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.
Let’s take a look at all the components of payroll management in Canada.
Payroll in Canada 101
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 to the Skuad team today.
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 hiring employees 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.
Deductions and taxes
If you are working on 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 are the same for all the provinces except Quebec.
When you use payroll software, it can calculate the tax and contributions on its own by taking information from the TD1 forms your employees filled out earlier.
These are the tax and deductions offered by Canada:
- Canada Pension Plan - 5.45%
- Employment Insurance - 2.21% (1.68% in Quebec)
- Québec Pension Plan - 5.9%
- Québec Parental Insurance Plan - 0.692%
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.
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.