325
learning outcomes
1
Describe payroll accounting
2
Calculate gross pay and net pay
3
Describe payroll liabilities, employer's
contributions and payroll payments
4
Record payroll liabilities, employer's
contributions and payroll payments
5
Prepare payroll registers
6
Describe payroll controls
Appendix
7
Calculate statutory deductions
Chapter 11
Payroll
Payroll Accounting
Payroll is one of the most important business obligations of any organization. Employees expect to
be treated fairly and to receive a timely and accurate paycheque. Employers are required to follow
all employment laws relating to payroll.
There is a lot of legislation surrounding how employees are treated and how they are paid. The
federal government and each province has a set of employment standards that apply to businesses
that operate in their jurisdiction. Employment standards include minimum guidelines for items
such as pay rate, vacation time allowed, and how much time must be given or paid out to termi-
nate the employment.These standards outline the minimum requirements however, employers are
allowed to offer more (e.g. pay more than minimum wage or give employees more vacation time).
Payroll accounting involves three types of payroll liabilities: 1) the net pay owed to an employee, 2)
amounts deducted from employee paycheques and owed to others, and 3) employer payroll expense.
Any business that hires people to work on its behalf will incur these liabilities and related expenses.
What an employee earns and what an employee actually takes home on their paycheque are often
two different amounts.What an employee earns is called
gross pay
.The amount actually received is
called
net pay
and is less than the gross pay amount because several items are deducted. Deductions
can include
• Canada Pension Plan
• Employment Insurance
• Federal and Provincial Income Taxes
• Other voluntary deductions
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