ARCHIVED CD 2008-026
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December 2, 2008
SUBJECT: Changes to the Net Pay Amount Commencing January 2009
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 2009.
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:
a. 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 2009, the contribution rate will increase by 0.3%. Effective January 1, 2009, public service pension plan contributions will be 5.2% (to a maximum of $2,407.60 for the 2009 taxation year) on all pensionable earnings below and equal to the yearly maximum pensionable earnings (YMPE) ($46,300 for the 2009 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 5.2% to 8.4%. The larger the public service pension plan contribution, the less income tax will be withheld from the employee's pay.
The CPP and QPP rate, effective January 1, 2009, remains at 4.95% of pensionable earnings. The maximum CPP/QPP contribution is $2,118.60 for the 2009 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 $10,455 for the 2009 taxation year.
b. Employment Insurance (EI) Premiums
The employee's rate of EI premiums (excluding employees working in the province of Quebec), for the 2009 taxation year remains at 1.73% of insurable earnings. The annual maximum insurable earnings will be increased from $41,100 to $42,300. 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 $731.79 in 2009, they will see an increase in the amount of their net pay as there will no longer be EI deductions withheld.
c. Quebec Parental Insurance Plan (QPIP)
Effective January 1, 2009, the employee's QPIP premium rate will be increased from 0.450% to 0.484% of insurable earnings. The annual maximum insurable earnings will be increased from $60,500 to $62,000. 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 $300.08 in 2009, they will see an increase in the amount of their net pay as there will no longer be QPIP deductions withheld.
d. Federal Tax Brackets and Rates Effective January 1, 2009
The federal income tax table has changed effective January 1, 2009, as follows:
Tax Brackets and Rates Effective January 1, 2008 |
Tax Brackets and Rates Effective January 1, 2009 |
||
---|---|---|---|
Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
More than - Not more than | More than - Not more than | ||
0 to 37,885 | 15% | 0 to 38,832 | 15% |
38,885 to 75,769 | 22% | 38,832 to 77,764 | 22% |
75,769 to 123,184 | 26% | 77,664 to 126,264 | 26% |
Over 123,184 | 29% | Over 126,264 | 29% |
Canada Employment Credit
Effective January 1, 2009, the maximum amount on which the credit is calculated will be increased from $1,019 to $1,044.
e. Provincial and Territorial Tax Brackets and Rates Effective January 1, 2009
There are no changes to the tax brackets or rates for the provinces of Prince Edward Island, Alberta and Nova Scotia.
Newfoundland and Labrador
The provincial income tax table has changed effective January 1, 2009, as follows:
Tax Brackets and Rates Effective July 1, 2008 |
Tax Brackets and Rates Effective January 1, 2009 |
||
---|---|---|---|
Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
More than - Not more than | More than - Not more than | ||
0 to 30,215 | 7.7% | 0 to 31,061 | 7.7% |
30,215 to 60,429 | 12.8% | 31,061 to 62,121 | 12.8% |
Over 60,429 | 15.5% | Over 62,121 | 15.5% |
New Brunswick
The provincial income tax table has changed effective January 1, 2009, as follows:
Tax Brackets and Rates Effective January 1, 2008 |
Tax Brackets and Rates Effective January 1, 2009 |
||
---|---|---|---|
Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
More than - Not more than | More than - Not more than | ||
0 to 34,836 | 10.12% | 0 to 35,707 | 10.12% |
34,836 to 69,673 | 15.48% | 35,707 to 71,415 | 15.48% |
69,673 to 113,273 | 16.8% | 71,415 to 116,105 | 16.8% |
Over 113,273 | 17.95% | Over 116,105 | 17.95% |
Manitoba
The provincial income tax table has changed effective January 1, 2009, as follows:
Tax Brackets and Rates Effective January 1, 2008 |
Tax Brackets and Rates Effective January 1, 2009 |
||
---|---|---|---|
Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
More than - Not more than | More than - Not more than | ||
0 to 30,544 | 10.9% | 0 to 31,000 | 10.8% |
30,544 to 66,000 | 12.75% | 31,000 to 67,000 | 12.75% |
Over 66,000 | 17.4% | Over 67,000 | 17.4% |
Ontario
The provincial income tax table has changed effective January 1, 2009, as follows:
Tax Brackets and Rates Effective January 1, 2008 |
Tax Brackets and Rates Effective January 1, 2009 |
||
---|---|---|---|
Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
More than - Not more than | More than - Not more than | ||
0 to 36,020 | 6.05% | 0 to 36,848 | 6.05% |
36,020 to 72,041 | 9.15% | 36,848 to 73,698 | 9.15% |
Over 72,041 | 11.16% | Over 73,698 | 11.16% |
The provincial surtax payable has been revised as follows:
Where the basic provincial tax payable is less than or equal to $4,257 (formerly $4,162), the surtax payable is $0.
Where the basic provincial tax payable is greater than $4,257 and less than or equal to $5,370 (formerly $5,249), the surtax payable is 20% of the basic provincial tax payable in excess of $4,257.
