The next step to ensuring you have a smooth Year-End is reviewing your 2021 Records.
If you haven't read Step 1: Review Important dates, click here.
Expand or download this flowchart here.
The flow chart above shows the actions you must complete for this current Step 2 and "Step 3 - Adjust Records."
We highly recommend taking the time to do this so that you can identify any potential discrepancies and make reconciliations before generating your T4s. Reviewing records can be a challenging process because updates made to one record can make another record incorrect.
For example, if you add a non-cash taxable benefit during the review then the "CPP & EI" due to CRA may increase. For this reason, it’s important to follow a process where you review your records, make adjustments (as needed), and then review your records again.
Friendly reminder
All employers are legally responsible for keeping payroll and employment records for each employee for at least 36 months.
It's also a best practice to backup all payroll records regardless of whether or not third-party payroll providers produce the records for you.
Payroll records in Humi
All payrolls processed through Humi will have a historical record. You can also access "Payroll Reports" through the "Reporting" module in Humi. Learn more about Humi's Payroll Reports.
The following reports were designed to streamline T4 preparation:
Pensionable and Insurable Earnings (PIER) Analysis Report
In "Reporting," select the "Payroll" tab and click on the "PIER Analysis" report.
The "PIER Analysis" Report will help you quickly identify any potential discrepancies in:
- Employee CPP
- Employer CPP
- Employee EI
- Employer EI
We recommend doing this review before generating your employee T4s to ensure your business won't receive a "Pensionable and Insurable Earnings Review (PIER)" from the CRA.
Example
You can easily see a discrepancy if there's an amount other than zero in any of the "variance" fields.
A positive discrepancy means there's an "overage" (i.e. over-remitted amount), and a negative discrepancy means there's a "deficiency" (i.e. under-remitted amount).
For "overages," you don't need to do anything because the CRA will return the over-remitted amounts to the employee as tax refunds.
Please note that it's normal to have minor "deficiencies" if there are still outstanding payrolls for the current tax year.
If the last payroll(s) for the year hasn't yet been processed, you should verify whether the discrepancies will be covered by the final payroll(s) or not.
Things to review on this report:
CPP Variance and ER CPP Variance
These amounts represent discrepancies in the "employee CPP" and "employer CPP" amounts calculated throughout the year versus the statutorily required amounts.
To determine the amount:
Humi takes the "Pensionable Earnings," subtracts the "Basic Exemption" (based on the "Periods Paid" and the pay period "Basic Exemption Amount"), multiplies this amount against the "CPP contribution rate," and then subtracts this value from the "CPP Deducted."
EI Variance and ER EI Variance
These amounts represent discrepancies in the "employee EI" and "employer EI" amounts calculated throughout the year versus the statutorily required amounts.
To determine the "EI Variance" amount:
Humi takes the "Insurable Earnings," multiplies this amount against the "EI premium rate," and then subtracts this value from the "EI Deducted."
To determine the "ER EI Variance" amount:
Humi takes the "Insurable Earnings," multiplies this amount against the "EI premium rate," multiplies this value by 1.4, and then subtracts this value from the "ER EI Deducted."
Common causes of CPP/EI discrepancies
- Rounding errors. It's possible for per-period CPP/EI deductions to be correct but have minor discrepancies when "per-period" amounts are added together to get the annual amount due to rounding. These are unlikely to trigger a PIER review from the CRA.
- The employee earned less Pensionable income in a pay period than the pay period basic exception amount.
- Clerical or calculation errors.
- Incorrect configuration of CPP/EI exemption statuses. For example, when an employee turns 18 and becomes non-exempt or turns 70 and becomes exempt.
- Incorrect or missing YTD amounts uploaded to Humi Payroll during implementation.
- A payroll frequency change mid-year.
- Records were adjusted retroactively and no longer reflected the remittances made.
- A reduced employer EI rate
If you see a variance that you believe is not a rounding error, we have included four columns in the report to help determine the root cause:
- Employee birthday
- CPP exemption
- EI exemption
- Is there a YTD?
Note
The report aims to help reveal basic errors in implementation or usage in Humi Payroll. It's not designed to replace the employer's review of payroll records. As a result, Humi does not guarantee all discrepancies are captured in the PIER Analysis Report.
T4 Preview Report
In "Reporting," select the "Payroll" tab and click on the "T4 Preview" report.
The "T4 Preview Report" allows you to generate a box-by-box preview of your T4s, broken down by each employee.
It's designed to help you quickly review where earning codes are mapped and check for overall accuracy.
Doing this review before generating your T4s will help you avoid mistakes and time-consuming T4 Amendments.
Important things to review
1. Confirm that your employee's personal information is correct:
- Employee First Name (legal)
- Employee Last Name (legal)
- Employee Address
- Employee valid Email (for terminated employees, this will be their personal email)
- Social Insurance Number (for security reasons, the T4 Preview Report will show a partially redacted SIN)
You can verify this information within the "Employee Profile" under the "Personal" and "Job & Pay" tabs.
Note
It's vital to ensure all employees paid within 2021 are set up in Humi Payroll, even if they've been terminated.
2. Confirm all "Income Types" are set up correctly
Certain "Income Types" have specific reporting requirements on the T4.
These resources may help you understand the requirements for pay types you have offered employees in the tax year:
With this information, you can use the "T4 Preview" report to ensure that T4s meet the reporting requirements.
If you need to investigate the specifics of certain "pay types" within your account, use the links below to dig into the details:
- Salary / hourly compensations. Learn more.
- Amounts and deduction behaviours for taxable benefits and allowances.
- Amounts and deduction behaviours for additional income types.
While Humi automates many of these processes, it's a best practice that employers also periodically perform a self-directed review of all payroll records.
The CRA has published a series of helpful resources to facilitate this review process:
- Calculation of CPP contributions (multiple pay periods or year-end verification)
- Payroll Deductions Online Calculator (PDOC)
- Pensionable and Insurable Earnings Review (PIER)
Note
The report aims to help reveal basic errors in implementation or usage in Humi Payroll. It's not designed to replace the employer's review of payroll records. As a result, Humi does not guarantee all discrepancies are captured in the PIER Analysis Report.
Click here to move on to Step 3: Adjust Records