Hi Smithco,

I did a test on my side.  When I zero out everything and just issue a vacation pay cheque, it takes into the 3500 exemption.  Therefore, when you just issue a paycheque includes vacation pay only, you will have to manually mulitple the amount by 0.0495. 

Hope this helps. 

I would recommend paying out vacation pay as a 'loan', then 'repaying' the loan on the next scheduled pay.

The payroll calculations aren't messed up by having extra 'pays', and you won't have as many PIER adjustments at T4 time.  (if you're paying 26 times a year, you aren't taking 31 CPP exemptions from 5 extra, small vacation pays.

Also, fewer people will be upset by how they owe extra tax when they file, since small vacation pay amounts are often below the personal exemption amount.

Thanks guys - have a couple of clients doing their own payroll and, altho they do use 'Loans' for vac pay advances, somehow one used advance instead of loans. Next paychq took off advance and paid out vac pay but the sources deductions got messed up with EI calculating on both the vac pay and the regular earnings - even tho the 'advance' already had EI off of it. I tried to 'adjust' paychq to see what it should be and the vac pay kept going back to zero each time I clicked on 'recalculate taxes'. Both the 'advance' and the vac pay amount were the same dollar amounts. If the vac pay advance had been done thru loans then I don't thing any of this would have happened.

And another thing - the Gross, Pensionable Earnings, and Insurable Earnings were questionable.

Example:

Advance was 600 less all taxes. Pensionable Earnings and Insurable Earnings were both 600.00 each.

Next chq was 1200.00 regular earnings less 600 advance plus 600 vac pay. Gross was 1200.00, Pensionable Earnings was 1200.00, Insurable Earnings was 1800.00

So it seems to me that only Loans should be used when doing advances for vacation pay.

CRA made 'Advances' taxable to get their remittance a half-month earlier from the few who were still using the tables and paper.  It had to have been one of the smallest payoffs in the history of taxation changes.  

I have a similar question.  We are paying out accrued vacation at the end of our fiscal year instead of releasing it when an employee is on holidays to cover lost pay.  We are on weekly payroll, how is this going to effect us?  This is the first year we are doing this.

Just realized that this question is answered, I will re post my question.

Thanks