0

# Calculate share incentives on a percentage of Net pay, then Tax the Bonus

Sep 25, 2017 at 02:27 PM

61

Former Member

Hi Gurus,

We are looking at Providing Share incentive when Employee elected to purchase shares with their Bonus. They would get 25% Share Incentive on the NET of their Bonus. Then we need to tax the Incentive share paid.

How should be go about to do that?

Thanks!

Rémi Corriveau Sep 25, 2017 at 04:48 PM
0

Do you have only one Bonus WT or many? Will the Share Incentive be applicable to all Bonus WT?

How is the Bonus paid? Through IT0015 on a Regular Pay or an Off-Cycle Pay?

What will be the "trigger" to tell the system that an employee has elected to purchase Shares with his/her Bonus?

If you were to create a Share Incentive WT for IT0015 that allows only a Number/Unit, and then create an IT0015 for an employee that has elected to purchase Shares, you could create a pcr to process the Bonus WT and put it's Amount into a Temporary Variable (through Operation ADDWT&XXXX), and an other pcr to process the IT0015 trigger,replace the NUMber by 25 (or a Constant from V_T511K with that value), replace the AMounT by the Temporary Variable, multiply the Number by the Amount (MULTI NAA) and divide the resulting Amount by 100.

As for Taxes, since I presume that it would not be a Periodic Payment, I would assume that for the Share Incentive WT, you would check Cumulator 03 in V_512W_D.

Share
Former Member Sep 28, 2017 at 07:41 PM
0

Hi Rémi,

- One Bonus Wage type paid using IT0267 during one OFF-CYCLE Bonus Run

- As for the trigger, let's assume the WT entered in IT0267 is the trigger, meaning it spits out incentives shares not matter what.

The steps in payroll I am expected to deliver are:

1. Process Bonus Wage type and Get Net (after tax) proceed of Bonus

2. Based on the Net (after tax) of the Bonus, calculate 25% of Incentive Shares

3. Tax Incentive Shares

4. Net pay for the bonus run will be = Bonus Net + Incentive Share Net

Makes sense?

Thanks!

Show 2 Share

Bonjour Benoit,

We don't use IT0267, so I've never worked with it, but you mention that you have only one Bonus WT, so you will either have to find an other field on IT0267 to identify the "Employee elected to purchase shares with their Bonus" from those who do not, because you do not want to calculate (and deduct) Income Tax on the Incentive Shares for employees who elect not to purchase shares. Can a field on IT0267 be used for that purpose and be queried in Payroll?

To get the After Tax value of the Bonus should be fairly simple if that is the only payment in your Bonus Payroll Run, so it should be pretty easy to calculate the Incentive Shares. The problem I see is that this calculation is done after the calculation of the net payment so it may be a little tricky to calculate Income Tax on it (and you better also check it those Incentive Shares are subject to CPP, EI and Health Tax).

Calculating the Incentive Shares on the Net value of the Bonus Payment may not be equitable to all since a person with higher Tax Credits (Federal & Provincial) will get more Incentives Shares per Bonus \$ than someone with the Minimum Tax Credits, but you may not have any influence on that.

The easiest way to achieve what you require would be to create a pcr to calculate the Aproximative Value of the After Tax Bonus Payment, and insert that pcr in sub-schema KDD0 so that both the Bonus Payment and the Incentive Shares Payment would exist before sub-schema KAN0 is called. Note that you will still need a trigger to identify the employees who have elected to purchase Shares with their Bonus and those who have not, since those who have need to be taxed on both Amounts and an equivalent deduction to be taken (for the purchase of Shares), while those who have not be only taxed on the Bonus.

Former Member

Bonjour Rémi,

Thank you very much for your help. I was in denial I guess. I did not want to get to this solution. I will keep you posted on how we went about to achieve this in the end.

Thanks again!

Former Member Nov 10, 2017 at 05:25 PM
0

Just an update on this, we had the wrong requirements. The Incentive share are getting reported to CRA by Solium. So the we do not have to calculate tax on our payroll system.

We only have to generate the Incentive Share based on the Net proceed of the Bonus, which is not an issue. Thanks again for your help Rémi.

Share