Pass the National Payroll Institute Payroll Fundamentals PF1 Questions and answers with CertsForce

In Block 6 (Pay period type), Service Canada instructs employers to enter the employee’s actual pay period type—one of the standard types such as weekly, biweekly, semi-monthly, monthly, or 13 pay periods a year.

Service Canada identifies a special rule only for employees “paid solely on commission or on salary plus irregularly paid commission”: in those cases, the employer must use a weekly pay period and average earnings using the weekly averaging formula.

Because this question specifies salary plus regularly paid commission (not irregularly paid commission), the “special situation” rule does not apply. Therefore, you enter the pay period type that matches the employer’s normal payroll cycle for that employee (for example, weekly, biweekly, semi-monthly, monthly, etc.).

The payment type most clearly not subject to all statutory deductions is directors’ fees. CRA guidance on directors’ fees shows they are treated as a special payment with distinct deduction rules, and (depending on the situation) they may not have CPP, EI, and income tax all apply in the same way as normal employment earnings.

By contrast, retroactive adjustments and performance bonuses are treated as taxable remuneration where CRA’s tools (like PDOC) calculate CPP contributions, EI premiums, and income tax on those payments (up to annual maximums).

“Vacation pay when no time was taken” is also treated as a non-periodic payment and is included in CRA payroll deduction formulas as a type of amount on which statutory deductions are calculated (again, subject to annual maximums for CPP/EI).

So, among the options listed, directors’ fees are the one that would not necessarily be subject to all statutory deductions in the standard way.

A fixed amount paid to an employee for meals each pay period is typically a meal allowance. CRA guidance distinguishes an allowance from a reimbursement: an allowance is usually a set amount paid without the employee having to submit receipts for actual costs, while a reimbursement repays specific expenses and is generally supported by receipts or an expense claim.

Because Charlene “receives $50.00 each pay for her meals,” it is a flat amount, which aligns with an allowance rather than a reimbursement. Whether the allowance is taxable or non-taxable depends on the facts (for example, whether it is reasonable and paid under conditions CRA recognizes as non-taxable for certain travel situations). If it’s not a reasonable travel allowance under CRA’s exceptions, it is generally a taxable allowance and must be included in income with appropriate deductions.

So the correct classification is A (an allowance).

For payroll withholding, income tax is calculated on taxable income for the pay period, so only deductions that are income-tax deductible (or otherwise reduce taxable income at source) will reduce the employee’s taxable base for withholding. Employee contributions to an RRSP are generally deductible for the employee, which is why payroll-deducted RRSP contributions (such as contributions to a group RRSP taken off the paycheque) reduce the amount of income tax withheld when the payroll system is set up to treat them as deductible contributions. The CRA confirms that deductible RRSP contributions can be used to reduce your tax.

By contrast, paying provincial health care premiums (where applicable) and paying an employee share of group benefit plan premiums are not automatic “reduce taxable income at source” deductions in the same way for payroll withholding; they may be personal expenses and, depending on the plan/premium type, may only affect the employee’s personal tax situation through credits/deductions when filing, not the standard payroll withholding base. Therefore, the only correct choice is A.

In ROE administration, the key concept is whether the employment relationship is still “active” (that is, whether there is an ongoing expectation the employee will work again). Service Canada’s ROE guidance ties ROE issuance to an interruption of earnings and specifically identifies situations where an employee is no longer on the employer’s active employment list (for example, no expectation of future work) as a trigger for issuing an ROE.

Options A and B describe circumstances that can still align with an ongoing employment relationship. For example, employees may remain eligible for certain benefits after a last day worked, and a right to recall means the employer may still consider the employee attached to the workplace (often still “active” depending on the arrangement). In contrast, when there is no expectation of work to be performed, the relationship is effectively ended for ROE purposes, and the employer generally proceeds with separation reporting and ROE completion based on the interruption of earnings rules.

Block 11 on the ROE is the “Last day for which paid,” meaning the last day the employee received insurable earnings. In most terminations, this is the employee’s last day of work. Service Canada notes Block 11 only moves beyond the last day worked when the employee continues to receive insurable earnings after the last day of work due to paid leave (such as vacation leave or sick leave) or salary continuance.

In this question, Charmaine’s employment ended April 13, and she received a lump-sum final pay that included wages in lieu of notice and vacation pay. These amounts are typically reported as special payments (for example, pay in lieu of notice is reported as such), but they do not automatically change Block 11 unless they are paid as an actual paid-leave period or as salary continuance (where regular pay continues and the ROE is not issued until the continuance ends).

Commission employees have a specific ROE rule. Service Canada’s ROE Guide explains that for employees whose earnings consist mainly of commissions, an interruption of earnings occurs only when the employment contract is terminated—unless the employee stops working due to specified EI-related reasons such as illness/injury/quarantine, maternity/pregnancy, parental leave, or compassionate care/family caregiver leaves.

This means the usual 7-day rule (7 consecutive days with no work and no insurable earnings) generally does not trigger an interruption of earnings for mainly-commission employees as long as the contract continues. In other words, if the employee stops working for reasons like vacation or a leave of absence but remains under contract, Service Canada indicates there is no interruption of earnings and therefore no ROE is issued just because of time without commissions/work.

So the correct choice is when the employment relationship/contract is terminated (option C).

QPIP premiums are calculated on an employee’s insurable earnings in Quebec (up to the annual maximum insurable earnings). For 2026, Revenu Québec shows the employee QPIP premium rate is 0.430% (0.00430) and the maximum insurable earnings are $103,000.

Step 1: Determine Evangeline’s weekly insurable earnings (assuming all earnings are QPIP-insurable and the annual maximum will not be exceeded, as the question implies):

Regular earnings $1,075.00 + overtime $154.00 = $1,229.00.

Step 2: Apply the employee QPIP rate:

$1,229.00 × 0.430% = $1,229.00 × 0.00430 = $5.2847.

Step 3: Round to cents (standard payroll practice): $5.28.

Payroll would deduct $5.28 from Evangeline’s pay for QPIP for that week and remit it along with other source deductions as required. The deduction continues until the employee reaches the annual QPIP maximum premium (based on the annual insurable earnings limit).

Option A is not correct. Service Canada’s ROE guidance for paper ROEs explains that if you need to complete Block 15C, you do that first, and then you still enter the total insurable earnings in Block 15B. It also reminds employers to include any insurable separation payments entered in Block 17 in both Block 15C (Pay Period 1) and Block 15B totals.

Option C is correct because retiring allowances (often treated as severance-type amounts) are not insurable, so even if they appear in Block 17C, they are not added to Blocks 15B/15C.

Option D is correct because vacation pay paid on separation is reported in Block 17A, and when it is insurable, it must be included in the insurable earnings totals in Block 15B (and Block 15C P.P.1 where applicable).

Even though the question uses the word “reimbursed,” the key fact isno receipts. In CRA terms, when an employee is paid a set amount or is not required to substantiate the expense, the payment functions like anallowance, not an accountable reimbursement. CRA’s guidance on uniforms/special or protective clothing states these amounts aregenerally taxable, and only in specific circumstances under CRA administrative policy would they be non-taxable.

CRA interpretations also reinforce that where employeesdo not have to provide receipts, a clothing allowance is generally ataxable employment benefit; non-taxable treatment is linked to substantiation and meeting strict conditions (for example, safety footwear with receipts).

So, because Helen’s payment isnot supported by receipts, it is best classified as ataxable allowance(option A). Payroll should include the amount in taxable income, apply required withholdings as applicable, and ensure policy/records support whatever treatment is used.