It could be that you are planning to expand your existing headcount or start a new business in Canada. You may simply desire to know how payroll functions in this country. Whatever be it, this comprehensive guide can assist you to do the needful.

Starting a business in Canada

There are several components present in the Canadian payroll that you need to be acquainted with. You need to be aware of a few factors and undertake thorough research on managed payroll.

Employment & Work Permit types offered in Canada

Some mandatory formalities are to be fulfilled to work in this country. The work permit is to be issued based on the type of work to be done.

Work Permits offered by Canada

Two major work permit types are offered to those seeking to migrate to this beautiful country for work. This again is based on your occupation and qualification. They are:

  • Employer-specific work permit
  • Open work permit

What are the eligibility criteria for all applicants to avail common work permit?

Certain eligibility should be fulfilled to get a common work permit from the Canadian authorities.

  • On the expiry of existing work permits, take into confidence the immigration department authorities to leave this country.
  • Carry sufficient proof to show availing financial aid in Canada for self and family members.
  • Ensure not having any criminal record.
  • You should not pose any threat to the country’s security.
  • Undergo thorough medical examination to prove to be in good health.
  • Provide desired documents to the concerned officials.

There are different types of employment opportunities offered in this country like a full-time, part-time, contract, temporary through some reputed staffing agency and voluntary work.

Payroll calculation meant for small businesses set up in Canada

Small entrepreneurs must initiate a payroll system before hiring employees to work in the organization. The payroll is to comprise of employees’ names, information, deduction, working hours, wages, along with payment records made every tax year and pay period.

Establishing a new payroll account is quite a straightforward process in Canada. However, some mistakes can be somewhat tricky. Hence, you need to be very careful right from the start to avoid such mistakes to establish a successful payroll system.

Payroll setup checklist to follow

  • Business Information:
  • Business No. & CRA Payroll Account No.
  • Business physical address
  • Business Bank Account details
  • Tax Rates & Remittance Schedules
  • ROFs that is issued to date
  • Employee YTD amounts
  • Workers Compensation Details (WSIB/WCB)
  • Employee Information
  • Date of Birth
  • Employee full name
  • Bank Deposit details (to make a direct deposit)
  • SIN
  • TD1s
  • Email Address
  • Home Address

Following this checklist will assist you to establish your company and include your new employees in the recently launched payroll system. Based on the employees’ hired and business type, there could be more required than what is mentioned in the above list.

Establish company details

It is considered to be the first step to be taken to establish a functional payroll system in Canada. Once you finalize your business address, the next step involves entering your Payroll CRA Account No. & Business No. (BN). The latter is termed to be a unique 9 digit no. assigned by the CRA to your business. It acts similar to that of a Tax Id. Not every business however requires a BN. However, it is mandatory if hiring employees to work in your organization. It is a straightforward process and you can do it by fax/mail/over the phone or even online.

When the remittance schedule is concerned, you are to know your remitter type. Your AMWA is likely to be CPP total, EI and Canada Pension Plan, Income Tax to remit annually divided by months, and Employment Insurance.

Based on your business type, you may be classified as Small Remitters, New Small Employers, Threshold 1 Accelerated Remitters, Regular Remitters, and Threshold 2 Accelerated Remitters.

You also need to be aware of the penalties that you may be faced with if you may fail to make remittance payments within the specified due date. Do remember to check the penalty percentage rates vary with the number of days increased.

Payroll Remittance Payment Submission

You need to fill up the following forms:

  • For accelerated remitters, fill up PD7A-RB or PD7A(TM)
  • For quarterly, regular and monthly remitters fill up PD7A

Also, bank account details should be correct. Remember, incorrect information will only make it impossible to make timely employee wage payments.

Adding all new and existing employees to the recently created payroll system is a straightforward process.

For each employee, you need to fill up the following information:

  • First/Last Name
  • Date of Birth
  • Home Address
  • Employment Province
  • SIN
  • Email
  • Hire Date
  • Territorial/Provincial & Federal TD1 Forms
  • Pay Group
  • Pay Type
  • Pay Rate

Next, you need to set up the bank account information of your employees to ensure they get direct deposits.

As an employer, your responsibilities include the following:

  • SIN request for employment
  • SINs starting with 9 number
  • SIN for documentation

You also need to protect your employee’s personal information and security.

Payroll components in Canada

Payroll management tries to cover various aspects associated with wage transactions and meet all employee and government requirements. The main components are:

  • Payroll taxes
  • Employee insurance
  • Employee benefits
  • Gross income

Deduction & Income Types

Additional deductions and income, at times, might need to be accounted for besides regular wages.

Income types

Payroll income is any income that is received apart from regular pay.

Payroll Schedule types

It means how often your employees get paid. All employers must follow payroll frequency/schedule to allow their employees to know their payment date. The common options to be availed are:

  • Monthly
  • Semi-monthly
  • Bi-weekly
  • Weekly

Income Tax Deduction & Payroll Tax

When payroll is concerned, the very first thing that employers think about is making employee payments. Besides this, payroll also helps cover the payroll tax obligations of the employer.

Reliable payroll taxes hold are essential for all Canadian employers. This information can be useful if there is a need to switch on to another payroll system. This way, you do not have to pay the CRA anything in excess or less.

For more guidance, you can take the help of an experienced payroll service company.