Taxes are an inevitable part of being an adult. Whether you’re an employee working for a business or an employer yourself, you have to pay taxes.
Of course, location will always affect the taxes you pay and the regulations you have to adhere to. For those who live in Québec, there are five main types of employee taxes, and two additional employer rates to consider.
In this post, we’ll be exploring both these types of taxes.
How Are Taxes Handled?
Federal and Provincial taxes are determined by the estimated income of the employee for the year. While salaried employees are fairly easy to work with, contract workers, freelancers, and other time-based employees have varied earnings.
The five types of employee taxes you should be aware of are:
- Federal tax
- Provincial tax
- QPP (Québec Pension Plan)
- EI (Employment Insurance)
- QPIP (Québec Parental Insurance Plan)
While the way these taxes are calculated can vary depending on payment type, we’ll be speaking to regular wages.
QPP (Québec Pension Plan)
The first type of tax you need to think about is QPP.
For QPP, the contribution rate is 11.8% of an employee’s gross earnings. In 2021, the maximum pensionable earnings is $61,600.
The pay period exemption, in simple terms, is that everyone gets $3500/year that they don’t have to pay QPP on. This is broken down per pay period.
So if your employees are paid on a bi-weekly frequency there are 26 pay periods – you would therefore take 3500/26 to get an exemption amount of $134.61 per pay.
NOTE: (never round up on the exemption!)
Let’s break down the math a little:
- Let’s say your wages + benefits= $1,000. To get your pensionable earnings you do 1000-134.61= $865.39
- QPP is 865.39 x 0.118 = $102.12
- The company will match the employee portion of QPP dollar for dollar
- Note: An employee is exempt from QPP if they are under the age of 18 or over 70, and some other special cases. Please speak to your accountant or CRA/RQ to see if you are exempt.
EI (Employment Insurance)
Employment Insurance is the second tax taken from an employee’s pay. This tax is regulated federally.
EI is calculated at 1.58% of the insurable earnings. Insurable earnings are any cash-based earning or benefit.
Non-cash benefits are not subject to EI in most cases. The company pays 1.4 times the employee amount for EI unless they have secured a reduced rate from CRA. The annual maximum of EI for 2021 is $889.54.
QPIP (Québec Parental Insurance Plan)
QPIP is an income replacement plan, designed to support the parents of a newborn or newly adopted child. This tax pays benefits to those who are eligible – only those who are salaried or self-employed workers qualify for the plan.
In Québec, employees pay QPIP on their insurable earnings. The annual maximum for salaried workers for QPIP is $412.49 for 2021.
Premium rates for QPIP are 0.494% for salaried workers. This rate does vary depending on your status – if you’re an employer, the premium rate is 0.692%. If you’re a self-employed worker, the premium rate sits at 0.878%.
In Québec, the maximum insurable earnings considered when calculating benefits are $83,500 in 2021.
For every employee, there is a basic amount one can make each year before they are subject to taxes.
Let’s look at 2021 – this amount is $13,808 federally and in QC, this means you can make this much without being taxed.
After that (or based on the estimated earnings for the year) you will be taxed within the tax bracket for your estimated earnings.
- For Federal tax brackets and rates see here.
- These rates are not a simple percentage- so be aware, there is more that goes into the calculation behind the scenes than just these rates. If you’re looking for a way to accurately and efficiently calculate these rates, check out our very own Payroll Calculator.
- To learn more about filing your income tax return for 2020, check out Revenue Québec.
As an employer, you will always be required to pay the company portions of QPP and EI; in Québec, you may also have to pay CNESST (which stands for The Commission des normes, de l’équité, de la santé et de la sécurité du travail – otherwise known as the commission on workplace standards, fairness, health and safety) and HSF (Health Services Fund).
You will need to register to CNESST for a contribution rate as they can vary. HSF should always be calculated as part of your payroll taxes unless the wages are exempt per Revenu Québec.
If you’re curious to learn more about exemptions, you can check out Revenue Québec’s website. Exemptions can be found here.
The HSF rate varies based on your total payroll for the year as well as the industry you are in. The amount owed is estimated throughout the year by your payroll provider and is then reconciled at year-end once you submit your RL-1 (a slip for reporting salaries or wages) and you find out whether you have over or underpaid.
Taxes Don’t Need To Be A Hassle
If you have any further questions about taxes in Québec, contact your accountant.
We get it – taxes can be a bit intimidating. This is one of the reasons why our company exists. We make taxes simple and painless – visit PaymentEvolution.com to automate payroll and get your staff paid accurately.
And be sure to check out our Payroll Calculator for a quick, easy way to calculate your tax rates.