Public Works and Government Services Canada
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CD 2010-024
December 20, 2010
SUBJECT: Changes to the Net Pay Amount Commencing January 2011
1. PURPOSE
1.1 The purpose of this directive is to provide clients with information about changes to the net amount of pay commencing with the first pay of January 2011.
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 "Are You a 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 client departments 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 low 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 contribution 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 may see that they have paid a larger amount to the plan in December than in January.
For the 2011 calendar year, the contribution rate will increase by 0.3%. Effective January 1, 2011, public service pension plan contributions will be 5.8% (to a maximum of $2,801.40 for the 2011 taxation year) on all pensionable earnings below and equal to the yearly maximum pensionable earnings (YMPE) ($48,300 for the 2011 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 will increase from 5.8% 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 CPP and 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 2011.
Effective January 1, 2011, the CPP and QPP rate remains at4.95% of pensionable earnings. The maximum CPP / QPP contribution is $2,217.60 for the 2011 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, effective January 1, 1998, the Quebec Tax Reform eliminated the Quebec provincial tax credit for QPP. This tax credit is now included in the basic credit amount of $10,640 for the 2011 taxation year. - Employment Insurance (EI) Premiums
The employee's rate of EI premiums (excluding employees working in the province of Quebec) for the 2011 taxation year will be increased from 1.73% to 1.78% of insurable earnings. The annual maximum insurable earnings will be increased from $43,200 to $44,200. Those employees who had reached their maximum EI premiums during the previous year will recommence paying EI premiums in the new year until the new annual maximum premium level is reached. Once employees reach the annual maximum premium deduction of $786.76 in 2011, they will see an increase in their net pay amount, 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 2011 taxation year, will be increased from 1.36% to 1.41% of insurable earnings. The annual maximum insurable earnings will be increased from $43,200 to $44,200. Those employees who had reached their maximum EI premiums during the previous year will recommence paying EI premiums in the new year until the new annual maximum premium level is reached. Once employees reach the annual maximum premium deduction of $623.22 in 2011, they will see an increase in their net pay amount, as there will no longer be EI deductions withheld. - Quebec Parental Insurance Plan (QPIP)
Effective January1,2011, the employee's QPIP premium rate will be increased from 0.506% to 0.537% of insurable earnings. The annual maximum insurable earnings will be increased from $62,500 to $64,000. Those employees who had reached their maximum QPIP premiums during the previous year will recommence paying QPIP premiums in the new year until the new annual maximum premium level is reached. Once employees reach the annual maximum premium deduction of $343.68 in 2011, they will see an increase in their net pay amount, as there will no longer be QPIP deductions withheld. - Federal Tax Brackets and Rates Effective January 1, 2011
Effective January 1, 2011, the federal income tax table has changed as follows:
Federal Tax Brackets and Rates Tax Brackets and Rates Effective January 1, 2010 Tax Brackets and Rates Effective January 1, 2011 Tax brackets ($) Tax rates Tax brackets ($) Tax rates More than - Not more than More than - Not more than $0 to $40,970 15% $0 to $41,544 15% $40,970 to $81,941 22% $41,544 to $83,088 22% $81,941 to $127,021 26% $83,088 to $128,800 26% Over $127,021 29% Over $128,800 29%
Canada Employment Credit
Effective January 1, 2011, the maximum amount on which the credit is calculated will be increased from $1,051 to $1,065.
- Provincial and Territorial Tax Brackets and Rates Effective January 1, 2011
There are no changes to the tax brackets or rates for the provinces of Prince Edward Island, Alberta and Manitoba.
