How to Calculate Canadian Payroll Tax
Canadian payroll tax is deducted from the pay of Canadian employees. It is comprised of payments toward employment insurance and the Canada or Quebec government pension plans. Both employers and employees contribute to employment insurance. The contributions go into a fund that can pay benefits in the event of unemployment. The same fund is also intended to cover periods of extended illness. The government pension plan payments are made only by employees. What you get at retirement depends on how much you contributed while employed.
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Instructions
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Gather your payroll data. You will need such information as salary or hourly pay rate, payment frequency, payment date and any bonus info, as well as current year-to-date payroll deduction amounts. You will also need to know whether such pre-tax deductions (amounts deducted at source, in Canadian parlance) as union dues or alimony will be taken out of your pay.
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Get your previous year's federal and provincial tax return. You will need certain line items, such as the total claim amount from your federal and provincial TD1 forms, as well as any additional deductions requested from your federal TD1.
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Calculate payroll tax using the Canada Revenue Agency Payroll Deductions Online Calculator (see Resources). Plug the relevant data into a brief series of screens, then press "Calculate" to get line-by-line detail of payroll deductions, to include the Employment Insurance and Government Pension Plan amounts.
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Add the Employment Insurance and Government Pension Plan amounts to arrive at the payroll tax figure.
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Tips & Warnings
According to the Canada Revenue Agency, "The printed calculations created by PDOC (Payroll Deductions Online Calculator) are not intended to be a statement of earnings and therefore should not be used as such."
References
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