Payroll in Canada
The US and Canada may be neighbors, but they work in different ways! And if you’ve not got the time to learn how payroll or payroll law works in Canada (and who could blame you!) then why not let a payroll company help?
Payroll partners like Skuad can take the weight off your shoulders, taking on the responsibility for payroll processing in Canada.
Let’s learn more about payroll systems in Canada and how companies like Skuad can step in to smooth things out.
What does the payroll process in Canada involve?
If you want to hire contractors or employees in Canada, then you need to meet local payroll requirements. If you’re here reading this blog, then it’s probably your first time looking at setting up payroll in Canada, so we’ll kick things off with the basics.
Essentially, payroll is the workflow required for employers to pay employees and contractors. Having proper payroll practices in place can be make-or-break for a company — good talent simply won’t stick around if you don’t pay them on time.
Breaking this out into a little more detail, payroll in Canada looks more or less the same as in any other country. It includes:
- Gross Pay - The pay according to an employee’s working hours, the overtime they might have completed, and the rate for every hour.
- Deductions - There may be different deductions that you must make from the salary of your employee. These deductions can include taxes, contributions, and other amounts, depending on the country of your employee.
- Payments - After taking out all the deductions you are left with the net salary. You must pay your employee the net salary via the method agreed.
- Records - Employees in most countries are required by law to keep a track of all the payroll records for their employees. Payroll requirements in Canada demand that you keep both paper and electronic records for a minimum of 6 years.
Another thing you’ll need to decide which Canadian employees is the currency you’ll pay them in! Some Canadian contractors and employees will prefer CAD and others USD. Businesses have the flexibility to choose… it’s just a choice you need to make!
Already heard enough and want to leave it with the experts? Chat with the Skuad team today.
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What do you need to know about payroll in Canada?
Canada, much like other countries, has payroll rules that differ from other countries in the world. Since you’re here to learn about paying talent in Canada, let's learn about the intricacies of payroll systems there.
The first thing you need to do is to get a BN (business number) and open a payroll program account with the help of the Canada Revenue Agency (CRA). The BN is your identification number.
The account is a 15 digit number out of which the first 9 numbers are the BN. The CRA website can direct you on how to complete the registration. You may also need to provide them with different information like the payment schedule you want to follow along with the number of employees you have onboard.
The next step of your payroll setup is to gather all the information from your employees, which may include the following details:
- Social Insurance Number (SIN)
- Phone number
- Date of birth
- Bank account information.
Your employees are then required to fill out TD1 forms. This paperwork will help you decide the different payroll deductions you may have to make from each employee's payroll.
Minimum wage requirements
The minimum wage requirement for employees in Canada is $15. Make sure to consider the time and a half overtime pay for the employees who work for more than 40 hours.
Employers need to calculate the gross salary of their Canadian employees. This is the basic amount without any sort of deductions and it’s also the number you state on a letter of engagement or offer.
There is no time limit to gross wages — you can break it down daily, per hour, per annum, or as per the offer letter. You can also include fringe benefits (retirement funds, health insurance, etc.) in the calculation of your gross wages. It’s also worth calculating all other reimbursements you provide to employees.
The CRA website outlines all the taxable benefits you can count in the gross payment — visit the website to get all the details you need or just speak to one of us here.
Issuing paychecks in Canada
There’s always room for human error wherever payroll calculation is concerned; running through a payroll reconciliation is essential, to check if there are any errors. As soon as you clear out all the errors, you can send out the payment for all your employees using a payroll software.
In Canada, you must keep a journal for the payroll entries and make sure that you integrate all the information into the software.
Book a demo with Skuad and take our done-for-you payroll service for a test drive today.
Paid leave for Canadian employees
Canada is quite a generous country when it comes to paid time off.
Based on how long they have worked with your company, Canadian employees will be entitled to:
- 1+ years of service. At least two weeks of vacation pay at 4% of their gross earnings.
- 5+ years of service. At least three weeks of vacation pay at 6% of their gross earnings.
- 10+ years of service. At least four weeks of vacation pay at 8% of their gross earnings.
Employees are also entitled to paid time off for maternity leave (up to 17 weeks — or 63 weeks unpaid), illness, compassionate leave, and bereavement.
Fathers can take unpaid paternity leave of up to 63 weeks.
