Payroll and Employment Terms: US, Canada and India Tax Glossary

Payroll and employment terms change at the border: the document that tells an employee what they earned is a W-2 in the United States, a T4 in Canada and a Form 16 in India, and each country funds social insurance in a different way. This glossary defines the key payroll and employment terms, shows the 2026 figures that are verified at the time of writing, and links to the guide that explains each filing.

Payroll and employment terms at a glance

Terms A to F

Additional Medicare Tax

Employers withhold an extra 0.9 percent Medicare tax on wages over $200,000 in a calendar year, whatever the employee's filing status. The employee reconciles it on Form 8959, where the thresholds are $250,000 for joint filers, $125,000 for separate filers and $200,000 for others.

Equivalents: none in Canada or India.

Canada Pension Plan (CPP) and Quebec Pension Plan (QPP)

CPP is Canada's mandatory retirement and disability contribution for workers outside Quebec. For 2026 the rate is 5.95 percent each for the employee and employer on earnings from $3,500 up to $74,600, a maximum of $4,230.45 each, and a second contribution (CPP2) applies to earnings up to $85,000. See payroll source deductions and the T4.

Equivalents: U.S., Social Security. India, EPF and the pension portion of the employer's contribution.

Contractor vs employee

Tax authorities in all three countries look at control, not labels. A worker you direct, schedule and equip is likely an employee, while one who bills several clients and sets their own methods may be an independent contractor. Misclassification can bring back payroll tax, penalties and benefits claims. See US employer compliance checklist.

Deposit schedule

U.S. employers deposit withheld taxes monthly (by the 15th of the next month) or semiweekly, depending on their lookback period, and must deposit by the next business day once they accumulate $100,000. Canada has a similar regular, accelerated and quarterly remitter system, with the 15th as the usual date. See the US employer compliance checklist.

Employer Health Tax

Several Canadian provinces, including Ontario and British Columbia, charge employers a payroll-based health levy. See the provincial guides for Ontario and British Columbia.

Employees' Provident Fund (EPF) and UAN

In India, employer and employee each contribute a percentage of wages to the provident fund, and each member is identified by a Universal Account Number (UAN) that stays with them across jobs. Contribution rates and wage ceilings are set by the EPFO, so confirm them with your payroll provider. See India labour and professional tax compliance.

Equivalents: U.S., 401(k) plus Social Security. Canada, RRSP plus CPP.

Employees' State Insurance (ESI)

ESI is an Indian scheme that provides medical and cash benefits to eligible employees below a wage ceiling in covered establishments. Employers and employees both contribute. See India labour and professional tax compliance.

E-Verify and Form I-9

Every U.S. employer must complete Form I-9 to verify work eligibility for each new employee. E-Verify is an optional electronic check in most states, and the Social Security Number Verification Service checks whether a name matches an SSN.

Equivalents: Canada, a valid SIN and work permit. India, no federal equivalent.

FICA

The Federal Insurance Contributions Act covers Social Security and Medicare. In 2026 each of employer and employee pays 6.2 percent Social Security on wages up to $184,500 and 1.45 percent Medicare on all wages. Some nonresident students and scholars are exempt for a limited time, but H-1B workers are generally covered. See Social Security and Medicare for foreign workers.

Form 16 (India)

Form 16 is the certificate an Indian employer issues showing salary paid and TDS deducted for the year. The Income-tax Rules, 2026 introduced new forms from April 2026, so ask your employer which form number applies to the period; the idea is unchanged. See income tax portal, AIS and Form 26AS.

Equivalents: U.S., W-2. Canada, T4.

Form 941 and Form 940

Form 941 is the quarterly federal payroll return, and Form 940 is the annual federal unemployment return. The third-quarter 2026 Form 941 is due Monday, November 2, 2026, because October 31 is a Saturday. See the US employer compliance checklist.

FUTA

The Federal Unemployment Tax Act tax is 6.0 percent on the first $7,000 of each employee's wages, reduced by up to 5.4 points of credit for state unemployment tax paid on time, which leaves 0.6 percent. States that have not repaid federal loans can lose part of the credit. See the US employer compliance checklist.

Terms G to R

Gratuity

Gratuity is a lump-sum payment from an Indian employer to an employee who leaves after a minimum period of service, typically five years. Rules and exemptions are tied to the labour laws and tax provisions in force, so ask your CA. See India labour and professional tax compliance.

Independent contractor reporting (1099-NEC)

A U.S. business reports payments to non-employees on Form 1099-NEC once they reach the reporting threshold, which IRS Publication 15 shows rising from $600 to $2,000 for 2026. A payee who gives no taxpayer ID can be subject to 24 percent backup withholding.

Equivalents: Canada, T4A. India, a non-salary TDS certificate.

Labour codes (India)

India has been consolidating many older labour laws into a smaller set of labour codes that cover wages, social security, industrial relations and workplace safety. The effect on provident fund wage definitions, gratuity and notice periods depends on which provisions are in force and how your state applies them, so rely on your payroll provider and CA for the current position.

