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National Payroll Institute Payroll Fundamentals 1Exam : PF1 Exam

PF1 Exam Questions
  • Exam Code: PF1
  • Exam Name: Payroll Fundamentals 1Exam
  • Updated: Sep 25, 2026
  • Q & A: 75 Questions and Answers
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National Payroll Institute PF1 Exam Syllabus Topics:

SectionObjectives
Topic 1: Payroll Records and Compliance Reporting- Government reporting
  • 1. Year-end reporting (T4 slips)
    • 2. Remittance reporting processes
      - Recordkeeping requirements
      • 1. Employee payroll records
        • 2. Retention requirements
          Topic 2: Payroll Fundamentals and Compliance Framework- Payroll system overview in Canada
          • 1. Payroll process cycle (gross-to-net)
            • 2. Employer payroll obligations
              - Payroll legislation and regulatory bodies
              • 1. Income Tax Act basics
                • 2. Canada Pension Plan (CPP) requirements
                  • 3. Employment Insurance (EI) rules
                    Topic 3: Earnings, Deductions, and Taxation- Deductions and remittances
                    • 1. Voluntary deductions
                      • 2. Statutory deductions
                        • 3. Employer remittance responsibilities
                          - Types of earnings
                          • 1. Taxable benefits
                            • 2. Overtime and special payments
                              • 3. Regular wages and salaries

                                National Payroll Institute Payroll Fundamentals 1Exam Sample Questions:

                                Question #1

                                Which of the following types of earnings are not considered income from employment?

                                • A. Commissions
                                • B. Regular salary
                                • C. Severance pay
                                • D. Vacation pay
                                Reveal Solution  Discussion  0

                                Correct Answer: C  🗳️

                                Explanation: Only visible for RealExamFree members. You can sign-up / login (it's free).

                                Question #2

                                Evangeline earns $1,075.00 weekly plus $154.00 in overtime. Calculate Evangeline's Quebec Parental Insurance Plan (QPIP) premium.

                                Reveal Solution  Discussion  0

                                Correct Answer:

                                $5.28 (employee QPIP premium for the week)
                                Explanation:
                                QPIP premiums are calculated on an employee's insurable earnings in Quebec (up to the annual maximum insurable earnings). For 2026, Revenu Quebec shows the employee QPIP premium rate is 0.430% (0.00430) and the maximum insurable earnings are $103,000.
                                Step 1: Determine Evangeline's weekly insurable earnings (assuming all earnings are QPIP-insurable and the annual maximum will not be exceeded, as the question implies):
                                Regular earnings $1,075.00 + overtime $154.00 = $1,229.00.
                                Step 2: Apply the employee QPIP rate:
                                $1,229.00 × 0.430% = $1,229.00 × 0.00430 = $5.2847.
                                Step 3: Round to cents (standard payroll practice): $5.28.
                                Payroll would deduct $5.28 from Evangeline's pay for QPIP for that week and remit it along with other source deductions as required. The deduction continues until the employee reaches the annual QPIP maximum premium (based on the annual insurable earnings limit).

                                Question #3

                                PF1 Exam - Net Pay Calculation (Template Worksheet)
                                Scenario
                                Diane Lemay works for Monarch Construction in Alberta and earns an annual salary of $49,500.00, paid on a semi-monthly basis.
                                The company provides its employees with group term life insurance coverage of two times annual salary and pays a monthly premium of $0.62 per $1,000.00 of coverage.
                                Diane uses her car to meet with clients on company business and receives a taxable car allowance of $50.00 per pay.
                                The company has a defined contribution pension plan to which Diane contributes 5% of her salary each pay.
                                Diane also contributes $20.00 to United Way and has $5.00 deducted for her social club membership each pay. She belongs to a union and pays 2% of her salary in union dues per pay period.
                                Diane's federal and provincial TD1 claim codes are 1. She will not reach the first Canada Pension Plan or Employment Insurance annual maximums this pay period.
                                Required: Calculate the employee's net pay, following the order of the steps in the net pay template.
                                EXHIBIT A - Net Pay Template (Fill in all blanks)

                                STATUTORY DEDUCTIONS

                                OTHER DEDUCTIONS


                                Given Data (Reference)