Newfoundland and Labrador
Effective January 1, 2011, the provincial income tax table has changed as follows:
| Newfoundland and Labrador Tax Brackets | |||
|---|---|---|---|
| Tax Brackets and Rates Effective July 1, 2010 | Tax Brackets and Rates Effective January 1, 2011 | ||
| Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
| More than - Not more than | More than - Not more than | ||
| $ 0 to $31,278 | 7.70% | $0 to $31,904 | 7.70% |
| $31,278 to $62,556 | 12.50% | $31,904 to $63,807 | 12.50% |
| Over $62,556 | 13.30% | Over $63,807 | 13.30% |
Nova Scotia
Effective January 1, 2011, the provincial income tax table has changed as follows:
| Nova Scotia Tax Brackets | |||
|---|---|---|---|
| Tax Brackets and Rates Effective July 1, 2010 | Tax Brackets and Rates Effective January 1, 2011 | ||
| Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
| More than - Not more than | More than - Not more than | ||
| $0 to $29,590 | 8.79% | $0 to $29,590 | 8.79% |
| $29,590 to $59,180 | 14.95% | $29,590 to $59,180 | 14.95% |
| $59,180 to $93,000 | 16.67% | $59,180 to $93,000 | 16.67% |
| $93,000 to $150,000 | 17.50% | $93,000 to $150,000 | 17.50% |
| Over $150,000 | 24.50% | Over $150,000 | 21.00% |
New Brunswick
Effective January 1, 2011, the provincial income tax table has changed as follows:
| New Brunswick Tax Brackets and Rates | |||
|---|---|---|---|
| Tax Brackets and Rates Effective January1,2010 | Tax Brackets and Rates Effective January1,2011 | ||
| Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
| More than - Not more than | More than - Not more than | ||
| $ 0 to $ 36,421 | 9.30% | $0 to $37,150 | 9.10% |
| $36,421 to $72,843 | 12.50% | $37,150 to $74,300 | 12.10% |
| $72,843 to $118,427 | 13.30% | $74,300 to $120,796 | 12.40% |
| Over $118,427 | 14.30% | Over $120,796 | 12.70% |
Ontario
Effective January 1, 2011, the provincial income tax table has changed as follows:
| Ontario Tax Brackets and Rates | |||
|---|---|---|---|
| Tax Brackets and Rates Effective January 1, 2010 | Tax Brackets and Rates Effective January 1, 2011 | ||
| Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
| More than - Not more than | More than - Not more than | ||
| $ 0 to $37,106 | 5.05% | $0 to $37,774 | 5.05% |
| $37,106 to $74,214 | 9.15% | $37,774 to $75,550 | 9.15% |
| Over $74,214 | 11.16% | Over $75,550 | 11.16% |
The provincial surtax payable has been revised as follows:
Where the basic provincial tax payable is less than or equal to $4,078 (formerly $4,006), the surtax payable is $0.
Where the basic provincial tax payable is greater than $4,078 and less than or equal to $5,219 (formerly $5,127), the surtax payable is 20% of the basic provincial tax payable in excess of $4,078.
Where the basic provincial tax payable is greater than $5,219, the surtax payable is the total of 20% of the basic provincial tax payable in excess of $4,078, and 36% of the basic provincial tax payable in excess of $5,219.
Saskatchewan
Effective January 1, 2011, the provincial income tax table has changed as follows:
| Saskatchewan Tax Brackets and Rates | |||
|---|---|---|---|
| Tax Brackets and Rates Effective January 1, 2010 | Tax Brackets and Rates Effective January 1, 2011 | ||
| Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
| More than - Not more than | More than - Not more than | ||
| $ 0 - $ 40,354 | 11% | $ 0 to $40,919 | 11% |
| $40,354 to $115,297 | 13% | $40,919 to $116,911 | 13% |
| Over $115,297 | 15% | Over $116,911 | 15% |
British Columbia
Effective January 1, 2011, the provincial income tax table has changed as follows:
The provincial tax reduction is indexed and is calculated as follows:
| British Columbia Tax Brackets and Rates | |||
|---|---|---|---|
| Tax Brackets and Rates Effective January 1, 2010 | Tax Brackets and Rates Effective January 1, 2011 | ||
| Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
| More than - Not more than | More than - Not more than | ||
| $ 0 to $35,859 | 5.06% | $ 0 to $ 36,146 | 5.06% |
| $35,859 to $71,719 | 7.70% | $36,146 to $72,293 | 7.70% |
| $71,719 to $82,342 | 10.50% | $72,293 to $83,001 | 10.50% |
| $82,342 to 99,987 | 12.29% | $83,001 to $100,787 | 12.29% |
| Over $99,987 | 14.70% | Over $100,787 | 14.70% |
Where net income is less than or equal to $17,493 (formerly $17,354), the reduction is equal to the lesser of (i) basic provincial tax, and (ii) $394 (formerly $390).
Where net income is greater than $17,493 and less than or equal to $29,805.50 (formerly $29,541.50), the reduction is equal to the lesser of (i) basic provincial tax, and (ii) $394 - [(Annual net income - $17,493) × 3.2%].
Where net income is greater than $29,805.50, the reduction is equal to $0.