Public holidays in Canada
In addition to the PTO above, the below dates are public holidays in 2022 and so Canadian employees will not be expected to work.
- New Year’s Day - (Monday, January 3, 2022)
- Good Friday - Friday, April 15, 2022
- Easter Monday - Monday, April 18, 2022
- Victoria Day - Monday, May 23, 2022
- Saint-Jean-Baptiste Day - Friday, June 24, 2022 (Quebec only)
- Canada Day - Friday, July 1, 2022
- Civic Holiday - Monday, August 1, 2022
- Labour Day - Monday, September 5, 2022
- National Day for Truth and Reconciliation - Friday, September 30, 2022
- Thanksgiving Day - Monday, October 10, 2022
- Remembrance Day - Friday, November 11, 2022
- Christmas Day - Sunday, December 25, 2022 (on years where this falls on a weekday, this will be a public holiday too.
- Boxing Day - Monday, December 26, 2022
Payroll taxes and premiums in Canada
If you are running payroll in Canada, you need to be very well acquainted with the taxes and contributions that are deducted from an employee’s salary. This includes different taxes, such as federal income tax, provincial income tax, CCP, QPP, EI, and RRSP.
Different taxes and contributions have different eligibility requirements. The requirements you’ll see below are the same for all the provinces except Quebec.
It’s worth noting that employers take responsibility for sending deductions and other contributions to where they need to be. It is very important for businesses to report the deductions and taxes to the CRA by the 15th of every month. It is possible to change the schedule and come up with one you are the most comfortable with, however.
Income tax for Canadian employees
As is the case in other countries, Canadian employees must pay federal income tax on their earnings — and it’s the employer’s responsibility to pay these deductions. In CAD, the income tax brackets are:
- $49,020 or less - 15%
- $49,020 to $98,040 - 20.5%
- $98,040 to $151,978 - 26%
- $151,978 to $216,511 - 29%
- $216,511+ - 33%
Canadian employees are taxed on their total income after other payroll deductions, such as…
Canada pension and insurance schemes
How much an employer needs to pay into an employee’s pension pot depends on the employee’s location:
- Canada Pension Plan 5.45%
- Québec Pension Plan 5.9%
Employers are also responsible for contributing towards employee insurance, to the sum of:
- Employment Insurance 2.21% (1.68% in Quebec)
- Québec Parental Insurance Plan 0.692%
There is a cap on insurance premiums, though: when either an employee's maximum insurable earnings have been exceeded ($60,300 for 2022) or the maximum employee premium for the year ($952.74 for 2022). For Quebec, the maximum employee premium for 2022 is $723.60.
Other important dates: generation and sharing of T4 forms
Canadian employees have to fill out T4 Forms every time February rolls around. This form is a collection of details about an employee’s earnings and deductions from the past year.
Employers have to submit these forms to the CRA along with a comprehensive summary of all their employees’ earnings and further deductions.
Feeling lost? Book a demo of the Skuad service today and we’ll answer any questions you have about Canada’s payroll laws.
Payroll providers in Canada: What are the benefits?
If you want to complete your payroll responsibilities without any hassle, then working with a payroll outsourcing company in Canada is a must. There are many benefits of outsourcing your payroll — let’s take a look at some of these advantages:
If you outsource your payroll calculations, you’ll get a lot of time back in return. It can be very time-consuming to calculate each employee’s gross pay, deductions, and run the payroll each month. And then there’s the time it takes to keep up with payroll requirements and compliance, too!
Calculations are not easy. And when you’re trying to do payroll alongside all your other responsibilities, well, mistakes are going to happen. That’s why it’s better to call on the experts — they are less prone to mistakes and it’s their job to help you out.
Spotted an issue in your payroll? Think you’re paying too much employment tax for a Canadian employee (or too little)? You can easily reach out to your payroll company and they’ll solve it on your behalf. At Skuad, we pride ourselves on our quick customer service and make it our mission to support your growing business.
Compliance is no joke. Not in Canada and not anywhere else in the world. You need a payroll partner who’ll keep you on the right side of the law.
Take help from Skuad
Skuad’s team of experts can take control of your international payroll. Choose from one of our pre-built payroll packages — one for contractors and one for employees — and get a multitude of benefits. Or if you want to come up with a custom package, you can contact us and we can set one up for you right away.
Book your demo with Skuad today and take your business beyond (or north of) borders.