4.10 Chapter Summary and Additional Readings and Resources

4.10.1 Chapter Summary

Source deductions, also known as statutory deductions, are mandatory deductions that employers must make for all employees in Canada. These deductions include Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax. Rates for CPP and EI change annually; rates for income tax vary by province. Payroll should ensure that these deduction amounts are calculated accurately for the current tax year and determine that deductions are not made after yearly thresholds for CPP contributions and EI premiums have been reached.

There are other mandatory deductions that employers may be required to make, including deductions based on the CRA issuing an RTP or deductions made in compliance with a court order. When making deductions for court-ordered wage garnishment, payroll should check exempt amounts for the applicable jurisdiction.

Employees may agree to certain non-mandatory payroll deductions, such as for health and insurance plans. Employees may also choose to contribute to social funds or charitable funds through payroll deductions.

4.10.2 Additional Readings and Resources

Government of Canada. (2024). Payroll deductions online calculator. https://www.canada.ca/en/revenue-agency/services/e-services/e-services-businesses/payroll-deductions-online-calculator.html

Government of Canada. (2023a). Employers’ guide: Taxable benefits and allowances. https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4130/employers-guide-taxable-benefits-allowances.html

Government of Canada. (2023b). Special payments chart. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/special-payments/special-payments-chart.html