In payroll, everything is about dates. Of course, not dates, as in couples or fruit, but dates as in 24 hour time periods.
There are two basic types of dates used in payroll: dates used to define employee demographics and dates used to mark payroll transactions.
The two most important demographic dates are the employee birthdate and the hire date.
Most HR and payroll staff believe that providing the birthdate is mandatory. However, there are only two statutory grounds on which employers have the right to insist that employees provide their date of birth. Where an employee’s age might be in question (under 18, 65 to 70 or 70 and over), employers have the right to know an employee’s birthdate in order to determine if the employment is CPP (or QPP) pensionable. Similarly, if an employee is claiming the credit on Line 3 of the TD1, the Age Amount, then employers have a right to know the employee’s birthdate. By contrast, where employee benefits are age specific, the sign-up sheet should contain an explicit statement that birthdates are mandatory, as part of the agreement under which the benefits are provided.
The hire date is the date that marks the formal start of an employment relationship. This most often is the day an employee begins performing services, but they are not necessarily the same. Where they differ, it’s the start of actual work that’s reported in Block 10 on the Record of Employment. Similarly, an employee may have a series of separate periods of employment with the same employer. In this situation, the hire date is the date the person last started work. However, the employer may also need to track the original hire date. This date is usually described as the seniority date, though there may be several seniority dates for separate pension, benefit or union membership purposes.
While it’s the last hire date that is usually reported in Block 10 on the Record of Employment, this isn’t always the case. For example, the hire date itself won’t change just because an employee was off on temporary lay-off. In other words, the hire date may be different than the date of the last return to work from a lay-off or leave of absence. If there are inactive periods within a single period of employment, what’s reported in Block 10 on the ROE is the first day back at work, after any previously issued ROE.
In payroll systems, there may be only two fields to describe the above: one field for the hire date and another field for a seniority date. By contrast, modern HRIS systems mark multiple status records for an employee, using what are termed effective, start/stop or first/last dates. For example, an employee may have 3 separate records within an HRIS system to reflect an initial hire, a short-term lay-off and a return to work. In such systems, the hire date is usually the start date on the first such record and the termination date is the stop date on the last such record, for the period of employment concerned.
There are two different types of dates that mark payroll transactions: the dates used to define pay periods and the actual timesheet or transaction date.
Pay periods are defined by the following dates:
- The first calendar day included in the pay period;
- The last calendar day included in the pay period; and
- The pay date for that pay period.
By contrast, earnings, deductions and benefits are marked by a single transaction date, even if the transaction represents the entire pay period. For example, a salary for the first semi-monthly pay period in June would normally show June 15 as the transaction date, even that wasn’t a regular working day.
The term allocation is used to describe how individual payroll transactions are connected or assigned to pay periods. Normally, there are two different ways that individual payroll transactions are allocated to pay periods: on an accrual versus a cash basis.
“Cash basis” means that for most purposes, a payroll transaction is recognized in the pay period in which it is paid. For example, banked overtime, included in the pay for a bi-weekly pay period, paid on Thursday, April 25, is allocated on a cash basis to that pay period. For this purpose, it does not matter if the related overtime hours had been worked in January.
“Accrual basis” means that regular wages, earned on May 6, but only paid in June, are allocated to the pay period in which the May work was performed. For example, this could have been a weekly pay period, running from Sunday, May 5, to Saturday, May 11, 2013, inclusive.
For payroll purposes, individual payroll transactions may be allocated on an accrual basis for some purposes and on a cash basis for others. For example, some employers may use the accrual basis for allocating payroll costs to the General Ledger, while T4s are always prepared on a cash basis.
Alan McEwen is a Vancouver Island-based HRIS/Payroll consultant and freelance writer with over 20 years’ experience in all aspects of the industry. He can be reached at email@example.com, (250) 228-5280 or visit www.alanrmcewen.com for more information. This article was first posted to Canadian HR Reporter and Canadian Payroll Reporter on May 7, 2013.