I'm glad you're here because making a mistake at this stage could result in unnecessary CRA fines, miscalculations of amounts or complaints to the labour board by your employee(s).
Here are the high-level steps we'll cover:
Most payroll systems in Canada will require you to have a Canadian based bank account in Canadian dollars in your company's name.
It's a good idea to set this up first so that you don't run into any delays on your first payment.
If you don't have a Canadian bank account and are looking for ways to pay Canadian employees, please reach out here and we can walk through options using LiveCA's payroll services.
There are four options when selecting a pay frequency for your employees in Canada:
We usually use the following situations to decide which frequency to use:
If you have a mixture of both salary and hourly employees, choose bi-weekly to lower the complexity during each processing period. It's easier to have a consistent cutoff period every two weeks than communicating what the cutoff date is every pay period. Trust me, it gets messy and you'll want to avoid that.
If you're wondering why monthly and weekly aren't chosen very often, it's because monthly is illegal in provinces like BC and tends to anger employees if they constantly run out of money. Weekly, while convenient for the employee, is far from enjoyable on the processing side. Coverage is hard to come by if the payroll person is off, it's more expensive if your payroll provider charges by the pay run and there's more accounting work to do on the back-end.
You'll need to make this pay frequency decision before moving to the next step.
This is easier than it sounds. Once you have a business number, here are the methods to register for a payroll account with the CRA (in order of priority we'd use):
Usually calling the CRA is the fastest method to get a payroll number, but given current backlogs and increased demand on CRA staff, the BRO system (which 100% needs a rename) may be a better bet. Very rarely would someone fill in a form and mail it in, the processing time is usually quite long.
There are three ways to run payroll in Canada:
People tend to use this because they think the cost is free or it's generally cheaper than using a paid system. In our experience, that's not true.
Most people forget they have to hire an accountant or bookkeeper to provide spreadsheets and clean up the work at year-end to manually create T4 files. This is usually more expensive that using a system that automatically creates the T4 (and ROEs).
While you can use the Payroll Deductions Online Calculator (PDOC) from the CRA, you'll need to keep track of year-to-date information such as salary, commissions, CPP and EI in order for the calculator to be close to accurate.
Manually processing payroll in Canada also requires you to manually pay your employee. This means cheques, EFTs, wires or email money transfers will need to be sent on pay day. Watch out for banking limits as hitting those could mean you'll need to resort to other methods that could delay payment.
All in all, we don't process payroll manually for any customers at LiveCA. There's too much risk and because most companies care deeply about the accuracy and accessibility of the information (and want peace of mind), we use online payroll systems to manage the process.
If you're looking for a recommendation - it's not as black and white as giving you a name.
Why? Because each payroll systems has its own set of pros and cons and depending on the type of business you are, you may be better off with one over the other.
LiveCA customers benefit from discounts from most payroll providers, so if you're coming on as a customer, this is one area that we'll make sure we optimize over the first few months.
For businesses that ONLY need to process payroll and nothing else (benefits, HR, time tracking, etc), here are some options we use:
For businesses that want an all-in-one experience with payroll, benefits, HR and time tracking, here are a few options we use:
What about ADP and Ceridian? While both try very hard to support businesses with less than 75 employees, their systems, support and pricing aren't as competitive as the others listed above in my opinion.
If setting up a payroll system isn't something you enjoy, we can do that for you as a customer for no charge.
There are a lot of companies in Canada that will process your payroll for you. They'll probably even set up the system, help you put in procedures and consult on other HR issues.
While we provide those services to LiveCA customers, other outsource payroll providers in Canada include Deluxe Payroll (the old NEBS) and Pivotal Solutions.
The bare minimum information you'll require to hire someone is included on the Federal and Provincial TD1 forms.
If in Quebec, you'll fill out the Federal TD1 form for the CRA and the TP-1015.3-V form for Revenue Quebec.
It's a VERY SMART idea to have an employment agreement in place as well.
It's a good idea to also get a void cheque from any new employee so you can be 100% sure of the account details before setting them up for direct deposit (nothing worse than having to delay payment and possibly lose the payment because it went into someone else's account).
An example of a techy workflow that we're seeing more and more companies adopt could look something like this:
Ideally your payroll system will pay your employees on time and directly into their bank account via direct deposit.
However, if you don't have a system setup and you're paying someone manually, you have the following options:
If you're using a payroll system (which you probably should), ensure you're aware of the processing dates, when money is taken out of your bank account and how those dates are affected during holidays.
As a general rule of thumb, be prepared to close payroll on Monday to pay your team by Friday.
Using a payroll system = you're covered. They'll do everything for you and you don't have to make manual payments (as long as you keep the remitter threshold up to date).
Not using a payroll system = best to pay using the CRA MY PAYMENT system. That way you can pay same-day using your online banking. Although some people use their online banking tax filing system, that requires a 1 business day lead time and sometimes causes people to miss deadlines and incur interest/late filing fees.
For example, here are a list of penalties for paying the CRA late for payroll remittances right from the CRA website:
Every year your company is required to tell the government the total of what your employees earned and how much you deducted from their pay. This report is called the T4 Summary. It's essentially the total of all T4s you issued throughout the year on one single page.
It's the CRA's way of reconciling personal tax returns with corporate returns, an equilibrium of sorts.
For those that do this manually, hopefully this year will be the last because there's a better way.
You guessed it, use a payroll service. Or us.
If you're using ANY payroll service, they'll file T4s for you. It's really that simple.
Things to look out for:
If you follow these steps, use a payroll service and have a decent accountant reviewing the information at year-end, you'll keep yourself out of trouble and look great in the eyes of your employees.
Want to look even better? Try using an ATS and HR system that's integrated with payroll so you don't have to hire an internal HR or Payroll assistant as you grow.
We cover payroll and every other element of your finance department on our free scoping discussions with new customers. If you'd like to chat through a few ideas, reach out here and we'll book in a call to show you exactly how we'd work together.