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If I want to do a one time vacation pay for an employee and I want to give it to them mid month, how do I go about doing that so it does not create problems with tax deductions.
Hi Donna. Vacation pay cheques calculate deductions exactly like regular paycheques do so when a vacation paycheque is issued instead of a regular paycheque then the deductions are calculated just like normal and there's nothing to worry about. When you want to issue a vacation paycheque in addition to a regular paycheque then you need to do a bit of math to make everything work out.
Let's say I have an employee that gets paid monthly (12 pay periods per year) and in June I want to issue a vacation paycheque in the middle of the month (either as a bonus, or to cover a portion of earnings that would normally be paid at the end of the month). I would issue the vacation paycheque as normal, nothing fancy needs to be done at this point. At the end of the month when I make the regular paycheque, to ensure that taxes, EI and CPP are still correct even though I've technically added an additional pay period I'll use CRA website to help me calculate the deductions for the regular paycheque.
At the end of the month, the first thing I'm going to do is go to the CRA website and calculate the deductions for a paycheque that includes the vacation pay already paid out AND the wages earned on the regular paycheque so that I can see what the deductions would have been of both items were paid out at once rather than over two cheques.
Once I have those deductions, I'd just do a bit of math.
Deductions calculated from the CRA website minus the deductions taken from the vacation paycheque equals the deduction amounts I'm going to use when creating the regular paycheque at the end of the month. When creating the regular paycheque in AgExpert, just replace what the system calculates with the results of your math. This way the "extra" paycheque won't have any effect on the calculations.
This method will work great whether you're replacing a portion of regular wages with vacation pay or paying out vacation pay in addition to regular wages.