Exam 6: Payroll and Benefits: Common Misconceptions and Calculation Methods

Employees in Quebec must also contribute an additional premium of----------on insurable earnings to the Quebec Parental Insurance Plan.

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(Multiple Choice)

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Question 1

Correct Answer:

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A

An employee earns $55,000 per year and is paid on a semi-monthly pay schedule. The employee enjoys the benefit of a company paid cell phone for personal use (cost is $150 per month) and receives 6% vacation pay on each payment. This pay cycle included 15 hours of approved overtime worked over the normal 40 hour work week and a reimbursement for travel expenses in the amount of $434.20. The employee contributes 5% of their regular wages to a Registered Retirement Savings Plan each pay cycle. -The employee is 32 years old and has contributed $460.37 to Employment Insurance so far this year. Calculate the Employment Insurance Premium.

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Question 2

Correct Answer:

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Insurable Earnings x 1.88%
$\begin{array} { | l | l | l | } \hline \text { Type of Earning } & \text { Calculation } & \text { Amount } \\\hline \begin{array} { l } \text { Gross Earnings } \\\text { Regular (Wages) }\end{array} & \begin{array} { l } \$ 55,000 \text { per year } / 24 \text { pay periods in a } \\\text { semi-monthly cycle }\end{array} & \$ 2,291.66 \\\hline \text { Overtime (Wages) } & \begin{array} { l } 15 \text { hours x } 1.5 \times \text { Hourly Rate } ( \$ 55,000 / \\40 * 52 = 26.44 )\end{array} & \$ 594.90 \\\hline \text { Vacation (Wages) } & \begin{array} { l } 6 \% \text { of } ( \$ 2,291.66 + \$ 594.90 = \\\$ 2,886.56 )\end{array} & \$ 173.19 \\\hline \begin{array} { l } \text { Travel Reimbursement } \\\text { (non-taxable allowance) }\end{array} & & \$ 434.20 \\\hline \text { Total Gross Earnings } & & \mathbf { \$ 3 , 4 9 3 . 9 5 } \\\hline \begin{array} { l } \text { Less: non-taxable } \\\text { allowances }\end{array} & \text { Travel Reimbursement } & \mathbf { 4 3 4 . 2 0 } \\\hline \text { Insurable Earnings } & & \mathbf { \$ 3 , 0 5 9 . 7 5 } \\\hline \begin{array} { l } \text { Employment Insurance } \\\text { Premium }\end{array} & \text { Insurable Earnings x 1.88\% } &\$57.52\\\hline\end{array}$

When would Pensionable Earnings and Insurable Earnings be different? Provide an example.

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Question 3

Correct Answer:

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Some taxable benefits are pensionable but not insurable. For example - the value of employer providedcellular phone service (non-cash) is included for the calculation of CPP but not for EI. Pensionableearnings would be higher than Insurable earnings in this scenario.

An employee earns $55,000 per year and is paid on a semi-monthly pay schedule. The employee enjoys the benefit of a company paid cell phone for personal use (cost is $150 per month) and receives 6% vacation pay on each payment. This pay cycle included 15 hours of approved overtime worked over the normal 40 hour work week and a reimbursement for travel expenses in the amount of $434.20. The employee contributes 5% of their regular wages to a Registered Retirement Savings Plan each pay cycle. -Calculate the Insurable Earnings.

(Essay)

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Question 4

Employees in provinces other than Quebec must contribute additional premiums on insurable earnings over and above the Employment Insurance rate of 1.88% for their provincial Parental Insurance Plans.

(True/False)

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Question 5

An employee earns $55,000 per year and is paid on a semi-monthly pay schedule. The employee enjoys the benefit of a company paid cell phone for personal use (cost is $150 per month) and receives 6% vacation pay on each payment. This pay cycle included 15 hours of approved overtime worked over the normal 40 hour work week and a reimbursement for travel expenses in the amount of $434.20. The employee contributes 5% of their regular wages to a Registered Retirement Savings Plan each pay cycle. -The employee is 32 years old and has contributed $1,212.15 to Canada Pension Plan so far this year. Calculate the Canada Pension Plan Contribution.

