Employment Income – Regular Earnings

Net Pay Calculations

To determine the employee’s net pay, the payroll professional must be
able to identify and calculate the employee’s gross earnings,
pensionable earnings, insurable earnings, net taxable income,
statutory deductions and other deductions as illustrated in the payroll
calculation template.

Question 1

Bainbridge Manufacturing, located in Alberta, has salaried and

hourly-paid employees. The salaried employees are paid bi-
weekly, and the hourly employees are paid weekly.

Andrew Murphy earns an annual salary of $78,000.00.

There are no taxable benefit values or authorized deductions for

this pay. Andrew will have a CPP contribution withheld; therefore,
a deduction for the enhanced C/QPP deduction will apply.

Andrew has submitted federal and provincial TD1 forms to the

employer and is considered a Claim Code 1.

MANUAL PAY STATEMENT

Taxable Payments
 Earnings 3000


 Gross Taxable Earnings (GTE)
Non-taxable Payments

 Total Gross Payment 3000
 CR RQ
Ai ii
GTE 3000



 Pensionable Earnings (PE)
GTE 3000

 Insurable Earnings (IE)
GTE 3000



 Deduction for enhanced 28.65
C/QPP contribution

 Net Taxable Income (NTI)
Statutory Deductions
 C/QPP contributions 170.49
 EI premiums 48.90
 QPIP premiums
 Income tax [federal + $ 798.95
provincial (except Quebec)]
 Quebec income tax Not
applicable
Authorized Deductions

Company Compulsory Deductions

Voluntary Deductions

 Total Deductions 1018.34
 Net Pay (Total Gross Payment  Total Deductions) 1981.66

Question 2:
Bainbridge Manufacturing also has a plant in Québec. The
salaried employees are paid bi- weekly, and the hourly
employees are paid weekly.

Frieda Campion earns $18.00 per hour and works

37.5 hours a week

There are no taxable benefit values or authorized deductions

for this pay. Frieda will have a QPP contribution withheld;
therefore, a deduction for the enhanced C/QPP deduction will
apply.

Frieda has submitted a federal TD1 form to the employer and is

considered a Claim Code 2, and on the TP-1015.3-V, a Deduction
Code B.
MANUAL PAY STATEMENT

Taxable Payments
 Earnings =18 *37.5 $
675.00



 Gross Taxable Earnings (GTE)
Non-taxable Payments $
675.00


 Total Gross Payment
CR RQ
Ai ii
GTE $ 668.92 $
668.92




 Pensionable Earnings (PE)
GTE $
675.00


 Insurable Earnings (IE)
GTE $
675.00




 Deduction for enhanced $6.08
 C/QPP contribution
($675.00 -$67.3)1%


 Net Taxable Income (NTI)

 C/QPP contributions $
38.89

 EI premiums $
8.57

 QPIP premiums $
3.33

 Income tax [federal + $

65.95
provincial (except Quebec)]
 Quebec income tax $
87.99

Legal Deductions

Company Compulsory Deductions

Voluntary Deductions

 Total Deductions $ 204.74

 Net Pay (Total Gross Payment  Total Deductions) $ 470.26

Payroll professionals need to be prepared to answer questions for

employees when there are changes to their net pay. These changes
may be the result of a combination of events.

 C/QPP contributions stop for the balance of the year

  EI or QPIP premiums stop for the balance of the year
 Once an employee has paid the maximum C/QPP
contributions for the year the reduction to net taxable income
based on the enhanced portion of the contribution also
stops, resulting in an increase to income tax withholding.

Question 3

Andrew Murphy reached the maximum annual CPP

contribution and EI premium for the year on the previous pay.
For the current pay net income will be determined as follows;

Andrew Murphy earns an annual salary of $78,000.00.

There are no taxable benefit values or authorized deductions

for this pay. Because Andrew will not have a CPP contribution
withheld this pay a deduction for the enhanced C/QPP
deduction does not apply.

Andrew has submitted federal and provincial TD1 forms to the

employer and is considered a Claim Code 1.

MANUAL PAY STATEMENT

Taxable Payments
 Earnings 3000


 Gross Taxable Earnings (GTE)
Non-taxable Payments 3000

 Total Gross Payment
CRAi RQii
 GTE 3000



 Pensionable Earnings (PE)
GTE

 Insurable Earnings (IE)
GTE



 Deduction for enhanced 0
C/QPP contribution

 Net Taxable Income (NTI)
Statutory Deductions
 C/QPP contributions 0
 EI premiums 0
 QPIP premiums
 Income tax [federal +
provincial (except Quebec)]
 Quebec income tax
Authorized Deductions

Company Compulsory Deductions

Voluntary Deductions

 Total Deductions
 Net Pay (Total Gross Payment  Total Deductions)
i The CRA values are used to determine CPP contributions, EI
premiums and federal and non-Quebec income tax.
ii The RQ values are used to determine QPP contribution, QPIP
premiums and Quebec provincial income tax.