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One of the more powerful features of Payroll is the ability to customize how deductions, benefits and additional earnings are calculated and taxed. 

To determine if a benefit or deduction is subject to taxes or withholding, please refer to the Canada Revenue Agency guide:  Employers' Guide to Taxable Benefits and Allowances

Overview

To take advantage of these custom pay rules, you'll first create the rule and then apply it individually to the employees that are affected.

Payrule-workflow.png

Custom Benefits

Let's say your company wants to provide certain employees with a gym membership as part of their regular employment. Typically, a gym membership, if paid directly to the gym on the employee’s behalf, is subject to Federal and/or Provincial tax (they are taxable benefits), are subject to CPP (they are pensionable) and not subject to EI (not insurable). They are non-cash when paid directly to the gym.  Ask your accountant or CRA for clarification on what your rule needs to be.
To setup this custom benefit, follow these steps:

  1.  Go to   and select PAY RULES. Click on the BENEFITS tab and + Add New Rule
  2. Name - Give your rule a name - such as, "Gym Membership". This description will be used in the system to track amounts and will be used on your employee pay slips to describe that line item in their pay.
  3. Description- enter a description for your reference
  4. Check ENABLED to have the rule run in every pay run
  5. GL Code - if you'd like to assign a custom general ledger code to this benefit, go ahead and enter the numbers. This should match the chart of accounts used in your general ledger and/or accounting program. If you assign a custom GL, the amounts here can be exported to your accounting program after you re-map. 
  6. T4 Box – Assign a box for your T4/T4A if needed, other than box 14
  7. Provincial Box – Assign a box for your RL-1 if needed, other than Box A
  8. CPP - checking the box makes the amount subject to CPP calculations For our “Gym Membership” example, this should be checked because we want the amount to be subject to CPP calculations. 
  9. EI - checking the box makes the amount subject to EI calculations (For our example, this should be unchecked so our “Gym Membership” benefits aren't subject to EI calculations as per the Canada Revenue Agency's guidelines on non-cash taxable benefits).
  10. Fed - checking this box makes the amount subject to federal taxes (increasing the taxable gross of the employee). For this example, it should be checked. 
  11. Prov - checking this box makes the amount subject to provincial or territorial taxes. For our example, this should be checked. 
  12. Non-Cash - check this box if this is a non-cash benefit.  This means you do not give the cash to the employee directly, but to a third party on their behalf.  Non-Cash benefits do not export to accounting programs.  In our example we are paying the gym directly so this would be non-cash
  13. Vacationable- selecting this option will make this benefit subject to vacation calculation amounts.  In our example this would be unchecked.

Here's what your screen should look like:  


Adding to Employees

Once the rule has been created go to EMPLOYEES> PROFILE>PAYROLL and click on the Benefits section and select Add Benefit +
It will now show up in the rules for the employee and you can enter an amount, either as a dollar or percentage (this can be different for each employee).  Save it and it will run each time you do payroll. 

Note** Often a gym membership is a monthly premium amount.  You will need to know the amount on a per pay run basis (per CRA guidelines). 
To get this amount here is the formula:
Monthly Rate x 12/ # of pays per year.
Ex: our monthly rate is $50 and our pay period is bi-weekly
50x 12= $600/year.  Divide $600 by 26 (bi-weekly) =$23.08 per pay run.  Enter $23.08 in the dollar amount in this example.


Custom Deductions

Now let's try another example - this time a deduction. We want to deduct premiums for a life insurance policy for our employees (the employees are paying for it). The amount we are deducting should come from the employees NET pay (i.e. after all tax calculations). To setup the deduction, follow these instructions:

  1. Go to the SETTINGS menu and select PAY RULES
  2. Click on the DEDUCTIONS tab and add a new rule
  3. Name - Give your rule a name, such as "Employee Paid Life Policy" - this will show on your employee pay slips and in your reports. 
  4. Description- enter a description for your reference
  5. GL Code - if you'd like to assign a custom general ledger code to this benefit, go ahead and enter the numbers. This should match the chart of accounts used in your general ledger and/or accounting program. If you assign a custom GL, the amounts here can be exported to your accounting program after re-mapping 
  6. Enabled - Check ENABLED to have the rule run in every pay run
  7. Reduce Pensionable – selecting this box will reduce the gross amount CPP is calculated on by the deduction amount
  8. Reduce Insurable- selecting this box will reduce the gross amount EI is calculated on by the deduction amount
  9. Reduce Tax - selecting this box will reduce the gross amount Income Tax is calculated on by the deduction amount
  10. Non-Cash – This means no money will actually be taken away from the employee

Here's what your screen would look like if you were adding this rule: 

 
Go and add to employees with a per pay run dollar/percentage amount the same as with Benefits.


Custom benefit and deduction combinations 

Now let's use a combination of benefits and deduction rules to create a split company-paid benefit and deduction.  For example, your company provides Health/Dental benefits to your employees where each pay 50% of the premiums
Here's how to enter this in the system: 

  1. Go to the SETTINGS menu and select PAY RULES.
  2. Click on the Deductions tab and select Add New Rule 
  3. Fill in all the necessary information for the Employee portion
  4. Save the rule
  5. Go to the Benefits tab and select Add New Rule 
  6. Fill in all the necessary information for the Employer portion
  7. Save the rule
  8. Go to Employees>Edit Profile and navigate the Benefits/Deductions tabs.
  9. Select the rule and click Add
  10. Enter the amount each is paying in each pay run

Note** Often a health/dental plan is a monthly premium amount.  You will need to know the amount on a per pay run basis (per CRA guidelines). 
To get this amount here is the formula:
Monthly Rate x 12/ # of pays per year.
Ex: our monthly rate is $100 and our pay period is bi-weekly
100 * 12= $1200/year.  Divide $1200 by 26 (bi-weekly) =$46.15 per pay run. 
Because you are each paying half of this enter $23.075 on both the Benefit and Deduction amount


These are just some examples of how to use our payroll rules to define custom benefits and deductions for your employees. If you have questions about the tax implications of various benefits and deductions, please consult your tax advisor or accountant or one of our Payroll Specialists.

Here is a VIDEO of how to add and use custom benefits and deductions

 

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