ARCHIVED CD 2000-015
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May 19, 2000
SUBJECT: Additional Information on the Implementation of the Pay Equity Agreement
1.1 The purpose of this directive is to provide Compensation Advisors in departments with information on the reporting process for the recalculations required, information on the income tax implications and additional information regarding the implementation of the Pay Equity Agreement as agreed to between the Treasury Board Secretariat (TBS) and the Public Service Alliance of Canada (PSAC) on October 29, 1999, and approved by the Canadian Human Rights Tribunal (CHRT) on November 16, 1999. This agreement affects the Clerical and Regulatory (CR), Library Science (LS), Educational Support (EU), Data Processing (DA), Secretarial, Stenographic and Typing (ST) and Hospital Services (HS) groups.
1.2 This directive must be read in conjunction with Compensation Directive 1997-041 dated December 5, 1997, entitled "Equalization Adjustment - CR, ST, DA, HS, LS and EU Groups," Compensation Directive 2000-001 dated January 10, 2000, entitled "Pay Equity Adjustment Reports - CR, ST, DA, HS, LS and EU Groups," and Compensation Directive 2000-004 dated February 1, 2000, entitled "Pay Equity Implementation - CR, ST, DA-CON, HS, LS and EU Groups."
1.3 In this text, use of masculine is generic and applies to both men and women.
2.1 Compensation Directive 2000-004 dealt primarily with the eligibility, factors and processes for the implementation of the retroactive portion of the Pay Equity agreement. During the month of February, information sessions were held with Compensation Advisors in departments as well as Regional Pay Office staff where many additional issues were raised. This directive will deal with these issues as well as the impact of these payments on employees and former employees status for income tax for the year 2000.
3.1 The Pay Equity agreement stipulates that promotions, acting pay, lateral transfers, overtime, additional hours for part-time employees and compensatory leave--adjusted hours are to be recalculated effective April 1, 1994.
3.2 This agreement also stipulates that the Pay Equity adjustment amount and the ongoing Equalization amount (code 144) for the CR, ST and EU groups must be added to the basic rate of pay effective July 29, 1998 (blended rate). Also effective July 29, 1998, the blended rates of pay are to be considered as pay for all purposes and are to be used for the recalculation of all salary based transactions and allowances.
3.3 Adjustments that are paid as a result of the recalculations mentioned above must be identified as resulting from the Pay Equity agreement and interest is to be calculated on these amounts.
4.1 The adjustments resulting from the recalculations will be paid using the following new entitlement codes:
- 271 Pay Equity Salary Adjustment (April 1, 1994 to July 28, 1998)
- 272 Pay Equity Salary Adjustment -- Non-superannuable (April 1, 1994 to July 28, 1998)
- 273 Pay Equity Overtime Adjustment (April 1, 1994 to June 7, 2000)
- 277 Pay Equity Basic Pay Adjustment (July 29, 1998 to June 7, 2000)
- 278 Pay Equity Basic Pay Adjustment -- Non-superannuable (July 29, 1998 to June 7, 2000)
- 308 Pay Equity Allowance - Adjustment -- Superannuable (April 1, 1994 to June 7, 2000)
- 309 Pay Equity Allowance - Adjustment -- Non-superannuable (April 1, 1994 to June 7, 2000)
- 310 Pay Equity Vacation Pay Adjustment (July 29, 1998 to June 7, 2000)
4.2. Retroactive Adjustments
The retroactive period of July 29, 1998 to June 7, 2000, for 7C pay frequency and from July 29, 1998 to May 24, 2000, for 7A and 7B pay frequencies will be processed for Pay Period (PP) 13 in 2000 (regular pay dated June 21, 2000) during the weekend of June 3, 2000, and the administrative rates of pay detailed in Appendix B of Compensation Directive 2000-004 will also be implemented at that time. The retroactivity will be paid using the automated revision process for all pay frequencies including 7A but will exclude 6C. The ongoing Equalization Allowance (code 144) for employees in the CR, ST and EU groups will also be stopped in the same update using the effective start date of PP 13 in 2000 and the Salary Service History (SSH) will be adjusted to reflect a stop date of June 20, 1999.
