Payroll Fundamentals 1 (PFP1) Exam Study Guide
Syllabus: 2025/2026 | 100+ Questions & Answers
Topic 1: Introduction to Payroll in Canada
1. What is the primary federal legislation governing labour standards for federally
regulated industries?
ANSWER ✓ The Canada Labour Code.
2. Which level of government has constitutional authority over taxation in
Canada?
ANSWER ✓ Both federal and provincial governments have the authority to levy taxes.
3. What is the core objective of the Employment Insurance Act?
ANSWER ✓ To provide temporary financial assistance to eligible workers who are
unemployed, sick, on maternity/parental leave, or caring for a family member.
4. Which act governs the Canada Pension Plan?
ANSWER ✓ The Canada Pension Plan Act.
5. Name the four common-law provinces that do not have a separate Provincial
Pension Plan.
ANSWER ✓ Ontario, Manitoba, Saskatchewan, and British Columbia. (Note: All provinces
except Quebec participate in the CPP; Quebec has the QPP).
6. What is the key difference between an employee and an independent contractor
for payroll purposes?
ANSWER ✓ An employee works under the control and direction of the employer, while
an independent contractor operates their own business and controls how the work is
performed. This distinction determines tax remittance and benefit eligibility.
7. What is the primary purpose of a TD1 form?
, ANSWER ✓ To determine the amount of federal and provincial personal tax credits to
which an employee is entitled, which affects the amount of tax deducted from their pay.
8. What is the consequence for an employer who fails to remit source deductions
on time?
ANSWER ✓ The employer is subject to significant penalties (10% for the first failure, 20%
for subsequent failures within the same calendar year) and daily compound interest.
9. What is the role of the Canada Revenue Agency (CRA) in payroll?
ANSWER ✓ The CRA is the primary federal agency responsible for administering tax
laws, processing source deduction remittances, and enforcing compliance for both
income tax and CPP/EI (except in Quebec).
10. Define "payroll compliance" in your own words.
ANSWER ✓ Payroll compliance is the process of ensuring that an organization adheres
to all federal and provincial legislative requirements related to paying employees and
remitting statutory deductions.
Topic 2: Calculating Gross Earnings
11. What are the two main categories of employment income?
ANSWER ✓ Gross earnings (wages, salary, commissions, bonuses) and taxable benefits.
12. An employee with a normal workweek of 40 hours is paid $18.50 per hour.
What is their regular pay for the week?
ANSWER ✓ 40 hours x $18.50 = $740.00.
13. Using the same employee from Q12, if they worked 45 hours and the company
policy pays 1.5x for overtime, what is their total gross pay?
ANSWER ✓ Regular Pay: 40 hrs x $18.50 = $740. Overtime Pay: 5 hrs x ($18.50 x 1.5) = 5
x $27.75 = $138.75. Total Gross: $740 + $138.75 = $878.75.
14. An employee earns a $55,000 annual salary. What is their gross pay per bi-
weekly pay period?
Syllabus: 2025/2026 | 100+ Questions & Answers
Topic 1: Introduction to Payroll in Canada
1. What is the primary federal legislation governing labour standards for federally
regulated industries?
ANSWER ✓ The Canada Labour Code.
2. Which level of government has constitutional authority over taxation in
Canada?
ANSWER ✓ Both federal and provincial governments have the authority to levy taxes.
3. What is the core objective of the Employment Insurance Act?
ANSWER ✓ To provide temporary financial assistance to eligible workers who are
unemployed, sick, on maternity/parental leave, or caring for a family member.
4. Which act governs the Canada Pension Plan?
ANSWER ✓ The Canada Pension Plan Act.
5. Name the four common-law provinces that do not have a separate Provincial
Pension Plan.
ANSWER ✓ Ontario, Manitoba, Saskatchewan, and British Columbia. (Note: All provinces
except Quebec participate in the CPP; Quebec has the QPP).
6. What is the key difference between an employee and an independent contractor
for payroll purposes?
ANSWER ✓ An employee works under the control and direction of the employer, while
an independent contractor operates their own business and controls how the work is
performed. This distinction determines tax remittance and benefit eligibility.
7. What is the primary purpose of a TD1 form?
, ANSWER ✓ To determine the amount of federal and provincial personal tax credits to
which an employee is entitled, which affects the amount of tax deducted from their pay.
8. What is the consequence for an employer who fails to remit source deductions
on time?
ANSWER ✓ The employer is subject to significant penalties (10% for the first failure, 20%
for subsequent failures within the same calendar year) and daily compound interest.
9. What is the role of the Canada Revenue Agency (CRA) in payroll?
ANSWER ✓ The CRA is the primary federal agency responsible for administering tax
laws, processing source deduction remittances, and enforcing compliance for both
income tax and CPP/EI (except in Quebec).
10. Define "payroll compliance" in your own words.
ANSWER ✓ Payroll compliance is the process of ensuring that an organization adheres
to all federal and provincial legislative requirements related to paying employees and
remitting statutory deductions.
Topic 2: Calculating Gross Earnings
11. What are the two main categories of employment income?
ANSWER ✓ Gross earnings (wages, salary, commissions, bonuses) and taxable benefits.
12. An employee with a normal workweek of 40 hours is paid $18.50 per hour.
What is their regular pay for the week?
ANSWER ✓ 40 hours x $18.50 = $740.00.
13. Using the same employee from Q12, if they worked 45 hours and the company
policy pays 1.5x for overtime, what is their total gross pay?
ANSWER ✓ Regular Pay: 40 hrs x $18.50 = $740. Overtime Pay: 5 hrs x ($18.50 x 1.5) = 5
x $27.75 = $138.75. Total Gross: $740 + $138.75 = $878.75.
14. An employee earns a $55,000 annual salary. What is their gross pay per bi-
weekly pay period?
