Doing payroll in Canada means the same steps for every employee: register with the CRA, collect each employee's SIN and TD1 forms, deduct CPP, EI and income tax from each pay, remit the deductions on time, and file T4 slips after the year.
Before the first payday, an employer needs a business number and a payroll program account (the RP account) with the Canada Revenue Agency. The deductions you take from your employees' pay are remitted to this account, and the T4 slips are filed under it.
For each new employee you need the social insurance number and the TD1 personal tax credits returns — the federal one and, outside Quebec, the provincial or territorial one. The TD1 amounts decide how much income tax is withheld from each pay.
For every pay period you work out gross pay — salary or hours times the rate, plus overtime, vacation pay or bonuses — and deduct Canada Pension Plan contributions, Employment Insurance premiums and income tax. The CRA publishes the rates, its Payroll Deductions Online Calculator and the payroll deduction tables. The employer also pays its own share: the same amount of CPP as the employee and 1.4 times the employee's EI premium. In Quebec, the Quebec Pension Plan takes the place of CPP and provincial income tax goes to Revenu Québec.
Most small employers are regular remitters: the deductions and the employer's share are due by the 15th of the month after the month in which employees were paid. If the 15th falls on a weekend or holiday, the due date is the next business day.
Keep the payroll records for six years. After the year ends, prepare a T4 slip for each employee and the T4 summary, and file them by the last day of February. When an employee stops working, issue a Record of Employment within five calendar days after the end of the pay period in which the interruption of earnings happened.
Payroll software for a small business does steps 3 to 5 for you: each pay run calculates the deductions, shows what to remit to the CRA and when, and keeps the history from which the T4 slips and Records of Employment are prepared. You still register with the CRA, collect the TD1 forms and file what the software prepares.
See also: Payroll software for small business in Canada
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