canada Revenue Agency collects the revenues for the financing of the program.


Exemption

The earnings that are not subject to contribution to the Canada Pension Plan and the personal credits which an employee declared to his/her employer on the TD1 (Federal) and TD1ON (Provincial).


Federal

Pertaining to Canada, the government of Canada. As in, federal taxes meaning taxes paid to Canada.


Financial institution

An institution chartered by the federal government or by a province to take deposits; it includes banks, trust companies and credit unions.


First day worked

The first day an employee works for an employer, or if a Record of Employment has been issued to the employee by that employer since commencing employment, this is the first day worked following the issuance of the most recent record of employment.


Frequency

The rate of occurrence, how often something occurs. In payroll, the frequency of a payroll is its periodicity; for example, a payroll frequency may be bi-weekly (26 times a year) or monthly (12 times a year).


Gross pay

The total pay before any deductions or withholdings.


HRSDC

Human Resources and Social Development Canada.


Holiday pay

Remuneration paid to an employee in regard to a public holiday. See also Statutory Holiday.


Human Resources and Social Development Canada

The name of the federal government department responsible for the policy, legislation, interpretation, and administration of the Employment Insurance program and the Canada Pension Plan.


Income Tax Act

The Act defining the issues regarding income tax falling under the jurisdiction of the Minister of Finance for Canada.


Insurable employment

(EI) Employment that, according to the Employment Insurance Act, entitles and requires an employee to participate in Canada’s employment insurance program. Qualifying earnings resulting from such employment determine the amount of insurability and are subject to Employment Insurance premiums.


Interruption of earnings

(EI) A partial or total discontinuity in insurable earnings, either temporary or permanent, that meets the conditions described in the Employment Insurance Act, the occurrence of which requires the issuance of a record of employment.


Lump sum

A single amount of money paid for reasons or from sources defined in the tax acts, including a retiring allowance and other payments not related directly to employment; a lump sum may be taxed at source according to lump sum taxation rates.


Lump sum payment

The issuance of money in a single amount (as opposed to instalments, periodic payments) for reasons or from sources defined in the tax acts, including a retiring allowance and other payments not related directly to employment and which may be eligible for lump sum tax rates at source. Or A single payment in respect of money or moneys owing, i.e. Retroactive pay, or vacation pay, or a retiring allowance can all be made as lump sums – single payment, not instalments.


Monthly

Occurring at regular intervals of one month, as in monthly payment; 2. (On the basis of) lasting for one month, as in monthly salary.


Net

Free from (any further) deductions; clear; as in net pay. That which is left after all deductions have been taken.


Net pay

Employee’s pay after all deductions have been taken. (syn.) Take-home pay.


Non-eligible

Income that does not meet the conditions of the tax acts and which may not therefore be transferred to an RRSP without the withholding of tax at source.


Non-resident

A person who does not reside in Canada or a person who does not reside in Canada and who does not qualify as a deemed resident. The residency (or non-residency) status determines the individual’s tax status and liability towards Canada in certain instances, as well as withholding and reporting requirements devolving upon the payer.


Pay

Remuneration. Compensation. Money owed or owing to an employee as a result of employment.


Pay period

The period (of time) for which an employee earns pay. A pay period has a starting date and an ending date; the intervening time inclusive of starting and ending dates is the period. The pay period may be qualified by the frequency, as in bi-weekly pay period.


Pay statement

Written details of an employee’s earnings, deductions, net pay, and other information directly relevant to the payment made to the employee.


Payday

The day on which an employee’s pay is paid, i.e., cheque is cashable or bank deposit is credited to the employee’s account.


Payee

A person who receives payment.


Payer

A person who makes a payment.


Payment

Amount of money paid or transferred.


Payroll

The list or record of employees entitled to receive pay, or who have received pay, including particulars of the pay and deductions from it or the wages and salaries paid or payable. The department that is responsible for issuing, recording, and reporting payroll payments. (i.e. the Payroll Department).


Payroll year

The calendar year; the year, 12-month period that forms the framework of actual payments, deductions, remittances to be reported to the Canada Revenue Agency.


Pensionable employment

Employment that, according to the acts respecting the Canada Pension Plans, entitles and requires an employee to participate in the plans.