The blended rates of pay as included in the Pay Equity Agreement were established using the basic rate of pay as of July 28, 1998 for each group and added the Pay Equity adjustment amount owing for 1998 as well as any ongoing Equalization Allowance. Since overpayments were not to be created for the Equalization Allowance amounts paid to date, Public Works and Government Services Canada (PWGSC) created administrative rates of pay. The administrative rates of pay were established by using the basic rate of pay as of July 28, 1998 for each group and adding the Pay Equity adjustment amount owing for 1998 to arrive at a new basic rate of pay. The Equalization Allowance amount was only added to the basic rate of pay as of June 20, 1999 for the affected groups. Additional lines are also reflected in the administrative rates of pay with effective dates of new rates as per the applicable collective agreements for each group.
The Equalization Allowance paid from June 20, 1999 to the end of the retroactive period will not be recovered. The administrative rates of pay will be used for the retroactivity process in order to calculate the amount owing and will take into consideration the ongoing Equalization amount already paid. This retroactivity will be paid using entitlement code 277 - Pay Equity Basic Pay Adjustment or entitlement code 278 - Pay Equity Basic Pay Adjustment -- Non-superannuable.
Example for employee on pay frequency 7C:
Basic rate for CR-4 = $32,892
Pay equity adjustment amount for 1998 = $1,589
CR Equalization Allowance = $994
|Effective Date||Basic Rate of Pay||Pay Equity Adjustment||Equalization Allowance||Revised Basic Rate of Pay|
|July 29, 1998||$32,892||$1,589||--||$34,481 + $994|
|June 20, 1999||$32,892||$1,589||$994||$35,475|
4.2.1 All adjustments will be subject to statutory deductions (Income Tax, Canada/Quebec Pension Plan and Employment Insurance) and will be pensionable where the employee has been identified as a contributor.
4.3. Ongoing Basic Salary Adjustments
Adjustments to ongoing salaries as a result of the recalculations of salary based events such as promotions, lateral transfers and acting pay where a blended rate of pay is to be reported can only be submitted after the Pay Rate Control File has been updated with the blended rates of pay. These transactions are to be reported using the Entitlement Amend (ENA) screen, closed period, and entitlement codes 271, 272, 277 or 278 for the retroactive portion and complete field 71 with "WWSWWAWWNSWW". Then, a Revision (REV) screen with an open period effective the start of the current pay period with the appropriate entitlement code (001, 002) is required. The administrative rates of pay which will be used to implement the blended rates of pay can be found in Appendix B of Compensation Directive 2000-004. The salary rates effective July 29, 1998 for each of the affected groups reflect the blended rates of pay referred to in the Pay Equity Agreement. Additional lines for each of the affected groups have been included to reflect the revised rates of pay for the effective dates as per the relevant collective agreement. The anticipated date for this update is June 3, 2000.
4.4. Retroactive Allowance Adjustments
Adjustments to ongoing pensionable allowances are to be reported using the ENA screen and an open period with the same entitlement codes as the original transaction, the new rate in field 66, inserting the number of days or hours in the retroactive period in fields 67 and 68, the old rate in field 69, and completing field 71. The values in field 71 are "WWSWWAWWNSWW", i.e. WW, Standard Work Week (SWW), Assigned Work Week (AWW) and Non-standard Work Week (NSWW); for example "WW375030002" for an employee whose SWW is 37.50 hours, AWW is 30.00 hours and NSWW indicator is 2. If the change to the ongoing pensionable allowance is for a period of Leave Without Pay (LWOP) the value in field 67 should be "X".
For the portion of the retroactive period from April 1, 1994 to July 28, 1998, only code 049 (Additional hours - Part-time employees) and code 147 (Adjustment -- Compensatory leave earned at a higher rate) need to be recalculated. The system will convert the Entitlement Amend (ENA) transactions to an Entitlement Adjustment (EAJ) transaction with entitlement code 308 for pensionable allowances or 309 for non pensionable allowances.
