Employees are entitled to certain standards when being paid. There are laws an employer must follow when paying their employees for the work they have done at the company. If these payroll laws are not followed, employees are able to request that changes are made. Otherwise, the company can be reported for not following the payroll laws.
Not abiding by the payroll laws would be bad news for the company, as they could be fined or charged for breaking the law. These violations could cost them in money, reputation, and they may even be suspended or banned from running.
Learn about the ten different types of payroll laws for business:
Payroll Law #1: Regular payment intervals
Employees must be paid on a normal and consistent schedule. Companies must choose a pay period – often every one or two weeks, sometimes two times per month (say, on the first and the 15th of the month) and sometimes once per month.
Whatever the pay period is, employees’ paycheques must come through on that day consistently and with a reliable amount of accuracy. Although there may be errors on occasion, this should not be the norm. You can increase the accuracy of your system by using payroll software and technology.
Payroll Law #2: Minimum wage
Companies must pay their employees at least the province’s minimum wage. These payroll laws vary per province, and in some places there are separate minimum wages, depending on the type of job. For instance, in some provinces, individuals who earn gratuities may receive less per hour as a minimum wage.
Whatever the minimum wage is in the province that the employee is working in, and for the particular job they are doing, if applicable, the employee must be paid out for every hour they work.
Payroll Law #3: Increase with rates
Wages must also keep up with the minimum. If an employee is making minimum wage, and the rate is increased, then each individual who is working for that wage will also receive a raise of the same amount per hour.
Payroll Law #4: Overtime
Overtime occurs when an employee surpasses the normal working hours allowed by law during a working period. According to the payroll laws, all additional hours must be paid at least by one and half times their regular pay.
Payroll Law #5: Minimum hours
If an employee is called in to do work and they subsequently report to work, they must be paid for a minimum of three hours at their regular hourly rate. If the employer subsequently sends the employee home, even before that three hours is up, the employee is still entitled to that three hours of pay.
As soon as the employee reports to work after having been asked to do so, they are to be paid for three hours, whether they complete any work or not.
Payroll Law #6: Pay stub
Employers are required to provide employees with a visual breakdown of your paycheque. This can be used to ensure that no errors were made in the calculation of their pay. Employees should be tracking their own hours in order to ensure that when their pay comes through.
Ideally, they can confirm that they have been paid according to the work they completed. Employees cannot assume that the employer has done everything perfectly all the time. Mistakes happen.
Payroll Law #7: Tax deductions
Every working individual must pay income taxes on the money they make. During tax season, they may have some deductions they can make when submitting their taxes, in order to receive some of that money back. Income tax deductions are based off of how much money an individual makes annually.
Employers should automatically deduct the correct amount based on each paycheque. Employees can also request that their employer take off additional taxes if they feel it is necessary.
Payroll Law #8: Other deductions
Employers also needs to take deductions to pay towards other government initiatives. For instance, employment insurance is for cases when employees are fired or let go from their job, and are unable to find another, or if they are unable to work for some reason.
For a period of time they may be able to claim employment insurance. Another deduction is for the employee’s pension. This is paid out upon retirement, so that the employee can still receive an income after they are no longer working.
Payroll Law #9: Vacation pay
For each hour an employee works, they earn vacation pay or days off. Some employers pay this out on each paycheque – it often is equivalent to approximately four per cent of the individual’s wage. Some employers hold the vacation pay for the individual, and they can request it to be cashed out when they take days off.
Many employers simply offer paid days off or paid hours off. If the person leaves the company, they are entitled to be paid out for those vacation days that they earned.
Payroll Law #10: Registered with CRA
In Canada, companies need to have an active payroll account with the Canada Revenue Agency (CRA). During tax time, the employee will receive a T4 slip from their employer, which they can then use to complete their taxes with the CRA.