(Essay)

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Question 6

Pensionable Earnings may be different from Insurable Earnings.

(True/False)

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Question 7

Explain the difference between Gross Taxable Earnings and Net Taxable Earnings.

(Essay)

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Question 8

Gross Earnings includes all but the following:

(Multiple Choice)

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Question 9

An employee earns $55,000 per year and is paid on a semi-monthly pay schedule. The employee enjoys the benefit of a company paid cell phone for personal use (cost is $150 per month) and receives 6% vacation pay on each payment. This pay cycle included 15 hours of approved overtime worked over the normal 40 hour work week and a reimbursement for travel expenses in the amount of $434.20. The employee contributes 5% of their regular wages to a Registered Retirement Savings Plan each pay cycle. -Calculate the net pay for this employee. Be sure to list all of the deductions from the employee's pay for this pay cycle. (Note: if you do not have access to the PDOC assume Federal Tax deduction = $424.69 and Provincial Tax deduction =$199.30)

(Essay)

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Question 10

If an employer pays $200 per month for employee life insurance premiums, what amount must be added to gross earnings on a weekly pay period before calculating deductions?

(Multiple Choice)

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Question 11

All but the following are deductions allowed in the calculation of Net Taxable Earnings

(Multiple Choice)

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Question 12

The value of taxable benefits provided to employees must be added to income _______in advance of calculating deductions.

(Multiple Choice)

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Question 13

Current information should always be used for payroll calculations and the latest rates can be found on government websites.

(True/False)

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Question 14

If employees receive benefits that are not paid in cash, such as free cell phones, these items will not be considered taxable.

(True/False)

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Question 15

An employee earns $55,000 per year and is paid on a semi-monthly pay schedule. The employee enjoys the benefit of a company paid cell phone for personal use (cost is $150 per month) and receives 6% vacation pay on each payment. This pay cycle included 15 hours of approved overtime worked over the normal 40 hour work week and a reimbursement for travel expenses in the amount of $434.20. The employee contributes 5% of their regular wages to a Registered Retirement Savings Plan each pay cycle. -Calculate the Net Taxable Earnings. Explain what deductions are allowed.

(Essay)

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Question 16

Why do we need the employee's date of birth in order to calculate pay?

(Multiple Choice)

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Question 17

The rate of 1.88% for Employment Insurance Premiums will never change.

(True/False)

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Question 18

Employees in Quebec contribute Employment Insurance premiums at a rate of________.

(Multiple Choice)

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Question 19

An employee earns $55,000 per year and is paid on a semi-monthly pay schedule. The employee enjoys the benefit of a company paid cell phone for personal use (cost is $150 per month) and receives 6% vacation pay on each payment. This pay cycle included 15 hours of approved overtime worked over the normal 40 hour work week and a reimbursement for travel expenses in the amount of $434.20. The employee contributes 5% of their regular wages to a Registered Retirement Savings Plan each pay cycle. -Calculate the Gross Taxable Earnings.

(Essay)

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Question 20

Employees in Quebec must also contribute an additional premium of----------on insurable earnings to the Quebec Parental Insurance Plan.

When would Pensionable Earnings and Insurable Earnings be different? Provide an example.

Employees in provinces other than Quebec must contribute additional premiums on insurable earnings over and above the Employment Insurance rate of 1.88% for their provincial Parental Insurance Plans.

Pensionable Earnings may be different from Insurable Earnings.

Explain the difference between Gross Taxable Earnings and Net Taxable Earnings.

Gross Earnings includes all but the following:

If an employer pays $200 per month for employee life insurance premiums, what amount must be added to gross earnings on a weekly pay period before calculating deductions?

All but the following are deductions allowed in the calculation of Net Taxable Earnings

The value of taxable benefits provided to employees must be added to income _______in advance of calculating deductions.

Current information should always be used for payroll calculations and the latest rates can be found on government websites.

If employees receive benefits that are not paid in cash, such as free cell phones, these items will not be considered taxable.

Why do we need the employee's date of birth in order to calculate pay?

The rate of 1.88% for Employment Insurance Premiums will never change.

Employees in Quebec contribute Employment Insurance premiums at a rate of________.

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