Period

Fixed duration (of time); time that is defined by a starting point and ending point. As in, pay period.


Personnel number

A unique number assigned by an employer to identify one individual.


ROE

Record of employment.


RRSP

Registered retirement savings plan.


Record of Employment

A form required by Canada Employment Insurance Commission to be issued to an employee upon termination of employment or interruption of earnings.


Registered retirement savings plan

A savings plan intended for an individual’s retirement, which has been accepted for registration by the Minister of Revenue of Canada as meeting the requirements of the respective Acts, and which confers certain tax benefits to the individual.


Regular pay

A category of an employee’s pay referring to pay for hours worked in the employee’s normal, regular functions at the basic rate of pay for those functions; used to differentiate such pay from other categories such as vacation, overtime or bonus.


Remuneration

Payment for service rendered.


Retiring allowance

An amount paid to an employee upon or after termination of employment in respect of (a) long service, or (b) loss of an office or sometimes erroneously called Severance pay. When paid as a lump sum payment lump sum tax rates may be applied at source.


Retroactive

Giving effect (to something) at a prior date; going backwards in time; e.g., retroactive pay, retroactive adjustments, retroactive increase.


Retroactive pay

Payment made in the current pay period of the increase in wages or salary earned during a past period.


RRSP deduction limit

The maximum contribution allowed by law that an individual may make to an RRSP in a year and deduct from income before calculating taxes.


SIN

Social Insurance Number.


Salary

A periodic payment, based on a monthly or annual rate, made to an employee under a contract of service.


Severance pay

Payment(s) due to the termination of employment.


Social Insurance Number

The unique number assigned to an individual, upon application, by the authority of the Canada Pension Plan for identification purposes; it is now used extensively and obligatorily by government for unique identification purposes in any transaction that may affect income and taxes of the individual. A social insurance number commencing with “9” signals that the bearer is not a Canadian citizen or landed immigrant and does not have the rights of citizenship, including the right to work in Canada without special permission.


Statutory holiday

A day designated by statute as a day that is to be considered a holiday from work


T4 Slip

The document prescribed by the Canada Revenue Agency to be filed by an employer at the end of the year to report an employee’s employment income and certain deduction amounts.


T4A Slip

The information slip that must be filed with the Canada Revenue Agency to report certain types of income that are not considered employment income.


Tax

A compulsory contribution of money eligible under law for the support of government and/or public services. (Income Tax)


Taxable

Subject to the payment of income tax.


Taxable benefit

A benefit derived (from employment) that is subject to income tax in the hands of the recipient. (i.e. Group Life Insurance)


Taxation year

A calendar year for an individual.


Transit number

The unique 5-character number that identifies a particular branch of a financial institution. It appears on the bottom of cheques; it is also used to direct an electronic funds transfer to the correct branch of a financial institution; a bank number and an account number are additional numerical identifiers that must be used to correctly transfer funds to an account.


Unused RRSP deduction room

The tax-assisted contributions that a person could have made to an RRSP but did not make.


Vacation pay

Pay to which the employee is entitled by law or bylaw and company policy or union contract the purpose of which is to provide remuneration for the annual period of vacation leave. The pay described in but paid upon termination of employment rather than in respect of a temporary vacation leave.


Void cheque

A cheque that has been produced and subsequently rendered without legal effect either by writing “void” on its face.


Withholding

Used in reference to that portion of an employee’s remuneration that the employer must collect at source in payment of income tax and other amounts required by law. In payroll, “withholdings” are government required withholdings such as income tax.


YMPE

Year’s maximum pensionable earnings.


Year

In the case of individuals, a calendar year, i.e., January 1 through December 31.


Year-end

In payroll, the year end is the end of the calendar year (December 31).


Year’s maximum pensionable earnings

CPP earnings are pensionable up to an annual maximum amount which is set each year. Earnings up to the maximum are subject to withholdings for CPP contributions and earnings over the maximum are not subject to withholding for CPP purposes.


Year-to-date

The running total, accumulation, for specified earnings or deduction type of all amounts added to the accumulator during the period defined as a year. Most commonly used for totalling payroll amounts for the payments and deductions falling within the current calendar.