Congratulations on hiring the first employee for your small business. It’s time to run your first payroll but where to start? Let’s talk about getting your new employee paid and how to fulfill your responsibilities as an employer.
Here’s what you need to know to set up payroll for your small business:
- As an employer, you have obligations to properly calculate and withhold income taxes, Canada Pension Plan (CPP), and Employment Insurance (EI) from your employees.
- You have an obligation to calculate and submit the employer portion of CPP and EI.
- You have an obligation to submit the employer taxes and the withholdings from your employees.
- Get your employee to complete a form TD1 available on here. Ensure your employees are eligible to work in Canada by getting their Social Insurance Number.
- Calculate and withhold deductions for Income Taxes, CPP and EI using one of the methods below.
- Pay your employees only the net amount and set aside the tax amounts.
- Keep proper records of your calculations and proof of payment.
- Submit the payroll withholding taxes by the 15th of the following month.
- Prepare and submit a T4 Statement of Remuneration for each employee. The T4 is due to CRA by the last day of February for the proceeding year.
- Prepare and submit a T4 for any employees who leave your employment within 5 days.
Now that you know your responsibilities as an employer, let’s talk about the easiest ways to pay your employees without becoming an accountant yourself
- Ask us how we can help you with time tracking and payroll processing to simplify your process and use the accountants you already trust. We’ve got the tools to get you and your employees set up for direct deposit and emailed paystubs to save you time! This is the easiest and safest way to pay your employees.
- Use Canada.ca’s Payroll Deduction Online Calculator to calculate weekly or bi-weekly payroll. This solution is useful but doesn’t calculate year-to-date amounts, track CPP or EI limits, and will require you to manually summarize all of the payrolls to prepare T4s or ROEs.
- Use a third-party payroll service such as ADP. ADP is synonymous with outsourced payrolls for large companies. ADP offers an app where payroll hours can be entered.
- Use an online payroll such as WagePoint or Payment Evolution to calculate payrolls and complete direct deposit for your employees.
- Use the payroll function in your accounting software to calculate payroll and cut your employee’s cheques.
- We don’t recommend the use of e-transfer to pay employees.
As you now know, you now have new responsibilities as an employer. CRA doesn’t give businesses a mulligan on the first payroll. Your business is expected to be in compliance from your first payroll. We can help you understand your responsibilities, define a process to get your employees paid, take care of the record keeping and maintain CRA compliance. Contact us to set up a payroll consultation today.
Are you staff employers or contractors? Check out our recent article Employee vs. Subcontractor to learn more.