Vacation Pay and Vacation Time Explained

Employers and employees often experience confusion when discussing vacation pay and vacation time. While there is some flexibility for employers, there are legislated rules that need to be followed and policies clearly communicated.

With some minor exceptions such as farmers or salespeople whose income is based solely on commission, ALL employees start earning vacation pay on the first day of employment.

In Manitoba, the minimum vacation pay earned by employees is 4% of gross wages from their first day of employment, and increases to 6% after completing five years of employment with the same employer. For a full time employee, 4% vacation pay equates to two weeks of working time and 6% equates to three weeks. Employers may choose to offer higher rates.

Gross wages include all regular wages (including hours paid as commission, salary, hourly, bonuses tied to productivity, and any other wages paid as compensation for the regular hours of work) and any general holiday pay. Overtime wages, wages in lieu of notice, and the previous year’s vacation wages are not included in the calculation of gross wages.

Vacation pay can either be paid to employees on each paycheque, or alternatively, accrued to an account on behalf of the employee. The first method is particularly suited to part-time employees, whereas full-time employees tend to prefer to have their vacation pay “saved” for them. The method of payment is selected by the employer.

When vacation pay is paid on each paycheque, employees are still entitled to take time off as vacation, however, they would not receive additional vacation pay while taking vacation time.

When vacation pay is accrued to an account on behalf of the employer, the employee can “draw” on the account when they take vacation time so that there isn’t an interruption in earnings. Vacation pay must be paid no later than the last day of work before vacation time starts and within 10 months of earning it. If an employee is terminated, the vacation pay “account” must be paid in full to the employee. Employers cannot use vacation in lieu of a notice period when terminating employment.

Employees are eligible to take vacation time after they have completed one year of work and must either take their vacation within 10 months of it being earned or the vacation account paid out. Employees and their employers can agree on when vacation will be taken.

In the event that an employer and employee cannot agree on when the vacation will be taken, the employer sets the vacation date. The employer must give the employee 15 days’ notice before the vacation is to be taken and cannot divide the vacation into periods shorter than one week. Employers can choose to schedule their employees’ vacations as part of an annual shut down.

Some employers allow their employees to take vacation time in the following year if it is not used. Employers should take care not to create a situation where an employee has a significant amount of vacation pay accrued that would then create an extended period of absence from employment; workloads must still be managed.

If you would like to discuss vacation time or vacation pay or need further clarification, contact us at Five Star Accounting. If you would like to know more about our accounting and bookkeeping services, click here.

Karin Sparrow Award

Karrin Sparrow Plaque

Sadly, on October 24th, 2014, one of our colleagues Karin Sparrow passed away after a courageous battle with cancer.

Karin was a senior accountant with Five Star from 2011 until her passing. She was a terrific individual who represented the Five Star core values at work and in the community as good as anyone.

As a result, Five Star Accounting has created the Karin Sparrow Award which will be presented annually in May to an employee deemed to best represent the Five Star Core Values:

  • Knowledgeable
  • Hardworking/Problem Solver/Takes Initiative
  • Accountable and Dedicated to Five Star Accounting
  • Honest and demonstrates integrity
  • Accurate and efficient

A plaque defining the award and showing past recipients will be displayed in our reception area. As well, the recipient will receive a cash award and a crystal that may be proudly displayed on their desk for one year.

Karrin Sparrow Crystal

Please assist us in congratulating Vivian Sigurdson for being selected as the first recipient of the Karin Sparrow Award.

We look for input from staff and clients. If one of
Five Star Accounting’s employees has performed above and beyond for you, please do not hesitate to let us know! You may do so, by completing the
Five Star Employee Recommendation form.

Tips from an accountant, how to grow your business

Grow your businessManaging your finances is one of the most crucial aspects to running your small business effectively. Without a steady stream of cash flow, your business may not grow as you hope and may even end up in bankruptcy. Keep track of your finances and follow these tips to help make sure your business is profitable.

Get your customers to spend more

The most important factor you need to consider when thinking about increasing sales is your customers. Without customers your business would not be able to run. How can you get new customers, keep current ones and increase sales through each transaction? Determine what products and services you offer will get new customers in the door. Then review their needs to see where you might be able to offer more to increase revenues per customer.
You should also think about creative ways to market your products and services to make sure people are aware of what you do and that your offer stands out from the competition.
Remember, your reputation depends on what customers think about you. Make sure you are achieving a high level of customer service to each one of your customers and clients.

Receivables

For quick payment on invoices, consider asking your clients to preauthorize cheques or keep a credit card on file. This way banks can draw against their accounts at timed intervals. As a thank you, you may want to offer discounts or incentives for clients that pay their bills within a specified time period.

Outsourcing

If you are currently managing your own finances, you should consider outsourcing your accounting and bookkeeping. Hiring a professional will ensure that you avoid any mistakes that can happen when filing taxes at the end of the year. Also, any tax breaks that you may qualify for will not be missed. Late filing penalties will not be incurred.