Where the basic provincial tax payable is greater than $5,370, the surtax payable is the total of 20% of the basic provincial tax payable in excess of $4,257 and 36% of the basic provincial tax payable in excess of $5,370.
Saskatchewan
The provincial income tax table has changed effective January 1, 2009, as follows:
Tax Brackets and Rates Effective January 1, 2008 |
Tax Brackets and Rates Effective January 1, 2009 |
||
---|---|---|---|
Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
More than - Not more than | More than - Not more than | ||
0 to 39,135 | 11% | 0 to 40,113 | 11% |
39,135 to 111,814 | 13% | 40,113 to 114,610 | 13% |
Over 111,814 | 15% | Over 114,610 | 15% |
British Columbia
The provincial income tax table has changed effective January 1, 2009, as follows:
Tax Brackets and Rates Effective January 1, 2008 |
Tax Brackets and Rates Effective January 1, 2009 |
||
---|---|---|---|
Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
More than - Not more than | More than - Not more than | ||
0 to 35,016 | 5.06% | 0 to 35,716 | 5.06% |
35,016 to 70,033 | 7.7% | 35,716 to 71,433 | 7.7% |
70,033 to 80,406 | 10.5% | 71,433 to 82,014 | 10.5% |
80,406 to 97,636 | 12.29% | 82,014 to 99,588 | 12.29% |
Over 97,636 | 14.7% | Over 99,588 | 14.7% |
The provincial tax reduction is indexed and is calculated as follows:
Where net income is less than or equal to $17,285 (formerly $16,946), the premium is equal to the lesser of (i) basic provincial tax, and (ii) $389 (formerly $381).
Where net income is greater than $17,285 and less than or equal to $29,441.25 (formerly $28,852.25), the premium is equal to the lesser of (i) basic provincial tax, and (ii) $389 - [(Annual net income - $17,285) × 3.2%].
Where net income is greater than $29,441.25, the premium is equal to $0.
Quebec
The provincial income tax table has changed effective January 1, 2009, as follows:
Tax Brackets and Rates Effective January 1, 2008 |
Tax Brackets and Rates Effective January 1, 2009 |
||
---|---|---|---|
Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
More than - Not more than | More than - Not more than | ||
0 to 37,500 | 16% | 0 to 38,385 | 16% |
37,500 to 75,000 | 20% | 38,385 to 76,770 | 20% |
Over 75,000 | 24% | Over 76,770 | 24% |
Deduction for employment income
Effective January 1, 2009, the deduction for employment income has been increased from $1,000 to a maximum of $1,025.
Yukon
The territorial income tax table has changed effective January 1, 2009, as follows:
Tax Brackets and Rates Effective January 1, 2008 |
Tax Brackets and Rates Effective January 1, 2009 |
||
---|---|---|---|
Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
More than - Not more than | More than - Not more than | ||
0 to 37,885 | 7.04% | 0 to 38,832 | 7.04% |
37,885 to 75,769 | 9.68% | 38,832 to 77,664 | 9.68% |
75,769 to 123,184 | 11.44% | 77,664 to 126,264 | 11.44% |
Over 123,184 | 12.76% | Over 126,264 | 12.76% |
Territorial Employment Credit
Effective January 1, 2009, the maximum amount on which the credit is calculated will be increased from $1,019 to $1,044.
Northwest Territories
The territorial income tax table has changed effective January 1, 2009, as follows:
Tax Brackets and Rates Effective January 1, 2008 |
Tax Brackets and Rates Effective January 1, 2009 |
||
---|---|---|---|
Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
More than - Not more than | More than - Not more than | ||
0 to 35,986 | 5.9% | 0 to 36,885 | 5.9% |
35,986 to 71,973 | 8.6% | 36,885 to 73,772 | 8.6% |
71,973 to 117,011 | 12.2% | 73,772 to 119,936 | 12.2% |
Over 117,011 | 14.05% | Over 119,936 | 14.05% |
Nunavut
The territorial income tax table has changed effective January 1, 2009, as follows:
Tax Brackets and Rates Effective January 1, 2008 |
Tax Brackets and Rates Effective January 1, 2009 |
||
---|---|---|---|
Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
More than - Not more than | More than - Not more than | ||
0 to 37,885 | 4.0% | 0 to 38,832 | 4.0% |
37,885 to 75,770 | 7.0% | 38,832 to 77,664 | 7.0% |
75,770 to 123,184 | 9.0% | 77,664 to 126,264 | 9.0% |
Over 123,184 | 11.5% | Over 126,264 | 11.5% |
Tax Adjustment Factors
Province | 2008 Tax Adjustment Factor | 2009 Tax Adjustment Factor |
---|---|---|
Ontario | 76% | 76% |
Nova Scotia | 101% | 102% |
New Brunswick | 104% | 104% |
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 "2009 Personal Tax Credits Return", form TD1 E (09) and/or, for the province of Quebec, a "Source Deductions Return 2009", form TP-1015.3-V (2009-01), 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
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