ARCHIVED CD 2007-023
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December 10, 2007 (Revised February 27, 2008)
SUBJECT: Changes to the Net Pay Amount Commencing January 2008
1. PURPOSE
1.1 The purpose of this directive is to provide clients with information about changes in the net amount of pay commencing with the first pay of January 2008.
1.2 A notice of information to employees concerning the above has been included with this Compensation Directive and will also be posted in the "Who are you? - Public Service Employee" page of the Compensation Sector Web site.
2. BACKGROUND
2.1 Each new year, compensation advisors must respond to queries from employees about changes in the net pay amount on the first pay in January compared to the last pay in December.
2.2 To assist clients in explaining these differences to their employees, this directive is issued on a yearly basis to advise them of the factors that may cause fluctuations.
3. PROCEDURES/INSTRUCTIONS
3.1 The following factors may affect an employee's net pay:
- Public Service Pension Plan, Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) Contributions
At the beginning of each year, the lowest rate of the two possible rates of contribution to the public service pension plan is used until the maximum level of contribution for that rate is reached. Then, the higher rate of contribution is used for the remainder of the year.> Beginning with the new year, public service pension plan contributions recommence at the low rate, until such time as they reach the maximum level of the contributions for the low rate.
Therefore, if employees who are contributors under the public service pension plan compare their last pay in December to their first pay in January, many of them will see that they have paid a larger amount to the plan in December than in January.
For the calendar year 2008, the contribution rate will increase by 0.3%. Effective January 1, 2008, public service pension plan contributions will be 4.9% (to a maximum of $2,200.10 for the 2008 taxation year) on all pensionable earnings below and equal to the yearly maximum pensionable earnings (YMPE) ($44,900 for the 2008 taxation year) and 8.4% on all pensionable earnings over the YMPE.
Contributions to the public service pension plan have a direct bearing on the income tax deducted at source since these contributions are deducted from the gross pay before determining the tax rate. Once the contributions reach the maximum public service pension plan low level, the contributions to the public service pension plan will increase from 4.9% to 8.4%. The larger the public service pension plan contribution, the less income tax will be withheld from the employee's pay.
Many employees reach their maximum level of Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) contributions sometime during the year. When this happens, the employee will see an increase in the net pay amount as there will no longer be CPP/QPP deductions withheld. Beginning with the new year, employees recommence paying CPP/QPP contributions until such time as they reach the maximum CPP/QPP contribution level for 2008.
The CPP and QPP rate, effective January 1, 2008, remains at 4.95% of pensionable earnings. The maximum CPP/QPP contribution is $2,049.30 for the 2008 taxation year.
The CPP contributions provide a federal tax credit of 15%. This tax credit is applied directly to the income tax that is owing and is not dependent on the employee's income tax bracket. Please note that the Quebec Tax Reform eliminated the Quebec provincial tax credit for QPP effective January 1, 1998. The tax credit for QPP is now included in the basic credit amount of $10,215 for the 2008 taxation year.
- Employment Insurance (EI) Premiums
The employee's rate of EI premiums (excluding employees working in the province of Quebec), for the 2008 taxation year will be decreased from 1.80% to 1.73%. The annual maximum insurable earnings will be increased from $40,000 to $41,100. Those employees who had reached their maximum EI premiums during the previous year will recommence paying EI premiums in the new year until the maximum premium level is reached. Once employees reach the annual maximum premium deduction of $711.03 in 2008, they will see an increase in the amount of their net pay as there will no longer be EI deductions withheld.
The employee's rate of EI premiums, for employees working in the province of Quebec for the 2008 taxation year will be decreased from 1.46% to 1.39%. The annual maximum insurable earnings will be increased from $40,000 to $41,100. Those employees who had reached their maximum EI premiums during the previous year will recommence paying EI premiums in the new year until the maximum premium level is reached. Once employees reach the annual maximum premium deduction of $571.29 in 2008, they will see an increase in the amount of their net pay as there will no longer be EI deductions withheld.
- Quebec Parental Insurance Plan (QPIP)
Effective January 1, 2008, the employee's QPIP premium rate will be increased from 0.416% to 0.450% of insurable earnings. The annual maximum insurable earnings will be increased from $59,000 to $60,500. Those employees who had reached their maximum QPIP premiums during the previous year will recommence paying QPIP premiums in the new year until the maximum premium level is reached. Once employees reach the annual maximum premium deduction of $272.25 in 2008, they will see an increase in the amount of their net pay as there will no longer be QPIP deductions withheld.
