Canadian HR Reporter

CANADIAN HR REPORTER May 29, 2017 FEATURES 13 PAYROLL A matter of timing When is the best time to switch payroll providers? By Deborah Boksteyn and Ashley Unger M aking the switch to a new payroll provider can be overwhelming. ere are a million and one de- tails to consider. When it comes to making the best decision for the business and, of course, em- ployees, you will want to ensure the transition is as simple and seamless as possible. Before making the switch, there are many things to consider: • What are your goals: Why do you want to make a change? What items or processes need to be implemented or improved? • Functionalities: What items do you wish to streamline? Do you need better reporting options? • What services are important? For example, online capabilities (such as pay statements or T4s), data protection or data access? How much will be outsourced; how much will be retained in-house? • Which software products will be needed? Will you purchase software or use a provider's software? What are the related licensing costs? • What is the budget, are there restrictions that need to be considered? • What are the ramifications throughout the business, both positive or negative? • Who will project manage the transition? Which key individu- als need to be involved? • Who is going to gather all the necessary information (such as employee personal details, tax information or historical data) and when? • What payroll rules need to be implemented? What pay codes are needed and what are their applicable rules? Don't forget to consider rules specific to differ- ent provinces, groups of employ- ees, such as hourly versus sala- ried staff, or union employees. • Who will be processing and handling other employer payroll taxes such as workers' compen- sation or employer health tax? • What are your specific needs re- lating to time and attendance? Is there a system in place that you wish to continue using or do you need a different or better solu- tion? How will it be rolled out to existing staff? For larger groups, consider a phased rollout. • What is the notification period required by the existing payroll service provider? What are the processes for "off-boarding"? • How will parallel testing be managed to ensure a smooth transition? • How will the training and rollout of the new system be managed? Another big consideration is when to actually make the change. One popular date is to pick Jan. 1. Alternatively, you might want to pick another prominent date in the year such as the fiscal year- end or the beginning or end of a quarter. In making a transition using a Jan. 1 date, there are some factors to consider: • is date is easier for employees to understand. • It can be cleaner and simpler. • Year-to-date employee and em- ployer payroll source deductions don't need to be carried over to the new provider. • Current year earnings, deduc- tions and benefits values don't need to be considered by the new provider for T4/RL1 purposes which, in turn, means less work to prepare data. However, if an employer's fiscal year-end also coincides with Dec. 31, key people at the organization, such as accounting staff, may al- ready have a heavy workload at this time. Many internal employ- ees may have scheduled vacation time around the Christmas and new year period, so resources may be stretched and they might not be able to assist with the transition and data preparation required. If a company's fiscal year-end occurs on a date other than Jan. 1, this can be an option to con- sider for the change. is transi- tion time tends to be preferred by accountants; in general, accoun- tants like to make major vendor ser- vice changes at these dates due to the impact on es- tablished budgets. However, depend- ing on the complexity of the business, it might make sense to choose anoth- er date option such as the begin- ning of a new quarter. One thing to make clear is what the effective date of the change will be, and it is important to con- sider the different dates, pay peri- od start date, pay period end date and paycheque date. It's also rec- ommended to provide very spe- cific information to employees, including the pay period start/ end/cheque dates for the last pay under the previous provider, and the pay period start/end/cheque dates for the new provider, so there is no ambiguity. One of the biggest advantages to a mid-year transition is there will be time to make adjustments or amendments to employees' pay, automated calculations or processes prior to year-end reporting. By splitting the different pay- roll functions into manageable portions throughout a year, espe- cially for more complicated pay- rolls, a phased approach can also be an option. An employer may not need to change all aspects of payroll at exactly the same time. It is important when planning the transition to give consider- ation to structuring the change in stages. For example, split the functions into five phases: data collection/human resources in- formation system (HRIS), paral- lel testing, time and attendance, rollout, and reporting. And once you have implement- ed a new provider, it's important to schedule a