My husband growls in January when he gets his first pay stub of the year (and second, third, etc.) when the annual deductions for CPP and EI start to come off his cheques. This January will be no different and don't tell him, but he will be paying in more this year than last—and so will his employer. At the bottom of the post are the payroll changes you should be aware of for 2023. Read on to learn about 5 Common Payroll Mistakes. 

Misclassifying employees

Misclassification creates trust issues with your employees and is likely to cost your organization money through payroll adjustments and potential fines.

One of the most common errors is incorrectly determining if employees are eligible for overtime. Many employers wrongly think paying an employee salary instead of hourly means they no longer need to pay overtime. That is incorrect. The position, not how they are paid, determines if an employee is eligible for OT. Employment standards rules – Overtime hours and overtime pay | Alberta.ca

Another common payroll error happens when an individual is classified as an independent contractor rather than an employee. The four-point test is the standard used by the CRA to determine which type of relationship exists. The test is based on four key points: control, ownership of tools, the chance of profit and risk of loss, and integration.

One easy way to provide contractor vs employee status is to have multiple clients. The contractor who only has one client makes it appear as an employer/employee relationship. If you have a contractor working for your business, ensure they are paying their taxes and deductions.

Incorrect calculations

An incorrect pay cheque can be frustrating for any employee, particularly if the error results in missed payments. Miscalculations also waste time as you investigate and correct errors outside the regular payroll cycle. Employees can grow frustrated or even have trouble paying their bills.

Pay miscalculations can happen with salaried or hourly employees. Common miscalculation scenarios include the following:

• Overpaying or underpaying employees
• Making erroneous retroactive payments
• Missing the first pay cheque for new hires
• Deducting the wrong amount for benefits or other payroll deductions
• Incorrectly calculating overtime

 Incorrectly logged overtime hours can lead to improper overtime payments, which leads to corrections possibly spanning across multiple tax years. Correcting those errors takes time and can be incredibly unsettling for employees, whether they are underpaid or overpaid and have to return money to the company.

Not using technology

An unorganized and inefficient payroll process can be a disaster. Relying on Excel spreadsheets may lead to errors that may take weeks or months to uncover. Having a manual system for managing payroll increases your reliance on one person to manage all payroll actions. Payroll processing can be difficult for your organization's sole person responsible for payroll. They must plan their vacation around payroll and ensure it is completed on time, even if they are sick. Additionally, in smaller companies, many employees are uneasy about a co-worker having access to their personal information, including banking information. Loose lips sink ships!

 Keep up to Date

Many laws affect how you administer employee pay, and regulations change. You can change payroll processes by keeping track of regulatory updates instead of playing catch-up by reading the Balanced Perspectives newsletter for updates.

Creating a payroll calendar and procedures documents can help prevent missing deadlines, filing late or forgetting to process payments. By following a payroll calendar, you always know what's next and can schedule payroll time more effectively.

Deliver the Right Pay cheque Every Time

Errors do happen sometimes, but there are proactive steps you can take to minimize and avoid some of the most common payroll errors. Getting payroll right is a great way to exceed employee expectations and build their trust in the organization. With the support of a reliable partner, you can create an efficient payroll process, stay in compliance, and deliver error-free pay.

Have you considered having payroll outsourced? Outsourcing can take many of the issues off your plate. Balanced Perspectives currently has the ability to take on 2 or 3 more payroll clients. If you want to explore the options available to your company and payroll, reach out.

Payroll Changes for 2023

	2022		2023
Alberta TD1 – Basic Personal Amount	$19,369		$21,003
Federal Basic Exemption	$14,398		$15,000
Employment Insurance (EI) (EMPLOYEE)	1.58%	Maximum $952.74	1.63%	Maximum $1002.45
Employment Insurance (EI)  (EMPLOYER)	1.58% * 1.4% = 2.21%	Maximum $1,333.84	1.63% * 1.4% = 2.28%	Maximum per employee $1403.43
Canada Pension Plan (CPP)* (EMPLOYEE)	5.7%	$3,499.80	5.95%	$3,499.80
Canada Pension Plan (CPP) (EMPLOYER)	5.7%	$3,754.45	5.95%	$3,754.45

 

The other change employees will see that will not affect the employer side of payroll is an increase in the Tax Brackets.

2023 Taxable Income	2023 Tax Rates	2022 Taxable Income	2022 Tax Rates
first $142,292	10%	first $134,238	10%
over $142,292 up to $170,751	12%	over $134,238 up to $161,086	12%
over $170,751 up to $227,668	13%	over $161,086 up to $214,781	13%
over $227,668 up to $341,502	14%	over $214,781 up to $322,171	14%
over $341,502	15%	over $322,171	15%