- Federal Tax Brackets and Rates Effective January 1, 2008
The federal income tax table has changed effective January 1, 2008, as follows:
Federal Tax Brackets and Rates Tax Brackets and Rates Effective
January 1, 2007Tax Brackets and Rates revised effective
January 1, 2007, as per Economic Statement of October 30, 2007Tax Brackets and Rates Effective
January 1, 2008Tax Brackets ($) Tax Rates Tax Brackets ($) Tax Rates Tax Brackets ($) Tax Rates More than - Not more than More than - Not more than More than - Not more than 0 to 37,178 15.5% 0 to 37,178 15% 0 to 37,885 15% 37,178 to 74,357 22% 37,178 to 74,357 22% 37,885 to 75,769 22% 74,357 to 120,887 26% 74,357 to 120,887 26% 75,769 to 123,184 26% Over 120,887 29% Over 120,887 29% Over 123,184 29%
Canada Employment Credit
Effective January 1, 2008, the maximum amount on which the credit is calculated will be increased from $1,000 to $1,019. - Provincial and Territorial Tax Brackets and Rates Effective January 1, 2008
There are no changes to the tax brackets or rates for the provinces of Prince Edward Island, Alberta and Nova Scotia.
Newfoundland and Labrador
The provincial income tax table has changed effective January 1, 2008, as follows:
Newfoundland and Labrador Tax Brackets and Rates Tax Brackets and Rates Effective
July 1, 2007Tax Brackets and Rates Effective
January 1, 2008Tax Brackets ($) Tax Rates Tax Brackets ($) Tax Rates More than - Not
more thanMore than - Not
more than0 to 30,182 8.7% 0 to 30,215 8.7% 30,182 to 60,364 13.8% 30,215 to 60,429 13.8% Over 60,364 16.5% Over 60,429 16.5% New Brunswick
The provincial income tax table has changed effective January 1, 2008, as follows:
New Brunswick Tax Brackets and Rates Tax Brackets and Rates Effective
July 1, 2007Tax Brackets and Rates Effective
January 1, 2008Tax Brackets ($) Tax Rates Tax Brackets ($) Tax Rates More than - Not more than More than - Not more than 0 to 34,186 10.56% 0 to 34,836 10.12% 34,186 to 68,374 16.14% 34,836 to 69,673 15.48% 68,374 to 111,161 17.08% 69,673 to 113,273 16.80% Over 111,161 18.06% Over 113,273 17.95% Manitoba
The provincial income tax table has changed effective January 1, 2008, as follows:
Manitoba Tax Brackets and Rates Tax Brackets and Rates Effective
January 1, 2007Tax Brackets and Rates Effective
January 1, 2008Tax Brackets ($) Tax Rates Tax Brackets ($) Tax Rates More than - Not more than More than - Not more than 0 to 30,544 10.9% 0 to 30,544 10.9% 30,544 to 65,000 13% 30,544 to 66,000 12.75% Over 65,000 17.4% Over 66,000 17.4% Ontario
The provincial income tax table has changed effective January 1, 2008, as follows:
The provincial surtax payable has been revised as follows:Ontario Tax Brackets and Rates Tax Brackets and Rates Effective
January 1, 2007Tax Brackets and Rates Effective
January 1, 2008Tax Brackets ($) Tax Rates Tax Brackets ($) Tax Rates More than - Not more than More than - Not more than 0 to 35,488 6.05% 0 to 36,020 6.05% 35,488 to 70,976 9.15% 36,020 to 72,041 9.15% Over 70,976 11.16% Over 72,041 11.16% - Where the basic provincial tax payable is less than or equal to $4,162 (formerly $4,100), the surtax payable is $0.
- Where the basic provincial tax payable is greater than $4,162 and less than or equal to $5,249 (formerly $5,172), the surtax payable is 20% of the basic provincial tax payable in excess of $4,162.
- Where the basic provincial tax payable is greater than $5,249, the surtax payable is the total of 20% of the basic provincial tax payable in excess of $4,162 and 36% of the basic provincial tax payable in excess of $5,249.
Saskatchewan
The provincial income tax table has changed effective January 1, 2008, as follows:
Saskatchewan Tax Brackets and Rates Tax Brackets and Rates Effective
January 1, 2007Tax Brackets and Rates Effective
January 1, 2008Tax Brackets ($) Tax Rates Tax Brackets ($) Tax Rates More than - Not more than More than - Not more than 0 to 38,405 11% 0 to 39,135 11% 38,405 to 109,729 13% 39,135 to 111,814 13% Over 109,729 15% Over 111,814 15%
British Columbia
The provincial income tax table has changed effective January 1, 2008, as follows:
The provincial tax reduction is indexed and is calculated as follows:British Columbia Tax Brackets and Rates Tax Brackets and Rates Effective
July 1, 2007Tax Brackets and Rates Effective
January 1, 2008Tax Brackets ($) Tax Rates Tax Brackets ($) Tax Rates More than - Not more than More than - Not more than 0 to 34,397 5.35% 0 to 35,016 5.35% 34,397 to 68,794 8.15% 35,016 to 70,033 8.15% 68,794 to 78,984 10.5% 70,033 to 80,406 10.5% 78,984 to 95,909 12.3% 80,406 to 97,636 12.29% Over 95,909 14.7% Over 97,636 14.7% - Where net income is less than or equal to $16,946 (formerly $16,646), the premium is equal to the lesser of (i) basic provincial tax, and (ii) $381 (formerly $375).