Overtime recalculations for the period from April 1, 1994, to the current pay period are to be reported using the Extra-Duty Pay (EDP) screen and entitlement code 273.
The following is a list of additional allowances that are to be recalculated effective July 29, 1998 and reported using an ENA screen completed as mentioned above:
- 006 Offender Supervision Allowance
- 015 Dirty Work Allowance
- 020 Temporary Assignment Allowance
- 027 Dual Remuneration -- Subject to Superannuation
- 029 Leave - Payment in Lieu - "S"
- 033 Leave -- Payment in Lieu -- "X" and "T"
- 042 Penological Factor Allowance
- 070 Supervisor Differential
- 077 Educational Leave Allowance
- 083 Pay Supplement - Late Hour Premium
- 091 Responsibility Allowance
- 232 Dual Remuneration -- Non-superannuable
For all other non pensionable allowances not listed above such as Maternity and Paternal Allowances (entitlement code 148) that are to be adjusted for a closed retroactive period, these are to be reported using the EAJ screen and entitlement code 309.
The transactions must be split for a change in rate, by calendar year, by fiscal year and at March 29, 2000.
Vacation Pay Adjustments (entitlement codes 073 and 173) must always be reported by Compensation Advisors in departments using the EAJ screen and code 310. This allowance will not be automatically produced for Pay Equity adjustments.
4.4.1. Retroactive Overtime Adjustments
Overtime recalculations from April 1, 1994 to the current pay period are to be reported using an EDP screen and entitlement code 273 (Pay Equity Overtime Adjustment) and the Pay Equity adjustment amount for the applicable year.
4.4.2. Part-time Employees
Employees in one of the affected groups whose AWW is less than the SWW are to be paid the adjustment for the salary related allowances prorated to the number of hours worked during the retroactive period.
Compensation Advisors in departments are to report the retroactive period for part-time accounts in hours.
4.4.3. Leave Without Pay (LWOP)
Pay Equity adjustments must be reduced by periods of LWOP. Pension contributions for contributory service are to be withheld for these periods at the single or double rate based on the reason code and the contributions rules for LWOP. Periods of LWOP are to be prorated for part-time service if applicable. The earnings for the LWOP periods including allowances if applicable are to be reported using an EAJ screen and code 202 for single rate and code 270 for double rate.
Periods of maternity leave during the retroactive period of July 29, 1998 to June 7, 2000 will not be recognized as active service. The entitlement will be reduced by the LWOP for the period of Maternity leave that extends beyond July 29, 1998 and pension contributions will be withheld for this period at the single rate. If maternity benefits were paid during this period, Compensation Advisors in departments are to recalculate the amount and report the adjustment using an EAJ screen and code 309, and are to follow the reporting requirements specified in section 4.4 of this directive.
- Employee temporarily struck off strength (T-SOS) effective June 1, 1998, - reason code K and in receipt of maternity allowance.
- Retaken on strength (RE- TOS) effective September 1, 1998.
- Pay Equity adjustment automatically paid with retroactivity for period from June 1, 1998 to July 28, 1998. Pension deficiencies automatically collected for LWOP period from July 29, 1998 to August 31, 1998 with an EAJ screen and code 202.
- Compensation Advisors in departments must recalculate maternity allowance received from July 29, 1998 to August 31, 1998, and report additional amount owing using and EAJ screen and code 309.
4.5. Separation Benefits
If an employee was struck off strength (SOS) after July 28, 1998 and received separation benefits these are to be recalculated using the blended rates of pay applicable at the time of SOS. The adjustment should be reported using the same dates as the original transactions and code 274 for eligible entitlements and code 243 for non-eligible entitlements. To determine which code to use, the eligibility criteria of the payments on departure must be revisited. Separation Benefits for part-time employees are to be prorated to the AWW. If the employee has since returned to work, the EAJ screen is to be used to report these adjustments. The Termination Entitlements (TEC) screen is to be used if the employee is still SOS.
