Final answer:
The annual QPP maximum contribution requires prorating when the employee exceeds maximum annual earnings, not simply due to vacation, part-time work, or bonuses. Economic incentives affect work hours, with some employees working less if earnings or government policies change favorably. Minimum wage hikes can lead to fewer hours worked but may still result in higher overall income if the increase in wage outweighs the decreased hours.
Step-by-step explanation:
The annual Quebec Pension Plan (QPP) maximum contribution must be prorated when the employee exceeds the maximum annual earnings. Employer contributions to the QPP are indeed adjusted based on factors that affect annual earnings, such as working part-time or receiving a bonus. However, for an employee taking vacation, earnings are generally not affected, and so, the contributions would typically not need to be prorated for vacation time.
Considering economic incentives, some individuals might opt to reduce their work hours in response to changes in wages or government policies. For instance, in a scenario where government payments decrease less than dollar for dollar against earned income, employees might find it more beneficial to work less and still end up with a similar or increased amount of income, compared to the previous scenario where they may have worked more hours.
Moreover, with minimum wage workers often not working full-time year-round, changes such as a minimum wage increase might result in fewer hours worked due to employers' responses to higher wages. However, the overall income of such workers might still increase if the percentage raise in wage more than offsets the reduction in hours worked.