One of the most common payroll CRA reviews that many business owners face is the PIER assessment. This is because payroll is one of those things with a ton of little moving pieces, so many of us don't realize something is broken until its too late.
Let's talk about what a PIER report is and how you can avoid it.
PIER stands for Payroll Inspection and Evaluation Review, and it’s how the CRA ensures accurate payroll deductions and remittances. The goal is to verify that your statutory deductions for Employment Insurance (EI) and Canada Pension Plan (CPP) have been calculated and
If there is a mismatch between what you paid and what the CRA expects - you're responsible for the difference (not fun if you didn't plan for that cashflow wise). And if you don't deal with that in a timely manner - you're also responsible for interest charges (not fun ever).
To understand how we can avoid or resolve a PIER Report - lets start by taking a look at why they typically happen. The common reasons for a CRA PIER report generally stem from the complexity of payroll calculations, data entry errors, and changes in employee status or payroll processes. Here's a list of the most common errors we've seen:
Incorrect Employee Age or Birth Date
CPP contributions are only required for employees aged 18 to 70.
If an employee’s birth date is entered incorrectly, or if payroll systems aren’t updated when an employee turns 18 or 70, deductions may be missed or incorrectly applied.
This often happens due to oversight or failure to update employee records promptly.
Partial-Year Employment
The basic exemption is the amount of annual earnings on which no CPP (Canada Pension Plan) contributions are required - this is currently $3500/year
This is prorated for employees who do not work the full year.
If payroll systems or staff do not adjust the exemption for employees who start or leave mid-year, the calculated deductions will be off.
This is a common oversight, especially with turnover or seasonal staff.
Mismatched Number of Pay Periods and Cheques
CPP exemptions (see above) are applied per pay period. If the number of payroll runs (cheques) doesn’t match the expected frequency (e.g., extra runs for bonuses or off-cycle payments), your payroll system may apply the exemption too many times, resulting in under-deductions.
This often happens when additional or off-cycle payments are made without adjusting the exemption calculation.
Bonuses and Lump Sum Payments
Employers sometimes fail to deduct CPP and EI from bonuses or allow employees to roll over bonuses into RRSPs without proper statutory deductions.
This oversight usually occurs if there isn't a proper payroll process for bonuses, where deductions are taken into account
Year-End Adjustments and Data Entry Errors
Errors in entering year-to-date (YTD) totals, especially when switching payroll systems or making year-end adjustments, can lead to incorrect CPP/EI calculations.
This is often due to manual data entry mistakes or incorrect carryover of YTD balances.
Incorrect T4 Information
Mistakes in reporting Social Insurance Numbers, names, or exemption boxes (e.g., Box 28 on the T4) can cause mismatches between what was reported and what should have been deducted.
These are typically clerical errors or misunderstandings of T4 reporting requirements.
Payroll Frequency Changes or Rule Changes
Changing pay frequencies mid-year (e.g., from biweekly to semi-monthly) or modifying deduction rules can disrupt the calculation of statutory deductions, especially if not handled carefully in the payroll system.
This usually happens if people make changes to their payroll schedule without checking that the deduction calculations are still accurate
Rounding and Calculation Errors
Small rounding errors or miscalculations, especially when summed over the year, can cause minor discrepancies.
While these are less likely to trigger a PIER report, they can contribute to cumulative errors if not monitored - especially when you have multiple employees
Avoiding PIER assessments (and the penalties associated) usually is as simple as reviewing your payroll details quarterly. Here's the checklist we share with our clients:
Check Employee Details
Make sure every employee’s name, birth date, and Social Insurance Number are correct in your records.
Update your records if anyone turned 18 or 70, started, left, or changed roles this quarter.
If anyone gave you a form to stop CPP deductions (CPT30), make sure your payroll reflects that.
Review Pay and Deductions
Look at a few pay stubs for each employee. Check that CPP and EI are being deducted from every pay (unless they’re too young, too old, or opted out).
If you paid any bonuses or lump sums, make sure you also took off CPP and EI from those payments.
Count Pay Periods
Check that you ran payroll the right number of times this quarter (for example, 13 times if you pay biweekly).
If you ran any extra payrolls (like for bonuses or corrections), make sure CPP and EI were still deducted properly.
Spot-Check Year-to-Date Totals
Look at the year-to-date (YTD) totals on a few pay stubs. Make sure the numbers look right and match what you expect for the year so far.
Check for New or Departed Employees
For anyone who started or left during the quarter, make sure they’re only getting the CPP exemption for the time they actually worked.
Stay Up to Date
If you changed payroll software or updated your system, double-check that CPP and EI rates are correct for this year.
Make sure you sent in all your payroll tax payments to CRA on time.
Keep Good Records
Save copies of all pay stubs, CRA forms, and any notes about changes or corrections you made.
If you’re not sure about something, write it down and ask your bookkeeper or payroll provider.
If you receive a PIER report or PD4R notice, here’s what to do:
Review the Report
The PIER overview includes a table listing affected employees, pensionable/insurable earnings, and the balance owed.
Agree or Disagree
If you agree, pay the credit balance or debit balance shown by the deadline.
If you disagree, respond with correct calculations and supporting documentation within 30 days.
Submit your response
Use your CRA My Business Account or submit by mail/fax, as noted in the report.
No response = Notice of Assessment from CRA, including penalties.
They may also issue amended T4s or benefit returns.
The CRA isn’t out to get you. But if your payroll program, application program, or internal processes are off — even slightly — it can lead to PIER Reviews and compliance actions.
Suddenly, you’re not just managing your Employees & Payroll, but defending:
Deductions (their share)
Contributions (your share)
...to government officers.
Be proactive:
✅ Use systems like Wagepoint or a trusted accountant.
✅ Know your exemption column, your identification obligations, and your employer services officers’ expectations.
Avoid the dreaded year-end PIER Notice by staying ahead — and keeping your payroll squeaky clean.