- Where net income is greater than $16,946 and less than or equal to $28,852.25 (formerly $28,364.75), the premium is equal to the lesser of (i) basic provincial tax, and (ii) $381 - [(Annual net income - $16,946) × 3.2%].
- Where net income is greater than $28,364.75, the premium is equal to $0.
Quebec
The provincial income tax table has changed effective January 1, 2008, as follows:
Quebec Tax Brackets and Rates Tax Brackets and Rates Effective
January 1, 2007Tax Brackets and Rates Effective
January 1, 2008Tax Brackets ($) Tax Rates Tax Brackets ($) Tax Rates More than - Not more than More than - Not more than 0 to 29,290 16% 0 to 37,500 16% 29,290 to 58,595 20% 37,500 to 75,000 20% Over 58,595 24% Over 75,000 24% Yukon
The territorial income tax table has changed effective January 1, 2008, as follows:
Yukon Tax Brackets and Rates Tax Brackets and Rates Effective
January 1, 2007Tax Brackets and Rates Effective
January 1, 2008Tax Brackets ($) Tax Rates Tax Brackets ($) Tax Rates More than - Not more than More than - Not more than 0 to 37,178 7.04% 0 to 37,885 7.04% 37,178 to 74,357 9.68% 37,885 to 75,769 9.68% 74,357 to 120,887 11.44% 75,769 to 123,184 11.44% Over 120,887 12.76% Over 123,184 12.76% Territorial Employment Credit
Effective January 1, 2008, the maximum amount on which the credit is calculated will be increased from $1,000 to $1,019.
Northwest Territories
The territorial income tax table has changed effective January 1, 2008, as follows:
Northwest Territories Tax brackets and Rates Tax Brackets and Rates Effective
January 1, 2007Tax Brackets and Rates Effective
January 1, 2008Tax Brackets ($) Tax Rates Tax Brackets ($) Tax Rates More than - Not more than More than - Not more than 0 to 35,315 5.9% 0 to 35,986 5.90% 35,315 to 70,631 8.6% 35,986 to 71,973 8.60% 70,631 to 114,830 12.2% 71,973 to 117,011 12.20% Over 114,830 14.05% Over 117,011 14.05% Nunavut
The territorial income tax table has changed effective January 1, 2008, as follows:
Nunavut Tax Brackets and Rates Tax Brackets and Rates Effective
January 1, 2007Tax Brackets and Rates Effective
January 1, 2008Tax Brackets ($) Tax Rates Tax Brackets ($) Tax Rates More than - Not more than More than - Not more than 0 to 37,178 4.0% 0 to 37,885 4.0% 37,178 to 74,357 7.0% 37,885 to 75,770 7.0% 74,357 to 120,887 9.0% 75,770 to 123,184 9.0% Over 120,887 11.5% Over 123,184 11.50%
3.2 Clients are reminded that each individual's own personal income situation is unique. While the above factors will assist you in your explanation, there are many other factors that may have an effect on the employee's net pay. Some of the factors to consider are changes to the employee's province of work or residence, salary, deductions, taxable allowances and benefits, personal credits, and hardship exemptions.
3.3. Change in province of work
The income tax deducted from an employee's pay is based on the employee's province of work. In some situations, when an employee changes his province of work, his tax liability may be such that he owes the Canada Revenue Agency (CRA) and/or the " Ministère du Revenu du Québec" (MRQ) at year end.
Employees who change their province of work at any time during the year are encouraged to review their personal tax situation in order to be aware of their tax liability upon filing at year end.
Employees who wish to have more federal and/or Quebec income tax deducted may do so by completing a "2008 Personal Tax Credits Return", form TD1 E (08) and/or, for the province of Quebec, a "Source Deductions Return 2008", form TP-1015.3-V (2008-01), and providing this documentation to their compensation advisor. For all provinces and territories, with the exception of Quebec, the deduction of additional income tax will continue to be administered by CRA. Please refer to Compensation Directive 2002-012, dated March 26, 2002, entitled "Deductions at Source of Additional Income Tax".
4. INQUIRIES
4.1 Any inquiries on the information contained in this directive should be addressed to your Public Works and Government Services Canada (PWGSC) Compensation Services Office.
Original Signed by
B. Fortin
Brigitte Fortin
Director General
Compensation Sector
Accounting, Banking and Compensation
Reference(s): CJA 9007-7, 9007-8
- Date modified: