GIF
2020 Year-End Guide

Step 2: Prepare for 2021

Review the 2021 payroll calendar

Confirm your pay schedule frequency and number of pay periods

An employer may consider changing the pay schedule frequency based on various internal and external factors, such as changing payroll provider, reducing frequency to decreasing operating cost, or adhering to new remittance frequency requirements due to the company's growth. Whether you're expecting a change in payroll frequency going into 2021, it is important to confirm the schedule is set up with the correct frequency in Humi Payroll.

In addition, ensure that the number of pay periods for 2021 is correct given the finalized pay schedule frequency:

Confirm your pay period dates

Humi Payroll automatically creates pay periods for the tax year based on your pay schedule. There are five key dates within each pay period.

If a pay date falls on a statutory holiday, Humi will automatically set the pay period's cheque date to the to the closest business day before the holiday.

Throughout the end of 2020 and beginning of 2021, Humi is providing tailored Payroll Review Summaries for applicable employers via email, which includes a preview of 2021 pay periods. Learn more about the summaries here.

Review your remitter type requirements

Confirm your remitter type and remitting frequency

As an employer, your remitter type sets your remitting frequency and affects your remittance due dates. It is normally based on your average monthly withholding amount (AMWA) from two calendar years ago.

You can also view your remitter type through CRA's My Business Account.

Confirm if a change in remitting frequency will affect pay schedule frequency

In some cases, a change in remitting frequency needs to be accompanied by a change in pay schedule frequency. For example, suppose an employer is a threshold two accelerated remitter required to make remittances up to four times a month, but only pays their employees monthly. In that case, there will not be enough payrolls processed per month, and payroll providers will not have the ability to remit frequently enough to the CRA on behalf of the employer.

If you expect a change in remitting frequency in 2021, it is recommended that you also verify if a change in pay schedule frequency is warranted.

Review your employee payroll configurations

Confirm compensations are up to date

It is common for employees to receive an increase in salary at year-end. Ensure each employee's compensations are set up with the correct rate and effective dates before processing your first payroll in 2021. Learn more about setting up an employee's Job & Pay.

Confirm benefits are up to date

Each employee benefit you offer may have direct implications on payroll remittances as well as tax calculations and reporting. It is important to understand the deduction implications for each benefit offered. Learn more about taxable benefits.

Ensure all existing benefits are set up with a specified T4 Box, to represent how the benefit should be reported when T4 slips are prepared.

Note that Boxes 14, 16-18, 22, 24, and 26 are automatically assigned by Humi Payroll based on the benefit's taxable / pensionable / insurable settings.

In addition, verify that each benefit offered is set up correctly to reflect whether they are eligible for income tax, EI, or CPP deductions. The company contribution and employee premium amounts should also align with the anticipated annual amounts from your benefit plan payments. Learn more about managing benefits in Humi Payroll.

Confirm additional income types are up to date

Typically regular earnings, or regular compensations, are salaries and wages paid to employees on a recurring basis. In addition to these earnings, there are other ways an employee can be paid that will contribute toward the employee’s gross earnings. These are generally referred to as additional income types.

Verify that each income type is set up correctly to reflect whether they are eligible for income tax, EI, or CPP deductions, or they have vacation pay requirements. Learn more about managing income types in Humi Payroll.

Review employee tax credits, exemptions, and additional tax deductions

Confirm tax credits are up to date

On a federal and provincial level, employees are subject to basic personal tax credits. These tax credits are applied toward the employees' taxable income automatically such that the taxable income will not be taxed until they exceed the credit amounts.

If employee federal or provincial claim amounts have changed, they must submit new forms to their employer to ensure accurate payroll calculations. Otherwise, make sure tax details are up to date with the 2021 basic exemption amounts. In addition, remind employees to complete and provide new TD1 Federal and TD1 Provincial forms for any additional tax credits.

Confirm exemption statuses are up to date

In some cases, an employee's exemption statuses for statutory deductions (i.e. income tax, EI, or CPP, may change). Common examples are when an employee turns 18 and becomes eligible for CPP deductions, or when an employee turns 70 and becomes CPP exempt. It's important to confirm all exemption statuses are up to date in Humi Payroll to avoid discrepancies in statutory deductions in 2021.

Confirm additional taxes to be deducted are up to date

Sometimes employees may opt for having additional tax deducted from their income per period. This could be due to various reasons such as to offset previously under-deducted amounts, or to cover for an increased tax rate resulting from holding multiple jobs because each independent payroll provider may not have the full context of the employee's employment income.

On the other hand, it's also possible for a previously set up amount to become non-applicable going into 2021. It's best practice is to always confirm if the amounts specified in Humi Payroll are up to date.