How do you record a bonus payment to an employee on their pay cheque?  

Create a new payroll income category called Bonus as  Type = Income, Unit of measure = Period.  Check off everything except calc Ins. Hours and Calc. Vac.
Set the linked account under Income, for Bonus to the appropriate G/L account.  If you don't know / care, link it to the same as your other wage / salaries expense account.

Check of the Bonus income type for any employees who you want to pay a bonus to.

Do you simply record them as regular hours, or do you have to create a different entry for bonuses only?  

You should have a separate category.  If the bonus is unrelated to work hours, it doesn't create any EI insurable hours, so it shouldn't be included as insurable hours of employment, although EI rates do apply, and it's insurable income. 

Income that isn't related to hours is usually not included as Vacationable earnings, but check your provincial laws. 

Can a bonus be on the same pay cheque as their regular pay cheque?  

Yes.  You can have multiple pay types on a single cheque.  In fact, to get the automatic CPP calculation to allow for the correct exemption amount, you need to  have exactly the number of pay periods that you set up the employee as.  

If you have 26 pay periods plus make 1 separate bonus pay, the CPP will show up on your PIER report as short by the CPP rate * 1/26 * the exemption *2  (employer + employee portion), since the program goes merrily along taking 1/26 of the exemption, the 27th time.

Any suggestions would be helpful.

If I haven't covered it here, please post back!

Randy

You would set up bonus as a separate income - rename an income as Bonuses, make it as Type Income and Unit of Measure will be Period. Bonuses are not considered for EI hours so make sure EI Hours in unticked but it is considered EI insurable. You can link the bonus to Wages - same as you have for regular earnings.

Then go into your employee profile and tick off the 'Bonuses' income and then go back into paycheque and the Bonuses will show up for you to enter an amount. All taxes will be deducted from Bonuses but there will be no insurable hours to the bonus.

Very helpful - thanks for your time! :)

Randy... If we pay out vacation of separate pay cheques (we were planning to do this so our employees don't get taxed so hard) that will make more than the 26 pay periods.  How do you still get the correct CPP calculations if you can't change the number of pay periods?  I want to stay on bi-weekly with the 26 pay periods and not change to weekly.  Because it is possibly some of our employees could have up to 30 paycheques with us paying out vacation plus a bonus paycheque.

You can pay out vacation pay with regular cheque and adjust the income tax amount so that it is not so high.

When you do the chq first enter the vacation pay amount only and note what the income tax amount is.

Then take out the vac pay amount and put in the regular earnings, make a note of the income tax amount, then put in the vac pay and change income tax amount to read the total of the two separate amount.

If it is a large amount of vac pay then the tax will still be a bit high but not as high if you had not adjusted. You don't want to go too low on income tax and cause employees to have to pay high amounts to CRA when it comes to personal income tax returns.

We started paying out vacation payouts requested outside the regular payroll cycle as a loan, then repaying the loan from vacation pay at the next payroll run.

This keeps it at 26 pays per year, so that the automatic calculations for tax and CPP are correct.

Also it makes for less grief and complaints from the people who had to pay tax when they filed their returns.