How To Do Payroll in Canada? 2024 Free Guide

by | Jun 3, 2022

Are you confused about how to do payroll in Canada? Then don’t be. Because we understand that you want to have a well-organized payroll system. Setting up payroll is a critical aspect for small businesses in Canada. For this purpose, you need to know authentic information about payroll. 

If you’re a small business owner going through the payroll process for the first time, you must comprehend the objectives involved in this process. Yogi & Associates can assist you with several payroll duties. For instance, we can verify your payroll system, check that your payroll taxes have been paid appropriately. And file employee T4 slips and summaries with the CRA.

1. What is Payroll in Canada?

Payroll is the salary an employer pays the employees for a specific time or on a particular day. Moreover, it is the responsibility of the owner to manage payrolls for small businesses.

2. What is meant by Payroll Program Account?

It is a 15-character account number assigned to an employer relating to employment. The payroll program account serves as identification when interacting with the Canada Revenue Agency. A payroll program account number contains three things:

1. Business Number (BN), a nine-digit number.
2. A two-letter code indicating the program type (e.g., for the payroll program, the letters are “RP”).
3. A four-digit reference number allows a company to track each account it uses.

3. Do You Need to Register For a Payroll Program Account?

If any of the following conditions apply to you, then you must sign up for a payroll program account:

  • Pay wages or salaries to your employees
  • Pay bonuses or tips
  • Give benefits to employees
  • Want to report, deduct and remit amounts from other payments

Tip!

If you have a business number (BN), you can add a payroll program account to it. And if you don’t already have a business number, you must apply for a BN first. Then create an account for the payroll program before your first remittance deadline.

4. How Does Payroll Work in Canada?

There are five steps to processing payroll in Canada for employers. Let’s examine each of these actions in more detail:

Establish a Payroll Account

The first step for running payroll in Canada is to open your payroll account. Simply put, you can use your payroll account to remit payroll deductions to the Canada Revenue Agency. If you own a business number (BN), you can add a payroll deduction account to your other registered program accounts, such as GST/HST. However, there are three ways to get in touch with CRA if you want to register for a business number:

Gather the Required Data From Employees

Check each new employee’s SIN card when you hire them. The employee’s name and SIN should also be entered exactly as they appear on the card. Additionally, verify the social security numbers that begin with the digit “9”. This number shows a person who is neither a Canadian citizen nor a permanent resident.

Furthermore, your new employee must complete the proper Form TD1 for the federal and provincial governments. Because the tax deduction amount from an individual’s income is determined by this form.

Perform the Necessary Payroll Deductions

You should include the taxable benefits to your employees’ salaries, before making deductions. Also, ask yourself, do I offer worker boarding and accommodation? Or access to a corporate car, parking, or a low-interest loan? The term “taxable benefit” refers to everything you give an employee and their wages.

Each pay period, you should add any taxable benefits an employee receives to their basic pay before making any payroll deductions. As a result, the total income displays the total amount subject to deductions for income tax, EI premiums, and CPP contributions.

“As an employer, you are required to remit your portion of the CPP and EI premiums as well as the income tax withheld from the wages of your employees.” – CRA

After recording all taxable wages and benefits, you are free to make payroll deductions. Moreover, employers should also make more deductions from employees’ salaries. These are as follows:

  • Canada Pension Plan (CPP)
  • Employment Insurance (EI)
  • Income Tax

Remember!

Your company can have some specific employee deductions. For instance, health benefits, insurance, and retirement programs.

Submit Deductions to the CRA

When you remit deductions to the Canada Revenue Agency, you need the following things to make a payment (remittance):

  • The payroll account number
  • Your remittance of the paydays
  • The end date of your remitting timeline.
  • The gross payroll in the remitting period
  • The number of employees who got salaries on the last payday in the remitting period.
  • Your remitter type and frequency
  • Remittance deadline

Additionally, you can send payroll deductions electronically or via paper remittance vouchers. Email-based account statements are also available. Additionally, you can access your online My Business Account to examine your statements and transactions if you make payments online.

Point to Ponder!

Regular remitters, such as new employers or ROE, must remit their deductions to the CRA. A new employer should remit deductions by the 15th day of the month they made deductions. After remitting deductions, you become a quarterly or accelerated remitter. So you’ll have to do less paperwork.

If you need more details about Record of Employment ROE, please visit our blog, A Comprehensive Guide on Record of Employment. 

Finally, you must complete a T4 slip for each employee each year. Additionally, you must complete the T4 summary form. Likewise, keeping in mind the calendar year to which the information return relates, you must file the T4 information return. And distribute the T4 slips to the employees on or before the last day of February.

Complete all T4 Slips and Information Returns

To file your T4 slips electronically using the CRA’s T4 web forms application, please see the CRA’s T4 – Information for Employers page. This way, you can file up to 100 original, additional, canceled, or amended T4 slips.

5. What Are the Types of the Payroll Schedule in Canada?

The payroll schedule or payroll period refers to the number of employee paychecks. Each company must stick to a payroll schedule or frequency so that the employees know when they may expect to be paid. There are a few more well-liked choices than others, each with advantages and disadvantages. The four most popular options are:

  • Weekly
  • Bi-weekly (once every two weeks)
  • Semi-monthly (twice a month)
  • Monthly

For detailed information about the payroll period, check out our blog, How to Choose A Perfect Payroll Period for Your Employees in 2022?

6. What happens If You Fail to Pay the Payroll Taxes?

As an employer, the CRA will impose fines and interest on you if your payroll taxes are not paid on time. Payroll penalties are determined based on calculation errors, deductions, payment (remitting), or late filing. Additionally, the Canada Revenue Agency will start charging interest the day after your payment was due, but you fail to make the required payment.

Thus, CRA charges payroll penalties on the basis of the following factors:

  • Incorrect calculation or deduction
  • Late or unpaid payment (remittance)
  • Late information return filing
  • Incorrect method of information return filing
  • Wrong payment method (remittance)

7. Do You Need Help With Managing Your Payroll?

When your small business grows, payroll is one area where you can’t afford to make mistakes. Moreover, the secret to avoiding fines and making sure you pay your employees accurately and on time is to work with a certified payroll expert.

For this purpose, you can hire our expert payroll administrator for your small business in Mississauga, Brampton, and surrounding parts. As we have a lot of experience in doing payroll in Canada.  Therefore, feel free to contact Yogi & Associates. And get our payroll services at reasonable rates.

Get in touch with Yogi & Associates!

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