4.6. Tax Waivers
Tax waiver transactions are to be reported using the same dates as the payment transaction to which they are to be applied.
4.7. Death Cases
If an employee died after SOS but prior to the day after the agreement approval date of November 16, 1999, Compensation Advisors in departments are responsible for determining the "Payor" for the adjustments owing. Any automated retroactivity cheque that is produced for these former employees must be returned for cancellation. The retroactive period of 1985 to 1989 should be created leaving the number of days blank. Once the Payor has been identified a change in title transaction should be completed and sent to the Pay office to advise of death after SOS. The Pay Office will ensure that the adjustments are paid, that statutory deductions are not withheld from the payment and that a T4 is not produced.
4.8. upplementary Deduction Dialogue (SDD) Screen
In order to provide Compensation Advisors in departments with a facility to report and collect certain deductions from any pay equity supplementary payment, the SDD screen was developed. Compensation Advisors in departments are to ensure that the pay period indicated on the SDD screen corresponds to the pay period for a payment transaction that processes in the same update. Please refer to section 14-5-7 of the Personnel-Pay Input Manual (PPIM) for a list of allowable deduction codes and for further details on this screen. Deduction code 540 (Other debts owing to the Crown) has been added to this list.
4.9. OVD Screen
The Overpayment Dialogue (OVD) screen has been created to allow Compensation Advisors in departments to collect overpayments of Pay Equity adjustments made to an employee. The only entitlement codes acceptable on this screen are those that have been created to pay the Pay Equity adjustments.
Compensation Advisors in departments must use PE in the pay period field of this screen if the overpayment covers a period up to December 26, 1996. If the overpayment is for a period in 1997 or 1998, the pay period field is to be left blank. If the overpayment is for a period in 1999, PE should be used in the pay period field. Once the OVD transaction has processed the net amount of the overpayment will be collected from the first available earnings.
If a personal cheque is received from an employee to repay a net overpayment the department must use the Cash Receipts (CRT) screen and deduction code 566 to ensure that the overpayment is not collected. Please refer to section 14-12-5 of the PPIM for further details on this screen.
4.10. Cancelled Cheques
If a Pay Equity adjustment cheque is to be returned for cancellation Compensation Advisors in departments are to re-report the transactions required to produce the payment in the correct amount after the cancelled cheque transaction has processed in the Regional Pay System (RPS).
The data found on the SSH will determine which screen should be used to report additional adjustments. If the correct information is currently reflected on the SSH Compensation Advisors in departments should use the EAJ screen to report the adjustments. If the information found on the SSH is incorrect they will use the ENA screen. The ENA screen must contain a former rate as well as a new rate. If an adjustment is not required, an "X" must be inserted in field 67 and field 68 is left blank. If the information is missing on the SSH the Entitlement Commence (ENC) screen is to be used. Compensation Advisors in departments are not to use the ENC screen to re-report the information unless the original lines do not exist on the SSH or have been purged.
It should be noted that even if the employee's pensionable and insurable earnings exceed the maximum allowable for the year 2000 after being reduced by the amount of the cancelled cheque, the Employment Insurance and Canada/Quebec Pension Plan deductions will be treated as non reversible deductions and will automatically create an overpayment for the employee which will be collected from the first available funds.
4.11. SSH Corrections
Compensation Advisors in departments are responsible for validating the information found on the SSH. If corrections are required to the information that has been updated to the SSH with the automated Pay Equity adjustment process, departments are to contact their Regional Pay offices for regional instructions concerning the procedures for submitting correction requests.
4.12. Corrections to Pay Equity Payments
4.12.1 If the SSH data is incorrect and the account in underpaid due to an incorrect rate then Compensation Advisors in departments are to use an ENA screen and insert the new rate in field 66 and the rate at which the payment was made (old rate) in field 69. If the ENA screen is used and an adjustment is required, the number of days in the retroactive period must be inserted in fields 67 and 68. The SSH will then be corrected.