Minimum wage

The Illinois minimum wage is $15.00 per hour for adults, with a lower youth rate and a lower cash wage for tipped employees. Canada sets minimum wages provincially, and India fixes them by state and category of work. See Illinois payroll withholding, UI and new hire.

New hire reporting

U.S. employers report new employees to a state registry, and that includes a rehired employee who has been separated for at least 60 consecutive days. See Illinois payroll withholding, UI and new hire.

Overtime

Under the federal Fair Labor Standards Act, most non-exempt U.S. employees earn at least one and one-half times their regular rate after 40 hours in a week. For tax years 2025 through 2028, the premium portion may qualify for the new overtime deduction of up to $12,500 ($25,000 joint) if the filer has a Social Security number. See US tax changes for 2026.

Equivalents: Canada and India set overtime by provincial or state and labour law.

Paid leave (Illinois)

The Paid Leave for All Workers Act, effective January 1, 2024, gives most Illinois employees 1 hour of paid leave for every 40 hours worked, up to 40 hours a year, usable for any reason after 90 days. It has no small-employer exemption, and Chicago and Cook County have their own ordinances. The Illinois minimum wage is $15 per hour.

Payroll account (RP) and remittance

A Canadian employer opens a payroll program account (RP) under its Business Number and remits CPP, EI and income tax deducted, normally by the 15th of the next month for regular remitters. The next dates are October 15 and November 16, 2026. See the Canada CRA deadline calendar.

Perquisites

Perquisites are non-cash benefits, such as housing or a company vehicle, that India taxes as part of salary. The U.S. treats many as taxable fringe benefits, and Canada calls them taxable benefits. See India labour and professional tax compliance.

Professional tax

Some Indian states levy a small annual tax on employment income, collected by the employer through payroll. It is not national, and the rules differ by state. See India labour and professional tax compliance.

Record of Employment (ROE)

A Canadian ROE is the form employers issue when an employee's pay is interrupted, and Service Canada uses it to assess Employment Insurance. It must be issued within a set number of days. See Canada payroll source deductions and the T4.

Remote work across borders

An employee who lives in one country and works for an employer in another can create payroll, residency and permanent establishment questions in both. Withholding follows where the work is performed, not where the employer sits, and a social security agreement may decide which country's contributions apply. See cross-border remote work between the US and Canada.

Restricted stock units (RSUs) and employee stock options

Equity pay is taxed when it vests or is exercised. U.S. employers report RSU income on the W-2, Canada reports a taxable employment benefit on the T4, and an Indian taxpayer treats the benefit as a perquisite and discloses foreign shares in Schedule FA. Moves between countries mid-vesting need planning. See startup and equity tax planning.

Terms S to W

Social Security wage base

Social Security tax stops once an employee's wages reach the annual base, $184,500 for 2026. Medicare tax has no cap. See Social Security and Medicare for foreign workers.

Equivalents: Canada, the Year's Maximum Pensionable Earnings, $74,600 in 2026.

Source deductions and Employment Insurance (EI)

Canadian employers withhold income tax, CPP and EI from each paycheck. For 2026 the EI rate outside Quebec is 1.63 percent of insurable earnings up to $68,900, a maximum employee premium of $1,123.07, and employers pay 1.4 times the employee amount.

State unemployment insurance (SUTA) in Illinois

Illinois employers pay state unemployment insurance on the first $14,250 of each worker's 2026 wages, at a rate set by their experience. See employer registrations with IDOR and IDES.

T4 and T4 Summary

Canadian employers issue a T4 to each employee and file a T4 Summary with the CRA by the end of February following the year. See Canada payroll source deductions and the T4.

Equivalents: U.S., W-2 and W-3. India, Form 16.

TD1

The TD1 is a Canadian form on which an employee claims personal tax credits so the employer can calculate source deductions. Newcomers usually complete federal and provincial versions. See hiring foreign workers in Canada.

Equivalents: U.S., Form W-4.

TDS on salary

An Indian employer estimates the employee's yearly tax and deducts it monthly as tax deducted at source, deposits it with the government and reports it in quarterly statements. See India TDS and TCS for businesses.

Equivalents: U.S., income tax withholding. Canada, source deductions.

Totalization and social security agreements

The U.S. and Canada, the U.S. and India, and Canada and India each have social security agreements that can prevent double contributions for workers on temporary assignment, usually proven with a certificate of coverage. See US-Canada Social Security totalization.

W-2 and W-4 (United States)

The W-2 summarizes wages and withholding for the year and goes to employees and the Social Security Administration. The W-4 is the employee's withholding certificate; submit a new one when your situation changes.

Workers' compensation

Employers carry insurance for workplace injuries. In the U.S. it is state-run or private, in Canada it is provincial (WCB or WSIB), and in India it is covered by statutory and insurance schemes. See withholding and estimated tax for newcomers.

How we can help

From the Aurora, Illinois area we handle U.S. payroll registration, withholding, unemployment insurance and quarterly returns, and we coordinate with Canadian and Indian advisers where employees or owners are cross-border. See payroll and employer compliance and bookkeeping and accounting. Browse the full tax and compliance glossary for the other term sets.

Frequently asked questions

General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.