Download the full Year-End payroll overview for Canadian businesses by clicking on the image or here.

1. Planning Year-End Activities

Objective: To re-evaluate any necessary updates from previous year processes, understand the additional lift that will be required from your team, and establish a clear working plan for your organization’s Year-End Payroll Process.

Steps:

• List activities in all areas that need to be performed within the process, not only those related to system set-up.
• Determine where responsibilities for each task will fall within the various teams, departments, and assign owners for each activity.
• Anticipate potential obstacles that may impact the work plan.
• Align with relevant parties on required target dates for each activity, especially simultaneous tasks, such as year-end last payments, coordinating potential off cycles of year-end, and start of the year activities.
• Be aware of incoming communications from SAP relating to year-end enhancements and review any relevant updates to determine potential impacts on your processing.
• Set a plan in place to track required progression and completion of required activities.

Consider revising your current plan to reflect the following*:

• Refresh the instance to ensure data is up to date.
• Upgrade the system to the support package level recommended by SAP.
• Collect and validate any information outside of the payroll system.
• Set up and/or review the holiday calendar
• Generate and validate work schedules, quota periods, payroll periods, payment dates and posting dates.
• Validate employee information, time management, and payroll constants.
• Generate and validate accrual year for vacations pay.
• Adjust and verify provincial and federal tax changes, rates for benefits, Workers Compensation Rates.
• Perform Start of the Year Configurations and the Year-End Configurations for Year-End Reporting.
• Map new wage types to forms.
• Apply changes for the tax forms and XML.
• Execute the functional test, deploy to production.
• Execute an audit of the payroll information and apply relevant adjustments.
• Execute Year-End Process and generate year-end reports and the Magnetic Media Files.
• Process amendments to Year-end reports

*Dependent on your landscape and conditions

Consider:

• Does my plan include all subtasks for each activity that needs to be performed for a clear overview of the entire project? 
• Are there any updates that need to be made from last year’s process? What changes need to be made to test properly and ensure a realistic timeline?
• Does my organization have the appropriate resources to prioritize and perform the Year-End Process activities required by the work plan on top of the regular day-to-day activities?
• Do the dedicated resources on my team have the appropriate knowledge on the Year-End process requirements? The month of December comes with a high workload, so it is important to re-evaluate and address any gaps to ensure that all goals can be accomplished.
• What is an appropriate timeline to set when working towards the goal of having performed all activities prior to the last day of February? This goal will ensure time to send information to the respective Legal Entities on time to avoid penalties.
• Does the current timeline reflect enough time to test all scenarios and changes for all employees in advance of next year’s first payroll period? If employees receive inaccurate payment due to lack of testing, the IT process to send corrections to production will take time and add stress to sending final payments.
• Does the current timeline allow for testing to ensure the amounts on the forms are distributed correctly?

Opportunities for Learning:

• Conduct a workshop to ensure your organization’s key users are set up for success in the SAP process
• As new resources become available or shift internally, create a training program for new personnel on the requirements of the Year-End Payroll Process

2. Prepare Start-of-the-Year Enhancements

Objective: To set up the payroll system for next year’s operations and stay updated with federal, provincial and/or territorial regulations.

Steps:

• Set up and review the premiums, quotas, calendars, and variables for the next year.
• Evaluate relevant wage type mapping with corresponding forms, ensure any necessary updates are applied. 
• Run reports to validate current information in the system.
• Stay up to date with the 2024 regulations from the Government:

Once the federal and provincial governments have released this year’s regulations, you’ll find the latest updates on the links below.

• CRA Payroll
• Canadian Income Tax Rates
• Quebec Businesses
• Provincial and territorial income tax rates

Consider:

• Is there room for improvement within the current process to have all the essential information centralized and data properly grouped?
• Are there any organizational or benefit changes that will be taking place starting January 1st?

Opportunities for Learning:

• With IT expertise, perform and document the process of configuration activities.

3. SAP Support Pack Installation, Testing & Validation for Start-of-Year

Objective: To implement legal and technical updates provided by SAP into the system and ensure your information complies with all regulations, including reporting regulations.

Steps:

• Coordinate with IT to support any relevant changes that need to be updated according to legal requirements.
• Apply and test Support Package upgrades regarding new taxes and relating to the Year-End Process delivered by SAP.
• Test new values in end-to-end scenarios.

Consider:

• What relevant product enhancements are coming in the latest Support Package by SAP? 
• What process is required to upgrade the latest Support Package by SAP on the system and run the Year-End Process?
• After the Support Package upgrade, is a definition of set regressions tests causes needed to update other parts of the process?
• As testing cases based on business process is essential, is testing the entire first month to validate for Start-of-the-Year accounted for?

Opportunities for Learning:

• Reach out to an external partner with inquiries and/or for support regarding the Support Package upgrade.

4.  Year-End Preparation and Testing

Objective: To verify that your payroll balances and deductions were calculated accurately throughout the year and that your organization’s information is compliant with all regulations.  

Steps:

• Review SNOTES for corrections and adjustments delivered by SAP.
• Collect, prepare, and validate any payment or deduction data that may not be reflected in the payroll software.
• Upload all information that resides outside of the SAP/payroll software.
• Conduct a test phase for Year-End process using Agile methodology.
• Execute your Year-End process.

Consider:

• What are the preparation steps needed to ensure delivery of the forms to employees?
• How can I mass-validate information?
• What tools does your organization have access to that is not being benefited to its full potential?
• Are there any wage types hidden within the system?
• Are there any missing wage types that require adjustments?
• What process needs to be executed to solve wage types with wrong cumulations?
• Have all the preparations been made to test the process with data as similar as possible to Real Production Data?
• How can we improve the process to ensure we are collecting all data accurately while reducing the amount of time it takes to generate forms?
• Is all the information stored in the payroll system to minimize reconciliation and maximize the automation of the process?

Opportunities for Learning:

• Access a reliable source of information to contact for any issues or troubleshooting within SAP. Look for an external partner that offers Application Management Services (AMS), such as IN-RGY.
• Use transactions for the cumulation Year-End Process Health-Check and year-end mapping.

5. Execute Year-End Reports and Submit Forms

Objective: To fill the legal requirements and inform the Canada Revenue Agency (CRA), provincial/territorial entities about taxation and provide your organization’s employees with the required information for their personal tax returns.  

Steps:

• Validate your organization’s data with the correct tools.
• File returns electronically.
• Execute the delivery strategy of forms to employees.

Consider:

• Which employees have specific scenarios that may require more in-depth revision of their forms?
• Are there any pending adjustments?
• Is all the data present for the completion of the forms?
• Is all the necessary data uploaded and processed?
• Will an amendment be required later?
• What tests need to be done before the end of the fiscal year?
• What tests can be done at the start of the new year?

Opportunities for Learning:

• Gain a deeper understanding when using a testing lead resource, such as an Application Management Services partner, for guidance on the test phase.
• Process the adjustments of the forms before submitting them to the government.
• Gain insight and learnings faster when working with a support team to solve unexpected errors in the system, learn how to run transactions, and more.
  
  

Due to the lack of skilled resources throughout the industry, our recommendation is to plan your year-end payroll process strategy ahead of time and start preparing as soon as possible.

If you have any questions about the above or need support in your Year-End Payroll Process, don’t hesitate to reach out to our team at any time. At IN-RGY, we have a team of skilled consultants have diverse HR-focused expertise, from working either at SAP or in HR on the client side, that are dedicated to helping you close the year off on a high note and ensure you are ready for 2025!