Question

An employee earns $55,000 per year and is paid on a semi- monthly pay schedule. The employee enjoys the benefit of a company paid cell phone for personal use (cost is $150 per month) and receives 6% vacation pay on each payment. This pay cycle included 15 hours of approved overtime worked over the normal 40 hour work week and a reimbursement for travel expenses in the amount of $434.20. The employee contributes 5% of their regular wages to a Registered Retirement Savings Plan each pay cycle. 1. Calculate the Gross Earnings. 2. Calculate the Pensionable Earnings. 3. Calculate the Insurable Earnings. 4. Gross Taxable Earnings 5. Net Taxable Earnings

Answer 1

1. Gross Earnings :

Total earnings in a year                               $ 55,000.00

Add: Reimbursement of travel expenses    $      434.20

Add: Cell phone benefit (150x12) $   1,800.00

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Total                                                             $ 57,234.20

                                                                --------------------

Number of payrolls per year = 2 x 12 = 24

Gross Earnings = Annual salary ÷ No. of payrolls

= 57,234.20 ÷ 24

= $ 2384.75

2. Pensionable Earnings:

It will be the sum of Gross pay and taxable benefits.

Pensionable Earnings = $ 55,000 + $ 1,800

  = $ 56,800.

3. Insurable Earnings:

Total earnings in a year                               $ 55,000.00

Add: Reimbursement of travel expenses    $      434.20

Add: Cell phone benefit (150 x 12) $   1,800.00

Add: Vacation pay (6% x 55,000)              $    3,300.00

                                                                    ------------------

Insurable Earnings $ 60,534.20

                                                                   -------------------

4. Gross Taxable Earnings:

It will be the same amount as Insurable Earnings = $ 60,534.20           

5. Net Taxable Earnings:

Gross Taxable Earnings                                   = $ 60,534.20

Less: Contribution to RRSP ( 5% x 40,000)     = $ 2,000.00

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$ 58,534.20

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