Acclaim - What is PIER Review?

Problem:

Revenue Canada has requested a PIER review of our payroll. What is this and why are they requesting it?

Cause:

A PIER (Pensionable and Insurable Earnings) Review is conducted by Canada Customs and Revenue Agency when they feel that you have either over deducted or under deducted C.P.P. Q.P.P. ( Quebec only) or E.I. You are sent a sheet showing the discrepancies and are charged the difference plus a fine for making a mistake (Like they never make mistakes). You should study this report carefully and try to determine why the pier review happened.

Solution:

Listed below are some of the reasons that PIER Reviews happen. 

1. You pay biweekly, semi monthly or monthly. The employee is hired in the second week of the bi-weekly pay or second half of the bi-monthly, or starts in the middle of the month.   When the pay is calculated the employee receives the biweekly, bi-monthly or monthly exemption of CPP instead of the correct exemption for the time worked. For example Paymate has no way of knowing that the employee was hired in the second week of the bi-weekly pay. If this happens in your company then you should consider doing the first pay for this employee manually.   You can run the pay through Paymate and then verify how much the CPP deduction should be for the time period worked.
   
   Employee is paid $1000.00 every week.
   This is the employee’s first pay.
   Example Gross is $1000.00 for two week period
   

   Tax	$250.00
   EI	$75.00
   CPP	$60.00
   NET	$615.00

   This is for a normal biweekly pay, CCRA wants you to calculate it like this. 
   Calculate everything as a weekly pay and then you can go to biweekly 
   Calculated as a weekly pay it would look like this.
   

   GROSS	$1000.00
   TAX	$265.00
   EI	$75.00
   CPP	$61.25
   NET	$598.75

   The differences are of course in the Income Tax and in the CPP, EI remains the same because it is calculated on a straight dollar amount with no exemptions built in. This would explain why you received a pier review for $1.25.
   NOTE: Even if you use the Revenue Canada Taxation Guide and pay the employee using the biweekly tables it is considered wrong. Because they only worked one week and they should not get the two week exemption for CPP.
   
   

2. The most common cause of PIER Reviews are the adjusting of the employees TAX CPP and EI. This will usually occur when the employee is receiving vacation pay or receives a bonus. The thought behind this is to save the employee some tax so the payroll person adjusts the employee’s TAX CPP & EI down. You may adjust the taxes down if you want but under no circumstances should you ever adjust CPP or EI. When you adjust CPP or EI you cause the program to stop calculating CPP or EI earlier then it should.
   
   

3. Another cause of PIER Reviews occurs when a payroll category is set up and it is marked as not subject to CPP and/or EI. You should check with CCRA to make sure that the category you set up is marked correctly. A good rule of thumb is that if you are not sure, mark it as subject to CPP & EI. Follow these suggestions and they may save you from PIER Reviews and fines.
   
   

4. Under no circumstance should you ever adjust the CPP or EI deductions. You can adjust the Income Tax but never CPP or EI. To save you from making any adjustments at all if you are using Paymate for Windows simply go to Setup/Preferences and uncheck the box that says Base deductions on the totals for the pay period. By un-checking this box, each time you have to run a separate payroll such as vacation pay or a bonus run it will treat the second timesheet as a totally separate run. That is it will not blend the two payrolls together to get a total for Tax CPP & EI.