4.12.2 If the account is overpaid, Compensation Advisors in departments are to use an ENA screen and insert a value in field 69 that is greater than the value in field 66, insert an "X" in field 67 and leave field 68 blank. Compensation Advisors in departments will also be required to report an OVD screen to recover the overpayment. Pay offices will receive message N73 "Check for Overpayment of Supps" and are not to take action when this message is produced for a transaction using a Pay Equity code.
5. TAX IMPLICATIONS
5.1. Tax Implications for Active Employees
The amount of income tax withheld from a supplementary payment is normally higher than the amount of tax withheld from a regular pay cheque. As the pay equity entitlement is considered a supplementary payment, the income tax will be calculated using the supplementary income tax calculation. The following explanation will assist Compensation Advisors in departments when advising employees of the manner in which income tax is calculated on supplementary payments.
In accordance with information provided by Canada Customs and Revenue Agency (CCRA) and le Ministère du revenu du Québec, the RPS uses a specific formula which involves two basic calculations to determine the required income tax to be withheld on a supplementary payment.
The first calculation takes into consideration the year-to-date salary of the employee plus the estimated taxable salary that will be paid for the balance of the year thus providing a projected estimate of the employee's annual taxable income. This is taxed at the rate applicable to the estimated taxable income.
The second calculation takes into consideration all amounts as mentioned in the first calculation plus the supplementary payment itself. This is also taxed at the rate applicable to the estimated annual taxable income. The income tax to be withheld from the supplementary payment is the difference between the income tax payable on the first calculation and the tax payable on the second calculation.
In many instances, employees will be taxed at a higher rate than that of their regular pay as their pay equity payment has increased their annual taxable income to a level where the employee will fall into a higher income tax bracket. However, it should be noted, that the employee's regular pay will not be taxed at the higher rate and will continue to be taxed in the same manner as before the issuance of the pay equity payment.
5.2. Tax Implications for Former Employees
The amount of income tax that will be withheld on a pay equity payment issued to a former employee who is now working for a separate employer, or vice versa, may be less than an employee who has not changed employers. This may also occur for Treasury Board employees who have ceased employment and were rehired in the same calendar year, but are now paid by a different pay office or department.
The RPS uses the formulae and the two basic calculations mentioned above and will not take into consideration the salary earned with the other employer. For instance, an employee who is SOS and is now employed with a separate employer will only have the salary earned to-date utilized in the calculations. A projected salary will not be included.
Similarly, an employee who is taken on strength (TOS) at some point in the calendar year with Treasury Board as the employer will not have the salary earned with the separate employer included in the calculations. However, a projected salary will be established for the employee based on the salary now earned with the Treasury Board employer.
Former employees who no longer work for the Federal Government and have been SOS since the beginning of the year will have even less income tax deducted as there will be no year-to-date earnings and no projected ongoing salary for the remainder of the year. The income tax deducted on the pay equity cheque will then be calculated on the amount of the pay equity cheque only and the rate of the income tax applied may be lower.
An employee or former employee in any one of the situations described herein may be required to pay more income tax when filing their income tax returns at the end of the year.
6. PENSION DEFICIENCIES/ARREARS
If an employee or former employee has completed 35 years service and is entitled to a Pay Equity adjustment, every effort is to be made to recover the Public Service Superannuation Act (PSSA) contributions deficiencies from the pay equity payments prior to the final installment being given to the employee or former employee. When message "N86- Change Pension Status in retro Period-poss adj. To Pension Contr." is received, the PSSA contribution deficiencies are to be calculated by the Pay Office and the amount recovered from subsequent Pay Equity payments, if possible. If there are no further payments, then the outstanding deficiencies will be recovered following the normal recovery process.
7.1 Any request for information regarding the foregoing should be addressed to your PWGSC Compensation Services Office.
Original Signed by
Government Operational Service
- Date modified: