National Payroll Institute PF1 - Payroll Fundamentals 1Exam

On the ROE, separation payments are reported in Block 17. Service Canada explains that Block 17C – Other monies is used to record “any other payments or benefits…paid…because of the separation,” whether or not they are insurable.

The ROE Guide specifically lists “Severance pay” as a type of separation money to enter in Block 17C (“Enter ‘Severance pay’ and the amount”).

Crucially, Block 15B and Block 15C are for insurable earnings totals/by pay period. The ROE Guide notes that some amounts reported in Block 17 (like vacation pay) are insurable and must be added into Blocks 15B/15C; however, retirement leave credits/retiring allowances (a form of severance-type payment) are not insurable and are not added to Blocks 15B/15C even though they are recorded in Block 17C.

So, severance is reported in Block 17C only.

Anne has both an automobile standby charge (because the car was made available) and an operating expense benefit (because the employer paid operating costs and she did not reimburse).

1) Standby charge (leased auto): Lease cost for standby charge purposes includes GST and excludes insurance.

Monthly lease incl. GST = $198.60 × 1.05 = $208.53.

Standby charge per month = 2/3 × $208.53 = $139.02.

Days available ÷ 30 = 365 ÷ 30 = 12.17, rounded to 12.

Annual standby charge = $139.02 × 12 = $1,668.24.

2) Operating expense benefit: Personal km = 34,134 − 15,805 = 18,329.

Optional method requires the automobile be used primarily (>50%) for business; Anne’s business use is under 50%, so the optional method does not apply and the fixed rate must be used.

Fixed rate (2026) = $0.34/km → 18,329 × 0.34 = $6,231.86.

Total taxable benefit = $1,668.24 + $6,231.86 = $7,900.10.

A hiring authorization package/checklist typically ensures the organization collects the documents needed to onboard the employee and set them up correctly in payroll and HR systems. This often includes items like an offer letter, signed policies, banking details for direct deposit, emergency contacts, and required HR/legal acknowledgements. A confidentiality agreement is a common onboarding document because it protects the employer’s confidential information and can be required regardless of payroll deductions.

The other options are not good examples of “required information” for all new hires. Employees do not give “consent” for statutory deductions—deductions like CPP, EI, and income tax withholding are required by law and employers must withhold them when applicable. A “clearance certificate” is not a standard universal onboarding requirement for payroll in Canada. A T1213 is only completed in special situations where an employee requests CRA authorization to reduce tax withheld at source; it is not something most new hires must provide.

For CRA automobile benefit purposes (standby charge on an employer-owned automobile), the “cost” used is the capital cost, which includes more than just the sticker price. CRA guidance states the cost includes the trade-in amount (if applicable), additions, and GST/HST and PST as part of the cost base used in the standby charge calculation.

Option D is the best match because it includes vehicle options/accessories, sales taxes, and additions that add to depreciation value. Importantly, CRA also notes that certain specialized equipment added to meet the requirements of a disabled person or employment (examples include heavy-duty suspension and power winches) is not considered part of the automobile’s cost for standby charge purposes. This directly rules out options A and C, since they treat specialized equipment as part of capital cost. Option B is incorrect because CRA includes sales taxes (GST/HST and PST) in the cost base.

A retiring allowance is treated as a lump-sum payment for payroll withholding purposes. When part of a retiring allowance is transferred directly to an RRSP/RPP, CRA guidance indicates you do not withhold income tax on the transferred amount (up to the employee’s available limit), because it is not paid to the employee in cash.

Step 1: Determine the portion paid directly to the employee (non-eligible portion):

$25,000 − $15,000 transferred to RRSP = $10,000 paid/remaining.

Step 2: Apply CRA lump-sum withholding rates (outside Quebec):

For total lump-sum payments $5,001 to $15,000, the withholding rate is 20%.

Step 3: Calculate tax to withhold on $10,000:

$10,000 × 20% = $2,000.00.

So the correct option is B ($2,000.00).

Because the plan is for the president only, it is a non-group insurance plan (a plan offered to an individual employee). The CRA states that when an employer pays premiums or makes contributions to a non-group insurance plan, the amounts paid are a taxable benefit. The CRA explicitly includes sickness or accident, disability, and income maintenance plans in this non-group category.