followup meeting to ensure your goals have been achieved and to discuss what, if anything, in the process needs to be tweaked or changed. Deborah Boksteyn is the corporate ser- vices director and Ashley Unger is the payroll team lead at PEO Canada in Calgary, which provides comprehen- sive payroll, benefits and HR services to employers across Canada. For more information, visit www.peocanada. com. PAYROLL E-T4s, e-RL-1s promise efficiencies Budget change expected to see employers save over $100 million annually By Rachel De Grâce T he 2017 federal budget contained some happy news for payroll and hu- man resources professionals: Employers are now allowed to distribute T4s electronically to employees without having to obtain express consent from the relevant employee in advance. Currently, issuers of information returns are required to provide two copies of the relevant por- tion of the return to the taxpayer, either by sending the return to his last known address or delivering it to him. ese copies may be sent electronically only if the taxpayer gives express consent in advance. e change announced in the budget is expected to improve the efficiency and effectiveness of payroll administration. "E-T4s are more secure and this change will save employers over $100 million annually… be- cause the cost of administering a paper T4 is $5 per slip and over 20 million slips are never used," says Patrick Culhane, president of the Canadian Payroll Association. e association has been ad- vocating for the change in legis- lation since 2008 and in 2009, it co-developed a pilot project to enable some employers to vol- untarily submit e-T4s to some employees. e project required that employees had confidential access to view or print their T4s. e CPA then advocated that all employers should benefit from the same electronic efficiencies because such modernization would reduce the paper and cost burden for employers. e e-T4 success resulted in the Quebec government moving forward with electronic Relevé 1s (e-RL-1s) as a harmonization measure with the federal govern- ment. Electronic RL-1s will save employers an additional $30 mil- lion annually. Next logical evolution Eighty-four per cent of Canadi- ans file their personal tax returns electronically with the Canada Revenue Agency (CRA). Canada's 1.5 million employers annually pay more than $928 bil- lion in wages and taxable benefits, $313 billion in payroll remittances (including personal income tax, Canada Pension Plan and em- ployment insurance (EI) contri- butions) to federal and provincial governments, and $177 billion in health and retirement benefits. They also create, print and distribute more than 26 million T4s, nine million T4As and seven million RL-1s to comply with the current paper-based tax admin- istrative processes. ese payroll remittances represent more than 60 per cent of federal government revenues and are significantly more than corporate and con- sumption taxes combined. But 95 per cent of Canadian workers prefer to receive T4s electronically or are neutral, while one-third of employers indicated they already provide e-T4s to em- ployees, according to a CPA sur- vey of 5,600 employees in 2016. Electronic T4s are more secure than paper T4s and are the next logical extension of technology after electronic funds transfers (used by 97 per cent of employ- ers) and electronic pay statements (used by 80 per cent of employers). Impact on payroll Budget 2017 said the Income Tax Act and Regulations will be amended so an employer can pro- vide a T4 as a single document in an electronic format unless: •the employee specifically requests her T4 be provided in print •the employee cannot reasonably be expected to have access to the T4 in electronic format •the employee is non-active. e criteria regarding privacy and access issues for electronic slips was released by the govern- ment in May and is consistent with those used in the pilot. For employers switching to the new format, HR should commu- nicate this change to employees and provide a detailed explana- tion of how to access their T4 or RL-1 information electronically. Printed copies must be available upon employee request, and to employees who are no longer ac- tive. HR and payroll staff can also provide the finance department with projected savings, based on the cost of paper slips that will no longer be needed. Ultimately, the ability to deliver e-T4s and e-RL-1s to employees as the standard delivery method benefits employers and employ- ees — at no additional cost to the government. It will create huge paper and costs savings for em- ployers, helping them to reduce their carbon footprint. Employ- ees will have ongoing records of their electronic T4s and can rest assured the delivery of their tax slips will be safe, secure and convenient. Rachel De Grâce is the Toronto-based manager of advocacy and legislative content at the Canadian Payroll As- sociation. For more information, visit www.payroll.ca. Credit: Lorelyn Medina (Shutterstock) Ninety-five per cent of Canadian workers prefer to receive T4s electronically or are neutral about it.

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