1.2 Key Terms

business number (BN): A unique nine-digit identifier that must be used when communicating with the CRA about any CRA program accounts, including payroll accounts.

Canada Revenue Agency (CRA): The Canadian government agency that collects taxes from individuals and businesses. Employers with one or more employees must register for a payroll account with the CRA.

collective agreement: The agreement between a union representing workers and an employer that sets out working conditions.

deduction: An amount subtracted from an employee’s gross pay as required by law, employer policies, or an agreement.

employee: Someone who is paid by an individual or organization to work and who is not an independent contractor. There is a legal test to determine whether a worker is an employee or an independent contractor. All employees must be included in payroll.

employment contract: The agreement between a non-unionized worker and an employer and that sets out working conditions.

employer payroll expenses: Payments, premiums, and contributions the employer must remit to the Canada Revenue Agency (CRA) or other government agencies.

employer: An organization or individual that has hired one or more employees.

gross pay: The total amount to be paid to an employee before taxes and other deductions.

human resources: The business function responsible for hiring, onboarding, training, maintaining personnel records, administering payroll, and terminating the employment of workers.

jurisdiction: An area of legal authority or application of law. A jurisdiction can be a province (e.g., Alberta), a country (e.g., Canada), or a group of countries with shared laws (e.g., the European Union).

net pay: The total amount to be paid to an employee after taxes and other deductions.

organization: A group of two or more individuals working towards a common purpose or purposes. Organizations include businesses (corporations, partnerships, sole proprietorships), non-profits, unions, associations, and charities.

payroll: The process of administering employees’ pay, including making the appropriate deductions, withholdings, and remittances. Payroll can also refer to an employer’s record of all employees, their salaries or wages, and any deductions.

record of employment (ROE): The form, electronic or paper, issued by an employer to an employee that documents the employee’s insurable earnings when the employee stops working and experiences an interruption of earnings.

remittance: The amounts sent by the employer to an appropriate recipient, including withholdings and employer payroll expenses. For example, payroll deducts and withholds taxes from an employee’s gross pay and remits this amount to the Canada Revenue Agency (CRA) .

Social Insurance Number (SIN): A number issued by the Government of Canada to individuals who are residents of Canada, including temporary residents. A SIN is required to work in Canada and to access various government programs and benefits.

T4: Also known as a Statement of Remuneration Paid, a T4 is a record that outlines the total amount of money an employer has paid to an employee in a given calendar year.

union: A workers’ organization certified by law that bargains collectively for members’ working conditions, including rate of pay.

withholding: The amounts, usually of income taxes, Employment Insurance (EI), and Canada Pension Plan (CPP) deducted by payroll from an employee’s gross pay on the employee’s behalf, as required by law, to be remitted to the government.