                                Step 1 - Calculate the employee's gross taxable earnings (GTE) for this pay.
                                [ _________________________________ ]
                                Step 2 - Calculate the pensionable earnings (PE).
                                [ _________________________________ ]
                                Step 3 - Calculate the insurable earnings (IE).
                                [ _________________________________ ]
                                Step 4 - Calculate the net taxable income (CRA) (NTI).
                                [ _________________________________ ]
                                Step 5 - Calculate the net taxable income (RQ) (NTI).
                                [ _________________________________ ]
                                Step 6 - Calculate Diane's Canada Pension Plan contribution.
                                [ _________________________________ ]
                                Step 7 - Calculate Diane's Employment Insurance premium.
                                [ _________________________________ ]
                                Step 8 - Calculate Diane's Quebec Parental Insurance Plan premium.
                                [ _________________________________ ]
                                Step 9 - Determine Diane's federal income tax.
                                [ _________________________________ ]
                                Step 10 - Determine Diane's provincial income tax.
                                [ _________________________________ ]
                                Step 11 - Calculate Diane's total deductions (statutory + other).
                                [ _________________________________ ]
                                Step 12 - Calculate Diane's net pay.
                                [ _________________________________ ]

                                Reveal Solution  Discussion  0

                                Correct Answer:

                                See the Explanation part for answer for each step.
                                Explanation:
                                Step 1 - Gross Taxable Earnings (GTE)
                                Salary per pay: 49,500 ÷ 24 = $2,062.50
                                Taxable car allowance: $50.00
                                Group term life taxable benefit:
                                Coverage = 2 × 49,500 = 99,000
                                Monthly premium = (99,000 ÷ 1,000) × 0.62 = 99 × 0.62 = 61.38
                                Semi-monthly benefit = 61.38 ÷ 2 = $30.69
                                GTE = $2,143.19
                                Step 2 - Pensionable Earnings (PE)
                                PE = $2,112.50 (2,062.50 + 50.00)
                                Step 3 - Insurable Earnings (IE)
                                IE = $2,112.50
                                Step 4 - Net Taxable Income (CRA) (NTI)
                                RPP = 5% × 2,062.50 = $103.13
                                Union dues = 2% × 2,062.50 = $41.25
                                NTI (CRA) = 2,143.19 # 103.13 # 41.25 = $1,998.81
                                Step 5 - Net Taxable Income (RQ)
                                $0.00
                                Step 6 - CPP (base CPP)
                                Period exemption = 3,500 ÷ 24 = $145.83
                                Contributory = 2,112.50 # 145.83 = $1,966.67
                                CPP = 1,966.67 × 5.95% = $117.02
                                CPP = $117.02
                                Step 6B - 2nd CPP (CPP2)
                                CPP2 = $0.00
                                Step 7 - EI premium
                                EI = 2,112.50 × 1.63% = $34.43
                                EI = $34.43
                                Step 8 - QPIP
                                $0.00
                                Step 9 - Federal income tax (CC1, semi-monthly)
                                $156.10
                                Step 10 - Alberta income tax (CC1, semi-monthly)
                                $73.20
                                Step 11 - Total deductions
                                Statutory: 117.02 + 34.43 + 156.10 + 73.20 = $380.75
                                Other: RPP 103.13 + Union 41.25 + United Way 20.00 + Social club 5.00 = $169.38 Total deductions = $550.13 Step 12 - Net pay Cash pay (salary + car allowance) = 2,062.50 + 50.00 = $2,112.50 Net pay = 2,112.50 # 550.13 = $1,562.37

                                Question #4

                                An organization pays the premiums for a sickness or accident plan for their president only. This would be considered:

                                • A. A cash taxable benefit
                                • B. A taxable allowance
                                • C. None of the above
                                • D. A non-cash taxable benefit
                                Reveal Solution  Discussion  0

                                Correct Answer: D  🗳️

                                Explanation: Only visible for RealExamFree members. You can sign-up / login (it's free).

                                Question #5

                                The Canada Revenue Agency form that is completed to allow a commissioned employee to claim non- reimbursed expenses at source is a:

                                • A. TD1
                                • B. T777
                                • C. TP-1015.R.13.1-V
                                • D. TD1X
                                Reveal Solution  Discussion  0

                                Correct Answer: D  🗳️

                                Explanation: Only visible for RealExamFree members. You can sign-up / login (it's free).

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