If you are a business owner who employs staff, many of your business's expenses are paying employee wages. As an employer, you must pay attention to a significant payroll expense: your cumulative year-to-date (YTD). In this blog, we go through what is year-to-date payroll and how it impacts your business and Canadian payroll as a whole.
Your company's year-to-date payroll (YTD) is the amount of money your company has spent on the payroll since the beginning of the calendar or fiscal year, up to the current payroll date. To calculate YTD, you must consider your employees' gross incomes, which an employee earns before subtracting taxes and deductions.
In some cases, YTD may also include the amount of money paid to freelance or independent contractors. This is important to note as independent contractors and freelancers are not your employees—they are self-employed people hired for a specific job, but are essential for you to include in your YTD.
For full-time employees, YTD payroll represents their gross income. This is different than what it means for a business, where year-to-date represents the overall earnings all employees earned. It also includes payments paid in this current fiscal or calendar year, but not necessarily received this year. This amount could consist of a sales commission sale made at the end of last year but not paid out until this year.
Your company's year-to-date payroll gives you an easy way to compare your employee payroll expenses to the overall annual budget for those costs. By having the two side-by-side, you can determine the amount paid for payroll versus your total business expenses.
Having a clear understanding of your YTD in payroll enables you to know if your company is on track to meet its projected results. Based on these YTD payroll numbers, you can easily make decisions like hiring and budget cuts.
Beyond helping with essential tax slips, year-to-date payroll provides you a way to predict your potential tax liability. Business owners must know their quarterly and yearly tax liabilities to manage purchases and overall cash flow.
Employees can view their year-to-date payroll earnings digitally or physically on every pay stub you've issued. As a business owner, you should have a practice of providing a pay stub each time you pay an employee.
A pay stub is vital for your employee as it shows the wages earned for a specific pay period and the wages earned from the year-to-date. A wage pay stub lists an employee's gross salaries, taxes and deductions, and net wages. Pay stubs are essential to help your employees manage their pay, cash flow, and understand if they will owe the CRA any money before they file.
To easily calculate your company's year-to-date payroll, gather each employee's pay stub and calculate the year-to-date gross incomes.
For example, you have four employees at your business: Ashley, Carson, Ali, and Soraya. Ashley earned a total of $36,000 in gross wages YTD. Carson earned $46,000, Ali earned $22,000 and Soraya earned $56,000. By combining these four year-to-date wages, your total YTD payroll comes to $160,000.
Soraya, the company's star Salesperson, also earned a hefty commission of $10,000 at the end of last year but hasn't been paid until the beginning of this year. That must be factored into your YTD in payroll; your business's year-to-date payroll is now $170,000.
No pay stubs? No problem. Not all employers are required to provide their employees with pay stubs. If this is the case for your business, simply multiply each of your employees' gross income per pay period by the number of cheques they received.
For example, you have two employees: Sebastienne and Sage. Each has received pay for 13 pay periods. Sage earned $3,500 per pay period in gross wages, and Sebastienne earned $1,500 per pay period. Take those numbers and multiply them by the number of pay periods.
The year-to-date for Sage is $45,500, and Sebastienne is $19,500. Once you have calculated that, add the two YTD amounts together: your business's total YTD in payroll is $65,000.
There you have it! An easy-to-understand guide to YTD in payroll and how you can manage it with no fuss. If you're looking for help with managing your year-to-date payroll? Knit's easy-to-use helps you run payroll and determine YTD with ease, while also taking your payroll paperless. Try it today!