When you hire employees, one of your responsibilities as an employer is to pay them properly.
In Canada, complying with the requirements of the Canada Revenue Agency (CRA), and making and remitting the correct payroll deductions, is essential for business owners to understand.
For Canadian employers, the following steps provide basic information to start & organize your payroll program.
Open a payroll account with the CRA:
If you already have a business number (BN) and have previously registered for other CRA program accounts (such as GST/HST), you will just be adding a payroll deductions account to your existing program accounts.
Collect information from employees, you will require:
- Full name, mailing address and phone number
- Date of birth and their social insurance number (SIN)
- Emergency contact information
- Signed completed federal and provincial TD1 forms
Determine your payroll schedule and how you will track your employees time:
- Weekly: Every week on a specific day of the week (52 payrolls per year).
- Bi-Weekly: Every two weeks on a specific day of the week (26 payrolls per year).
- Semi-Monthly: Twice per month on two specific dates of the month (24 payrolls per year).
- Monthly: Every month on a specific date of the month (12 payrolls per year).
Prepare the employees paycheque:
- Each pay period, deduct the appropriate Canadian payroll deductions from each employee. This includes tax payable, employee CPP & EI amounts
- Provide each employee a payroll information slip per pay period
Remit the employee payroll deductions monthly:
- Remit the employee withholding amounts along with the employer’s contribution of the Canada Pension Plan (CPP) and the required Employment Insurance (EI) premiums.
- You have to remit your deductions so the CRA receives them on or before the 15th day of the month following the month you made the deductions.
Lastly, as an employer, each year you need to complete a T4 slip for each employee and complete the T4 summary form.
- You must file the T4 information return and give the T4 slips to the employees on or before the last day of February following the calendar year to which the information return applies.
Penalties for noncompliance with Canadian payroll requirements range from fines of $1,000 to $25,000, imprisonment for up to 12 months.
Starting and understanding your responsibilities when establishing payroll, is a necessary function of running a business. Muia Consulting can provide guidance and assist you in establishing the proper foundation from the beginning.
