A Quick Guide to Implementing Payroll in Canada

Starting a new business or initiating a payroll system in Canada can initially seem overwhelming. But don't fret, as a leading provider of Payroll Canada services, specializing in HR software, payments, and payroll, we've got you covered! We're here to break down the process into manageable steps, so you can establish your Canadian payroll system like a pro.

Step 1: Register Your Payroll Account

Your Canadian payroll journey begins with registering your business with the appropriate governmental agencies. This first step is critical in setting the stage for a successful payroll system.

Step 2: Secure a Business Number from the CRA

The Canada Revenue Agency (CRA) requires you to have a Business Number (BN). This number is vital for remitting statutory deductions like income tax, employment insurance, and the Canada Pension Plan (CPP). After registering your BN, the CRA will ask you to choose your required services, one of them being a "payroll account". If you already have a BN, it's simple to update your services to include a payroll account.

Step 3: Set Up Employer Health Tax (EHT)

Depending on your business location, you might need to set up an Employer Health Tax remittance. For example, Ontario-based businesses must register with the Ontario Ministry of Finance. The cost of this process typically ranges from 0.98% to 1.98% of your payroll, contingent on its size.

Step 4: Determine Your Payroll Frequency

Now that you've met all provincial administrative requirements, it's time to decide on your payroll frequency. This is an essential aspect of payroll management and Canadian employers often opt for a biweekly pay schedule.

Processing Payroll in Canada

When it comes to processing your payroll, you have two main choices: do it in-house or outsource to a third-party payroll provider. Each has its own pros and cons, and the decision will ultimately depend on the size and needs of your business.

In-house Payroll

Processing payroll in-house means you'll need a reliable person, like your company's CFO or a part-time accountant, to manage your payroll. This person is responsible for maintaining records, ensuring timely and accurate payment, and managing all necessary remittances and tax slips.

Third-party Payroll Processing

On the other hand, Canada is home to a range of automated payroll services, with some available entirely online. These services provide payroll journals, statistics, T4s, year-end reports, and Records of Employment (ROEs) – making payroll management easier, especially for startups and smaller companies.

Essential Information for Payroll Processing

You'll need to gather some key information from your employees to process payroll accurately. This includes their full name, current Canadian address, Social Insurance Number (SIN), date of hire and birth, payment amounts, and pay type.

Handling Payroll Deductions

As an employer in Canada, you'll be responsible for making the necessary payroll deductions from your employees' pay each period and remit these to the CRA. Remember, you also need to provide your employees with the necessary information for accurate CRA filing.

Remitting Deductions to the CRA

New employers in Canada will be classified as a regular remitter, meaning your deductions must reach the CRA on or before the 15th day of the month following the deduction month. Deductions can be remitted to the CRA electronically or via paper vouchers.

T4 Slips and Information Returns

Completing a T4 slip for each employee annually and filling out the T4 summary form is part of your payroll responsibilities. These forms can be completed electronically or via an online PDF.

Keep Accurate Records

Lastly, it's crucial to keep comprehensive and secure records. All payroll-related documents must be stored at your business or home address in Canada unless you have explicit permission from the CRA to keep them elsewhere.

After going through all these steps, you'll be well-equipped to manage your Payroll Canada system. But if you still need help, don't hesitate to reach out to us! We're here to provide comprehensive business solutions, from HR to payments, to make your entrepreneurial journey smoother.