Pensionable earnings (CPP)

A buyer meets pensionable earnings when setting up payroll for the people who come with the business. The Canada Revenue Agency (CRA) says an employer must generally deduct CPP contributions from salary, wages or other remuneration, commissions, bonuses, most taxable benefits, honorariums and certain tips and gratuities. The Canada Pension Plan Act ties the idea to pensionable employment, which it defines by reference to subsection 6(1). See how to handle payroll on closing day.

What to check or ask

• Which pay items the seller treated as pensionable, including bonuses and taxable benefits, and whether they match the CRA’s list.
• Whether any employee’s province of employment is Quebec. The CRA says Quebec Pension Plan contributions are deducted instead of CPP for those employees.
• Which business number will run payroll after closing. The CRA says a new employer deducts CPP contributions without taking into account what a previous employer paid in the year, but under subsection 9(2) of the Canada Pension Plan Act a successor employer that acquires all or part of the former employer’s business may take the former employer’s amounts for the year into account.

The contributions themselves are covered in CPP contributions.