1. In Employment Hero, click on Settings .
2. In the Payroll section, click on Income Types.
3. Click the + Add Income Type button.
4. Enter the Name for the income type and select the income type from the dropdown menu. You'll have a preview of the taxes and calculations applied once you select the income type you need.
5. Click Create to add the income type to EH.

1. In Employment Hero, click on Settings .
2. In the Payroll section, click on Income Types.
3. Click the + Add Income Type button.
4. At the top of the box, click the Create Custom Income Type button.
5. Enter the Income Type name, select the rate unit, T4 Box (optional). Check the required boxes for the Frequency and Calculation, and Applicable Taxes and Premiums.
6. Click Create.

Your new custom income type will be added to Employment Hero.

This form allows you to define a new type of earnings for your employees. Follow these steps to ensure it is set up correctly for calculation and tax purposes.

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   1. Income Type Name
      • What to do: Enter a clear and descriptive name for this income. This is the label you and your employees will see on pay stubs and reports.
      • Examples: Sales commission, annual performance bonus, shift premiums etc.
   2. Rate Unit
      • This section defines how the income is calculated.
      • Select from Hourly, Annually or Fixed.
   3. T4 Box (Optional)
      • What to do: If this income needs to be reported in a specific box on an employee's year-end T4 slip (Statement of Remuneration Paid), enter the box number here.
      • Explanation: Most regular employment income is reported in Box 14. However, certain taxable benefits or allowances might need to be reported in Box 14 and also noted in the "Other Information" area with a specific code (e.g., Code 40 for a taxable car allowance).
      • Action: If you are unsure, consult the Canada Revenue Agency (CRA) guidelines or your accountant. If it's standard salary or bonus, it typically belongs in the main earnings (Box 14) and you may be able to leave this blank.
   4. Frequency and Calculation: Use bonus tax method
      • What to do: Check this box if the income is a lump-sum payment rather than part of regular, recurring pay.
      • Explanation: The "bonus tax method" is a CRA-approved way to calculate income tax on payments like bonuses or retroactive pay increases. It annualizes the lump-sum amount to find a more accurate tax rate, preventing the system from taxing a single large payment as if the employee earned that much every pay period.
      • Check this for: Annual bonuses, retroactive pay, large commissions paid out infrequently.
      • Do NOT check this for: Regular salary, hourly wages, recurring allowances, or regularly paid commissions.
   5. Applicable Taxes and Premiums
      • What to do: For each item, check the box if this income type is subject to that specific deduction or premium. This is a critical section for payroll compliance.
      • Income Tax: Check this box if the earnings are considered taxable income by the CRA. Most cash payments to employees are taxable.
      • CPP (Canada Pension Plan): Check this if the earnings are "pensionable." Most employment income is subject to CPP contributions until the employee reaches the yearly maximum contribution limit ($YMPE).
      • EI (Employment Insurance): Check this if the earnings are "insurable." Most employment income is subject to EI premiums until the employee reaches the yearly maximum.
      • Employers’ Payroll Tax (EPT): This refers to provincial payroll taxes, such as Ontario's Employer Health Tax (EHT). Check this if the income should be included in the total payroll amount used to calculate EHT. Most remuneration is included.
      • Workers’ Compensation: Check this if the income should be included in the "assessable" or "insurable" earnings for your provincial workers' compensation board (e.g., WSIB in Ontario). Most salary, wages, and bonuses are included.
   6. Vacationable Earnings
      • What to do: Check this box if vacation pay should accrue on this income.
      • Explanation: Provincial employment standards require vacation pay to be calculated as a percentage of "gross wages" earned. Most earnings like salary, overtime, and commissions are considered vacationable. Some discretionary bonuses or certain benefits may not be. Consult your provincial guidelines (e.g., Ontario's Employment Standards Act) if you are unsure.
   7. Stat Holiday Pay
      • What to do: Check this box if this income should be included in the earnings used to calculate an employee's pay for a statutory holiday.
      • Explanation: Pay for a public holiday is often calculated as an average of the employee's earnings over a specific period before the holiday. Checking this box ensures this new income type is part of that calculation, as required by provincial employment standards.

1. In Employment Hero, click on Settings .
2. In the Payroll section, click on Income Types.
3. Find the custom income type you need to edit and click the three dots and select Edit.
4. Make the changes needed and click Save.