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National Payroll Institute PF1 Exam Syllabus Topics:

SectionObjectives
Payroll Fundamentals and Compliance Framework- Payroll system overview in Canada
  • 1. Payroll process cycle (gross-to-net)
    • 2. Employer payroll obligations
      - Payroll legislation and regulatory bodies
      • 1. Canada Pension Plan (CPP) requirements
        • 2. Income Tax Act basics
          • 3. Employment Insurance (EI) rules
            Earnings, Deductions, and Taxation- Types of earnings
            • 1. Regular wages and salaries
              • 2. Overtime and special payments
                • 3. Taxable benefits
                  - Deductions and remittances
                  • 1. Statutory deductions
                    • 2. Employer remittance responsibilities
                      • 3. Voluntary deductions
                        Payroll Records and Compliance Reporting- Government reporting
                        • 1. Year-end reporting (T4 slips)
                          • 2. Remittance reporting processes
                            - Recordkeeping requirements
                            • 1. Employee payroll records
                              • 2. Retention requirements

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                                National Payroll Institute Payroll Fundamentals 1Exam Sample Questions (Q21-Q26):

                                NEW QUESTION # 21
                                An employee in Ontario was paid a $25,000.00 retiring allowance. The eligible portion was $15,000.00 and was transferred to the employee's Registered Retirement Savings Plan (RRSP) by the employer. Calculate the income tax on the non-eligible portion.

                                Answer: A

                                Explanation:
                                A retiring allowance is treated as a lump-sum payment for payroll withholding purposes. When part of a retiring allowance is transferred directly to an RRSP/RPP, CRA guidance indicates you do not withhold income tax on the transferred amount (up to the employee's available limit), because it is not paid to the employee in cash.
                                Step 1: Determine the portion paid directly to the employee (non-eligible portion):
                                $25,000 # $15,000 transferred to RRSP = $10,000 paid/remaining.
                                Step 2: Apply CRA lump-sum withholding rates (outside Quebec):
                                For total lump-sum payments $5,001 to $15,000, the withholding rate is 20%.
                                Step 3: Calculate tax to withhold on $10,000:
                                $10,000 × 20% = $2,000.00.
                                So the correct option is B ($2,000.00).


                                NEW QUESTION # 22
                                What is piecework?

                                Answer: A

                                Explanation:
                                Piecework (also called piece-rate pay) is a pay method where an employee's earnings are determined by output-they are paid a set amount per unit produced or completed, rather than by hours worked or a fixed salary. This aligns directly with option C. A time-based hourly/daily wage (option A) is a different earnings method, and a fixed pay-per-period arrangement (option B) describes salary. Therefore, "all of the above" is incorrect because these are three distinct compensation structures.
                                In payroll calculations, piecework earnings are typically calculated as: piece rate × number of units produced in the pay period. Employers still have to ensure compliance with employment standards, such as minimum wage and overtime rules, even where piecework is used. A Canadian payroll educational reference defines piecework as payment for each unit produced "regardless of the amount of time taken."


                                NEW QUESTION # 23
                                Matt earns $10.10 per hour and works 37.5 hours per week. Calculate Matt's regular bi-weekly earnings.

                                Answer:

                                Explanation:
                                $757.50
                                Explanation:
                                Regular earnings for an hourly employee are calculated as hourly rate × hours worked. Because "bi-weekly" means two weeks of work paid together, you calculate one week's regular earnings and then multiply by two (assuming the hours are the same each week and there is no overtime premium indicated).
                                Step 1: Weekly regular earnings:
                                $10.10 × 37.5 hours = $10.10 × 37 + $10.10 × 0.5
                                = $373.70 + $5.05
                                = $378.75.
                                Step 2: Bi-weekly regular earnings (2 weeks):
                                $378.75 × 2 = $757.50.
                                So Matt's regular bi-weekly earnings are $757.50.
                                In payroll documentation, "regular earnings" are the employee's base wages before statutory deductions (CPP
                                /QPP, EI, income tax) and before other deductions, and they exclude any separately calculated earnings like overtime premiums or taxable benefits unless stated. This approach (rate × hours, then adjust for pay period) is the standard method used to compute gross/regular pay for hourly employees before moving on to deductions and net pay.


                                NEW QUESTION # 24
                                Bonus and incentive pays are subject to which statutory deductions?

                                Answer: C

                                Explanation:
                                Bonuses and incentives are treated as taxable remuneration, so they are generally subject to the same core statutory deductions as regular earnings: CPP/QPP, EI, and income tax (and in Quebec, QPIP also applies when the remuneration is subject to EI). The CRA specifically notes that you must deduct EI premiums from bonuses/retroactive pay (up to the annual maximum), and the CRA's guidance for bonuses/irregular amounts uses tools (PDOC/formulas) that calculate CPP contributions, EI premiums, and income tax on these payments.
                                In Quebec payroll, remuneration that is subject to EI premiums is generally also subject to QPIP premiums, so bonuses/incentives that are EI-insurable are typically QPIP-insurable as well.
                                In the Northwest Territories and Nunavut, there is also a statutory territorial payroll tax that employers must withhold/remit where applicable, and the NWT guidance explicitly lists bonuses as part of employment income subject to payroll tax.


                                NEW QUESTION # 25
                                Which of the following types of earnings are not considered income from employment?

                                Answer: B

                                Explanation:
                                Regular salary, vacation pay, and commissions are generally treated as income from employment because they are amounts paid for services performed during employment. In contrast, what many people call
                                "severance pay" is often classified by the CRA as a retiring allowance-an amount paid when or after an employee retires or loses their job, in recognition of long service or for the loss of employment.
                                This distinction matters in payroll because a retiring allowance has its own rules for withholding and potential RRSP/RPP transfer eligibility, and it is not treated the same way as normal employment income earned while actively employed. CRA technical guidance also draws lines between amounts that are employment income versus retiring allowance depending on the nature/timing of the payment.
                                So, among the options listed, severance pay (when it is a retiring allowance) is the one that is not considered income from employment in the way salary/vacation pay/commissions are.


                                NEW QUESTION # 26
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