Take control

The success of your business depends on your financial situation. If you would like to discuss how we can help take control of your business finances and achieve your financial goals contact Five Star Accounting today. We will set you free from your accounting and bookkeeping necessities allowing you more time to do what you do best and grow!

By the books

Five Star Accounting sets you free so you can grow

By Jennifer McFee

Ybonnie_kawkaou can count on Five Star Accounting Inc. to take care of your books while you take care of your business. Offering tailor-made solutions and services for several hundred clients, the homegrown business bases its approach on a five-star system: Team, Trust, Quality, Flexibility and Value.

With over 30 years of accounting experience, president and owner Bonnie Kawka initially founded a company called Hospitality Solutions in 2003, focusing mainly on accounting and bookkeeping services for the restaurant industry. Eight years later, the business rebranded as Five Star Accounting Inc., to better reflect their expanding and diverse customer base. Since then, it’s seen steady growth, with a mid-sized team who share Kawka’s passion for accounting and bookkeeping.

“We stand out because of our value, our systems and our processes,” Kawka says. “We’re very structured. We have a qualified staff. We have a thorough in-house training process as well. This is to ensure every staff member has an understanding of what is required to
properly take care of our clients.”

Accurate bookkeeping is essential to operating a healthy business, but it’s a task many entrepreneurs don’t enjoy. “I’m very passionate about accounting,” Kawka says. “I love it.”
Five Star Accounting Inc. focuses on three key components that simplify clients’ lives.

Read the entire article in Who’s Who, Manitoba Women in Business.

Five ways the 2015 federal budget positively affects small business

Small business ownerOur review of the 2015 Federal Budget, released on April 21, 2015, revealed the following five initiatives that provide opportunities for increased profitability in your business:

1. Reduction of the small business corporate tax rate from 11% to 9% over the next four years.
To ensure small corporations ($500,000 or less in sales) receive this benefit, these cuts will be guaranteed by law. Some examples of savings:

  • Net yearly taxable income of $30,000: $1,500 in tax reductions over four years
  • Net yearly taxable income of $500,000: $25,000 in tax reductions over four years

2. Significant reductions in credit card processing fees and new rules to ensure fairness in the payments industry.
Earlier this year, Visa and Mastercard promised significant reductions to merchant fees. Key changes were passed, ensuring that reductions will be passed along to small businesses, including the following:

  • Merchants will be able to opt out of their contracts if their payment processor raises rates or doesn’t pass on savings from Visa/MasterCard.
  • The entire code will now apply to mobile payments.
  • Payment processors can only auto-renew a contract for up to six months, enabling merchants to switch to more beneficial contracts.

3. Major changes at the Canada Revenue Agency, including less frequent tax remittances for new firms, a commitment to honour all written advice (including the CRA website) and a new CRA forum with CFIB.
Currently new businesses need to remit monthly for one year before becoming eligible to remit source deductions quarterly. Beginning in 2016 new employers with remittances under $1,000 per month will be eligible to remit quarterly provided they keep a perfect compliance record.

4. Confirmation of reductions
A new rate setting mechanism will be implemented in 2017, which is expected to result in a 21% reduction in the EI premium rate, from the current employee rate of $1.88 per $100 of earnings to $1.49 per $100 of earnings. Employer contributions would be reduced from $2.632 per $100 of earnings down to $2.086 per $100 of earnings.

5. Accelerated Capital Cost Allowance (CCA) for manufacturers extended for the next 10 years.
This is a write off used to encourage product-enhancing investment spending in the manufacturing sector that was first introduced in 2007 but due to expire in 2015.

For questions or clarification regarding these or any other portions of the recently released 2015 Federal Budget call your Five Star Senior Accountant today at (204) 927-7111!

Income tax returns for sole proprietorships and partnerships

Sole ProprietorshipAs part of your small business accounting, you are required to file the income tax return every year. Filing your sole proprietorship or partnership business income tax return in Canada is done on T1 income tax form. This is the same form used in filing personal income taxes. By completing and filing the form, you are declaring all your income, whether it is from a job or business.
You will need to gather all the papers that you need to start the process. They include:

  • The business number
  • Your social insurance number
  • Business and professional income guide from Canada revenue agency
  • Business records with totals for sales, business expenses and cost of goods sold.

Completing the form:

  1. Fill the first section, which is the identification section
  2. Fill form T2125: Statement of Business or Professional Activities. This will enable you to calculate the business income. This form is included with the income tax form.
  3. Get your business’s industry code from the appendix of Business and Professional Income Guide.
  4. Fill the income and expenses parts on form T2125. For a partnership, you should fill the sections of partner’s details and the section for claiming amounts deductible from your share of partnership income. The form contains information to assist in calculating business expenses. This includes charts on calculating the motor vehicle expenses to claim, sections for calculating capital cost allowance to claim and a section for calculating business- use -of -home expenses if your business is home based.
  5. On the section of Total Income on the T1 income tax return form, go to the subsection for self-employment income and fill in your gross or net business income, professional or commission income. Enter your other income such as employment income on the Total income section.
  6. Fill the rest of the T1 income tax return form.

