Are you an employer?
You are an employer if you pay salary, wages, bonuses, vacation pay or tips, or give someone taxable benefits such as board and lodging. A contract that calls a worker self-employed does not settle it. What counts is how the work is actually done, including who controls it. If you are not sure, the CRA can rule on a worker’s status.
Opening a payroll account
Payroll runs through a payroll account (letters RP) added to your Business Number. Open it before your first remittance is due, which is the 15th of the month after the month you first take deductions from a pay. How to register is in registering a business with the CRA.
When you hire someone
- Ask for their social insurance number within three days of their first day.
- Have them fill out the federal TD1 form and the TD1 for the province where they work. Their deductions depend on it.
- When they leave, or have a break in earnings, issue a Record of Employment.
What to deduct
| Deduction | Who pays, and your share |
|---|---|
| Canada Pension Plan (CPP) | Employees from 18 until they turn 70, with some exceptions. You pay the same amount. |
| Second CPP (CPP2) | Earnings between the first and second CPP ceilings. You pay the same amount. |
| Employment Insurance (EI) | Insurable earnings up to the yearly maximum, at any age. You pay 1.4 times the employee’s premium. |
| Income tax | Everyone, at any age. There is no employer share. |
Rates and maximums change every January. Use the CRA’s Payroll Deductions Online Calculator (PDOC) or its tables rather than last year’s figures. Taxable benefits, such as personal use of a company car, are added to pay before you work out deductions.
Sending deductions to the CRA
You send what you deducted plus your own share. How often depends on your average monthly withholding two years back:
| Remitter type | Due |
|---|---|
| Regular | By the 15th of the month after you paid |
| Quarterly (eligible small employers) | By the 15th of the month after each quarter |
| Accelerated, threshold 1 | Pay from the 1st to the 15th by the 25th, the rest by the 10th of the next month |
| Accelerated, threshold 2 | Within three working days after each of four periods a month |
A remittance counts when the CRA receives it, not when you send it. Late remittances are charged a penalty and interest.
At year-end
Give each employee a T4 slip and file the T4 information return by the last day of February. With more than five slips you have to file electronically.