Payroll Advances

by Sheila
(Burnaby, BC)

Stat Deduction Rates for Irregular Paycheques

Stat Deduction Rates for Irregular Paycheques

I am doing bookkeeping for an incorporated business, no employees, but the owner draws salary cheques for herself. She would like to make them semi-monthly, but it depends on the cash flow ... some months she writes one paycheque, some months two.


Our question is which tax tables we should use for her stat deductions ... semi-monthly, or monthly? I presume if we use monthly tables, any over/under taxes she makes will be resolved on her tax return? Thanks in advance for your help.

P.S. Wonderful site. I have found answers to several other questions here.



section divider



Hi Sheila,

As she is the owner/manager, I would use the monthly tables. When you have a month where there is enough cash flow for her to take a mid-month paycheque, pay by advance.

I wrote a guest column on payroll advances in December 2010. Here is an edited reprint of the article for your reference:

Are payroll advances compliant with regulations ... and if they are allowed, are payroll withholdings required?

CRA Publication T4001 Employers' Guide - Payroll Deductions and Remittances states you generally deduct CPP contributions, EI premiums, and income tax at source for salaries or wages ... which includes payroll advances under CRA definitions.

If you pay the employee the advance net of withholdings, and take all withholdings and repayment of the advance on the end of month pay, CRA payroll compliance remittance requirements for the period will still be met.

In effect, paying an advance net implies withholdings have been deducted but not reported on the employee's pay stub or the business's books until the end of the month. The risk to the employer is minimal if the employee leaves prior to repaying the advance.

The next question then is ... is this an acceptable practice?

The Employment Standards Act in BC requires a minimum of semi-monthly pay periods. Monthly pay periods are not allowed. So it would seem at first glance that, in BC anyway, payroll advances would not be compliant with the provincial employment standards.

Closer examination of the employment standards provided clarification under ESA Section 17, Subsection (1).

"The semi-monthly requirement can be met by an employer paying an advance to an employee in the middle of the month. The advance payment should be about one-half the monthly payment based on net (after tax) earnings. If payment is made this way, the employer must give the employee, at the end of the month, a full statement of wages paid, including the advance amount and any deductions paid during the month."

For readers who live in a province other than B.C., it would be up to you to check your employment standards to see if this is also applicable in your province.


Hope that helps.



P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

Comments for Payroll Advances

Average Rating starstarstarstarstar

Click here to add your own comments

Feb 19, 2015
Rating
starstarstarstarstar
Mid month advance
by: Anonymous

According to this at the CRA website, CPP, EI, and Tax have to be deducted on Advance payments, which implies remittance has to be done accordingly.

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/spcl/pychrt-eng.html

Click here to add your own comments

Return to Payroll Taxes.

Enjoy A Tea Break With
Me Today. Let's Chat!

Use the search feature to quickly find the
information you're looking for.

Like this page? Please let Google
know by clicking the +1 button.






 Keep Your  eDocuments Safe And Secure… $7 USD
Version 2 now out
Bigger and Better



SHORTEN
Your Learning Curve!

Buy Now



Warm up your tea cup and check out these chats ...

Click on image above to read the chat.






Purchasing These Products Through My Links Helps To Support This Site

Click on image above for my review.






Join Me On Facebook

Help support this site by "liking" me! Here's where I post current information.

Listed Under Websites NOT Local Business.
This website is not associated with the business operating in Bonnyville AB.






A Handy Reference

Buy Now