Starting a payroll business can be challenging. You might get confused about how to start? How to proceed and how to pay your employees. “Recent studies have revealed that Canada is one of the strongest countries in the business world. The country is dominated by service industry, making up nearly 75% of its workforce.”
But before stepping ahead, you need to understand what actually is ‘Payroll’ and how you can set up your own payroll business. In this blog, we will guide you and inform you about what is Payroll? And secondly, you will be able to understand how to set up your own payroll?
What is Payroll?
Payroll refers to paying your employees. The business of payroll includes the sum of all the compensations that a business must pay to its employees on a given date. Small business owners can pay their employees through paychecks or direct deposits to the employee’s accounts. For bigger companies, the payroll process is complicated. It includes the total number of hours worked, each employee’s pay, bonuses, overtime, sick time, vacation salary, and the final payment distribution.
How Do I Set Up My Payroll In Canada?
Setting up payroll for your new or growing business is very important. In order to run payroll successfully in Canada, the following steps will help you:
1. Registration with Government Agencies
Having a valid Business Number is essential to running Payroll in Canada. This BN can be easily obtained from Canada Revenue Agency (CRA). A business number helps to recognize your business with the federal agency and to repel statutory deductions such as income tax, Canada pension plan, and employment insurance. Once you are done with the BN registration process, you can go for a payroll account. The business owners who already have a business number can add a payroll account directly from the CRA website.
The goose lays the golden egg. Payrolls make consumers. -George M. Humphrey
2. Collection of Employee Information
To run payroll efficiently, you will need some basic details of your employees. Such as:
- Accruals (bonuses, vacation)
- Bank acocunt details for direct deposits
- Phone Number
- Date of Birth
- Date of Employment
- Social Insurance Number (SIN)
- Amounts to be paid
- Type of payment
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3. Computation of wages and Tax Deductions
Calculation of wages is necessary before you actually pay the workers. The ‘gross wages’ of your employees means the total amount you pay to each employee without deductions. The deductions include taxes and retirement contributions.
While calculating the gross pays, also include the taxable benefits in wages. A taxable benefit includes the bonuses that a business provides to its employees. It may be a car, free parking facility, cell phone, lodging, etc.
"For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."–Winston Churchill
Required Deductions for Payroll
Whether you use a third-party provider or you choose to offer your employees with benefits and support direct deposit, then you may also need to provide the following information to the CRA:
- Type of employee (for example, full-time or part-time)
- Employee number
- Benefit eligibility date
- Province of residence
- Gender of communication
- Banking information for direct deposit
- Charity deductions
- Pension and registered retirement savings plans (RRSP) deductions
Make the Appropriate Payroll Deductions
Once you have decided which deductions are necessary for your company, the next step is to make the appropriate payroll deductions from your employees' pay each pay period. So being an employer, you need to remit these Canadian payroll deductions, and contribute the employer's share of Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums. It is important to know that you provide your employees with the necessary information to file with the CRA accurately. This will help you to run your business smoothly.
Let’s wrap it up!
When it comes to starting a payroll in Canada, you need to understand the concept of payroll. Be well aware of your business needs. Once you get a grasp of payroll, the next step is to examine on the set-up of payroll business. If you are looking for a reliable payroll service in Mississauga, you can easily approach Yogi & Associates to get all the essential guidelines for successfully doing your work. Feel free to contact us anytime!