Calculations

The deduction is calculated for each individual pay period. The exemption is distributed based on the number of days in the pay period. The typical 14-day period distributes the exemption for a biweekly payroll of 26 periods per year. To implement a biweekly payroll of 27 periods per year assign half the periods 14 days and the other half 13 days.

Employment Insurance

EI is heavily dependent on weekly reporting. The Payroll can give precise numbers based on the total Earnings History for Records of Employment, etc. However, calculations for a pay period become a Gordian Knot without some constraints. The following constraints are built into the EI calculations:

• The Pay Period End Date coincides with a EI week ending date.
• Calculations are based on whole weeks.
• Earnings for dates preceding the pay period are added to the first week of the period for the calculation.
• Earnings are considered to apply evenly to the weeks ending with the week in which the Effective Date falls. The distribution is based on the number of days assigned to the particular earnings entry.
• Vacation Pay and other calculated earnings are spread evenly over the weeks of the pay period.

Beginning in the year 2001 the Employment Insurance parameters are stored in the EI table of Government Deductions. It takes two entries to completely define EI parameters for a calculation. The first entry, Amount = zero, carries the basic premium rate in the Rate(R) and the maximum annual premium in the Constant(K). The last entry, Amount = 999999.00, carries the employer/employee ratio in the Rate(R) and the maximum annual insurable earnings in the Constant(K). There is an EI table for each year and version of the Government Deductions.

Until 2001, the basic parameters for the calculation are stored on a regular Deduction entry (code = UIC). When updated using the standard Deduction Update, the fields correspond as follows:

EI Reduced Rates are defined in the UI table of the payroll (application = P). The table entry gives a replacement rate in percent for an EI code, and an associated RCT Number. The EI code is defined on the Assignment for the Employee. The EI calculation looks for a matching EI entry in the table. If that code carries a non-zero rate it is used to override the basic premium rate. The reduced rate must be recorded as a percent to have sufficient accuracy for the calculation. There is only one table of EI Reduced Rates. This is only a concern if more than one government deduction version is in use in one payroll and the EI Reduced Rates are different for each version.

Income Tax

Earnings are reported by pay period. The tax calculation is based on equivalent annual income. The pay period earnings are converted to equivalent annual income by multiplying by 364 then dividing by the number of days in the period. A monthly payroll will show variances in tax from month to month based on the number of days in each month.

The distribution accounts were defined on a regular Deduction entry (code = TAX). The other variables are kept in the Tax Tables. Each entry is identified by Province, Table ID, and Upper Limit of the amount. Each entry contains a Rate and a Constant. By extending the definition of Table ID, all the parameters can be contained in one physical file. The Table IDs used include:

Another important concern in the tax calculation is nontaxable deductions. They are implemented like other deductions except that the Taxable Benefit Type is set to N, nontaxable. They include:

The Bonus Tax Calculation is as described for Machine Computations. Bonuses are recorded using separate Rate Codes. The Taxable Earnings Type on the Rate Code is set to B to differentiate it from other taxable earnings.