Quebec
Effective January 1, 2011, the provincial income tax table has changed as follows:
| Quebec Tax Brackets and Rates | |||
|---|---|---|---|
| Tax Brackets and Rates Effective January 1, 2010 | Tax Brackets and Rates Effective January 1, 2011 | ||
| Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
| More than - Not more than | More than - Not more than | ||
| $0 to 38,570 | 16% | $0 to $39,060 | 16% |
| $38,570 to $77,140 | 20% | $39,060 to $78,120 | 20% |
| Over $77,140 | 24% | Over $78,120 | 24% |
Deduction for employment income
Effective January 1, 2011, the maximum deduction for employment income has been increased from $1,030 to $1,045.
Yukon
Effective January 1, 2011, the territorial income tax table has changed as follows:
| Yukon Tax Brackets and Rates | |||
|---|---|---|---|
| Tax Brackets and Rates Effective January 1, 2010 | Tax Brackets and Rates Effective January 1, 2011 | ||
| Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
| More than - Not more than | More than - Not more than | ||
| $ 0 to $40,970 | 7.04% | $0 to $41,544 | 7.04% |
| $40,970 to $81,941 | 9.68% | $41,544 to $83,088 | 9.68% |
| $81,941 to $127,021 | 11.44% | $83,088 to $128,800 | 11.44% |
| Over $127,021 | 12.76% | Over $128,800 | 12.76% |
Territorial Employment Credit
Effective January 1, 2011, the maximum amount on which the credit is calculated will be increased from $1,051 to $1,065.
Northwest Territories
Effective January 1, 2011, the territorial income tax table has changed as follows:
| Northwest Territories Tax brackets and Rates | |||
|---|---|---|---|
| Tax Brackets and Rates Effective January 1, 2010 | Tax Brackets and Rates Effective January 1, 2011 | ||
| Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
| More than - Not more than | More than - Not more than | ||
| $ 0 to $ 37,106 | 5.90% | $0 to $37,626 | 5.90% |
| $37,106 to $74,214 | 8.60% | $37,626 to $75,253 | 8.60% |
| $74,214 to $120,656 | 12.20% | $75,253 to $122,345 | 12.20% |
| Over $120,656 | 14.05% | Over $122,345 | 14.05% |
Nunavut
Effective January 1, 2011, the territorial income tax table has changed as follows:
| Nunavut Tax Brackets and Rates | |||
|---|---|---|---|
| Tax Brackets and Rates Effective January 1, 2010 | Tax Brackets and Rates Effective January 1, 2011 | ||
| Tax Brackets ($) | Tax Rates | Tax Brackets ($) | Tax Rates |
| More than - Not more than | More than - Not more than | ||
| $ 0 to $ 39,065 | 4.00% | $0 to $39,612 | 4.00% |
| $39,065 to $78,130 | 7.00% | $39,612 to $79,224 | 7.00% |
| $78,130 to $127,021 | 9.00% | $79,224 to $128,800 | 9.00% |
| Over $127,021 | 11.50% | Over $128,800 | 11.50% |
Tax Adjustment Factors
The calculation of income tax withheld at source is based on the taxable income earned by the employee and the income tax rates in effect for the province of employment at the time the payment is issued. Those employees who work in the province of Quebec in the National Capital Region (NCR) and reside in Ontario, or work in the province of Quebec and reside in Nova Scotia or New Brunswick, their Quebec provincial tax is calculated by using a tax adjustment factor which is based on the current Federal Tax Brackets for each province, as provided by CRA.
| Tax Adjustment Factor Effective July 1, 2010 | Tax Adjustment Factor Effective January 1, 2011 | ||||||
|---|---|---|---|---|---|---|---|
| More than - Not more than ($) | Nova Scotia | New Brunswick | Ontario | More than - Not more than ($) | Nova Scotia | New Brunswick | Ontario |
| $0 to $40,970 | 90% | 94% | 61% | $0 to $41,544 | 95% | 92% | 67% |
| $40,970 to $81,941 | 103% | 93% | 73% | $ 41,544 to $ 83,088 | 104% | 91% | 73% |
| $81,941 to $127,021 | 103% | 89% | 86% | $ 83,088 to $128,800 | 105% | 90% | 75% |
| Over $127,021 | 103% | 88% | 89% | Over $128,800 | 105% | 89% | 81% |
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 "2011 Personal Tax Credits Return", form TD1 E (11) and/or, for the province of Quebec, a "Source Deductions Return 2011", form TP-1015.3-V (2011-01), 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
Carrie E. Roussin
Carrie E. Roussin
Director General
Compensation Sector
Accounting, Banking and Compensation
Reference(s): CJA 9007-7, 9007-8