Once the form is complete, double check for accuracy prior to filing. The income tax may be filed prior to June 15th, 2015 without penalty. Interest on unpaid taxes will accrue from April 30th, 2015.

Remember, we’re always here to assist you! Contact Five Star Accounting, Winnipeg’s leading accounting and bookkeeping firm.

Do You Know Your Accounting Policies and Procedures?

Do you know your businesses’ accounting policies and procedures?  Are they optimized for your specific type of business, and your operations individual needs?

If you were audited tomorrow, would your books stand up to Federal scrutiny?

Did you just break out in a cold sweat at the thought of a bunch of  “Revenooers” poring over your records, looking for inconsistencies?  If you did, it’s because you’re too busy running your business to spend your every waking moment fussing over your books.  Small businesses are the engine that drives the economy, but they are also the operations that are exposed to the greatest amount of risk.  As an entrepreneur, you are to be commended for your courage.  At Five Star Accounting, we completely understand the needs of small businesses in Winnipeg and Calgary.  We represent numerous small businesses in Winnipeg and Calgary.  We ourselves are a small business, with offices in (you guessed it) Winnipeg and Calgary.

Let our experience work for you.  We have the knowledge (kept current because we endeavor to be the best-educated accountants and bookkeepers you’ve ever met) and the experience to put your business finances in order.  We will help you set up a record keeping method that is easy to maintain, and that follows the best practices that we’ve established for all of our clients.  Once we’ve got you up and running, we’ll help you keep your accounting records up to date, so you can sleep comfortably at night knowing that your business’ books are completely in order.

We offer all the advantages of an in-house bookkeeper, without the added cost of another full-time employee.  For support with your accounting and bookkeeping needs, both in strategic planning and day-to-day support, contact Five Star Accounting, and experience our professional service and our personal touch.

Accepting Credit Cards Can Save You Money

Cash used to be king.

Today’s customer, however, rarely has more than a few dollars in his or her wallet.  Interac debit cards, as well as a wide variety of credit cards (most of them bearing the Visa or MasterCard logo) have replaced the wad of money that used to be in most Canadians’ billfolds.

Customers love the convenience the get when paying by plastic – it’s more secure than carrying around a week’s supply of cash, and all of their record keeping is done automatically – they can keep track of each and every purchase they make, down to the last penny.  If they’re careful consumers, the added convenience doesn’t cost them a penny.

As a small business, however, it does cost you.  Credit card companies and banks are offering convenience to their customers for free, and charging you a usage fee.  Many businesses hold out until they can no longer justify not accepting credit and debit cards, and then are pleasantly surprised when the finally do.  Here are some of the advantages of accepting credit and debit payments for your business:

  1. Increased revenue level.  Anytime you turn a customer away because you have a “cash only” policy, you’ll not only lose that single sale, but there’s a good chance they won’t be back.  Lost opportunities add up!
  2. Reduced collection costs.  If you extend credit to your customers, or you accept personal cheques, you will have a certain amount of delinquency.  Debit/Credit cards are authorized at the time of purchase, so you won’t be chasing people for money.
  3. Easy Recurrent Payments.  If you bill your customers periodically, setting up a pre-authorized payment plan will increase convenience for them, and make it easier to retain clients over the long haul.

In the 21st Century, debit and credit payment options aren’t going to go away anytime soon.  Accepting the forms of payment that your customers prefer is a must, even if the usage fees are a little daunting.

What Revenue Level Dictates Outsourcing?

When will your business be making enough money to justify outsourcing some of the things you don’t want to do, or don’t do as well as someone more qualified could?

Our answer, when it comes to accounting and bookkeeping, is right from the get-go.  And we don’t say that just because we’re accountants and want to get paid.  We have years of experience in the small business marketplace.  We’ve seen firsthand the advantages that a small business that’s financially informed has, and we’ve also had to do some serious clean up work when we’ve gotten that call too late in the game.

Professional accountants have knowledge and tools that can make every stage of business growth easier.  We can do financial projections that can be instrumental in creating the initial business plan, and we can help when it comes to convincing lenders that your plan is solid.

Accountants know how to deal with the government.  In the start-up phase, you’ll be providing all kinds of compliance documents, which can be confusing and time-consuming for the uninitiated.  We spend a great deal of time learning how to navigate the legal landscape surrounding small businesses, and can put this knowledge to work for you.

Once your business is up and running, accounting and bookkeeping services will keep your cash flow flowing, your payroll paid, and your finger on the financial pulse of your business.  And, since you’ve outsourced the work, your hands will be free to do the thing you set out to do in the first place – build your business.

At Five Star Accounting, we know what it’s like being a small business in Winnipeg.  Besides fitting into that category ourselves, we have many years of experience in the field.  We know that the economy needs small businesses. Wherever you are in your business trajectory, from initial concept to full-blown operation, you can count on Five Star Accounting to provide professional accounting and bookkeeping support.  It’s never too early to get the help of a professional accountant, but it can be too late.