An employee earns commission income in addition to regular salary. How are commissions generally treated for payroll purposes?

Commissions are a form of remuneration paid to employees, typically based on sales performance. Under the Income Tax Act, commissions are considered employment income and are fully taxable. They are subject to all statutory payroll deductions, including income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums. Employers must include commission payments in the employee's total earnings when calculating these deductions and report them on the T4 slip at year-end.

A. Commissions are earned income for services rendered, not a repayment of expenses, and are therefore taxable.

B. Commissions are included in the calculation of pensionable earnings for CPP purposes and insurable earnings for EI.

D. Retiring allowances are payments related to the termination of employment, not regular earnings like commissions.

1. Canada Revenue Agency. (2023). T4001 Employers' Guide - Payroll Deductions and Remittances. Chapter 2, "Special payments," Section "Bonuses, retroactive pay increases or irregular amounts." Commissions are treated as irregular payments subject to deductions.

2. Income Tax Act, R.S.C., 1985, c. 1 (5th Supp.), s. 5(1), defines salary, wages, and other remuneration, including commissions, as income from an office or employment.