This benefit is generally treated as a non-cash taxable benefit because the employer is paying the premium directly to the insurer (the employee receives the coverage, not cash). CRA guidance distinguishes cash benefits (paid as money, reimbursements, or allowances) from benefits provided in a manner other than cash.

Payroll must therefore include the value of the employer-paid premium in the employee’s taxable income and report it on the appropriate slip (commonly T4 code 40 for current employees, as noted in CRA instructions for insurance premiums).

Step 1 — Block 6

Bi-weekly

Step 2 — Block 8

435837159

Step 3 — Block 10

September 19, 2007 → 19092007

Step 4 — Block 11

October 28, 2019 → 28102019

Step 5 — Block 12

October 28, 2019 → 28102019

Step 6 — Block 15A (Total insurable hours)

80.00 × 27 = 2160

Block 15A = 2160

Step 7 — Block 15B (Total insurable earnings)

$1,884.62 × 27 = $50,884.74

Block 15B = 50,884.74

Step 8 — Block 17A (Vacation pay)

$52,050.00 × 6% = $3,123.00

Block 17A = 3,123.00

Step 9 — Block 17C (Pay in lieu of notice)

Weekly earnings = $1,884.62 ÷ 2 = $942.31

Pay in lieu = $942.31 × 8 = $7,538.48

Block 17C (Pay in lieu of notice) = 7,538.48

Step 10 — Block 17C (Severance)

Severance = $942.31 × 10 = $9,423.10

Block 17C (Severance) = 9,423.10

Because Elodie is subject to QPP, her pensionable earnings for the pay period include both salary and commissions (both are pensionable employment earnings, assuming no exemptions apply). First, determine total pensionable earnings for the bi-weekly pay:

$1,000.00 + $4,300.00 = $5,300.00.

For 2026, Revenu Québec shows the QPP basic exemption is $3,500 annually and the (employee) QPP contribution rate on earnings up to the maximum pensionable earnings is 6.30%.

Payroll applies the exemption per pay period. For bi-weekly pay (26 pay periods):

$3,500 ÷ 26 = $134.62 (rounded to cents).

Pensionable earnings subject to QPP this pay:

$5,300.00 − $134.62 = $5,165.38.

QPP contribution:

$5,165.38 × 6.30% = $5,165.38 × 0.063 = $325.41894, which rounds to $325.42.

Net pay (often called “take-home pay”) is what the employee actually receives after all withholdings and other deductions are taken from their earnings. In Canadian payroll practice, the starting point is gross earnings (regular wages plus any taxable amounts that must be included in income). From gross earnings, payroll subtracts total deductions, which include statutory deductions (such as CPP/QPP, EI, and income tax) and any authorized non-statutory deductions (for example, union dues, benefits premiums, pension contributions, or garnishments where applicable). This is why the most accurate generic formula is gross earnings − total deductions. CRA payroll guidance reflects this structure by requiring employers to calculate gross pay, determine the correct statutory deductions, and then arrive at the amount paid to the employee after those deductions are withheld and remitted.

Options C and D are incomplete or incorrect because “total tax” is only one part of deductions, and “net taxable income” is not a payroll calculation base in the way the question frames it. Option A is also incorrect because “pensionable earnings” is only relevant to CPP/QPP calculations, not the overall net pay formula.

In Quebec, employees must complete a Quebec-specific source deductions form so the employer can calculate Québec income tax to withhold. Revenu Québec identifies Form TP-1015.3-V (Source Deductions Return) as the form employees complete and provide to their employer/payer for this purpose. It is part of the onboarding/payroll setup process in Quebec and is used to determine personal tax credits and any additional withholding instructions for Québec provincial income tax.

The other options are not the standard Quebec source deductions return for new employees: T1213 is a CRA form used to request a reduction in tax deductions at source (federal), TD1-AB is a provincial TD1 for Alberta (not Quebec), and T2222 is not the Quebec source deductions return. From a payroll communication standpoint, the employer should request both the applicable federal TD1 and the Quebec TP-1015.3-V, then retain them on file to support accurate withholding calculations.