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4 Signs Your Company Needs Employer of Record Services

Posted by Stacey Duggan

|

Feb 19, 2018 9:00:00 AM

4_Signs_Your_Company_Needs_Employer_of_Record_Services.jpgEmployer of record services have been growing in popularity in recent years. As the size of the contingent workforce has grown, and more businesses and industries have adopted contingent working arrangements, the need for these services has also grown.

The contingent workforce is predicted to keep growing into the future, which means EOR services aren’t going anywhere any time soon. In fact, you might be looking at adopting them for your business in the near future. You may even need these services right now!

Download our free guide on what US companies need to know about paying  employees in Canada.

How can you tell if you need to adopt employer of record services in your business? These four signs may provide some clues.


1. You’re Hiring Many New Contractors

Until recently, most companies used part-time and full-time permanent working arrangements. You’d hire an employee and they’d stay with you until you let them go or they quit. If you didn’t need another person working 40 hours a week, you may have hired someone part-time versus full-time, but that was about as much flexibility as you had.

Now, you have a choice of many different options, all designed to give you much more flexibility. Seasonal, temporary, and contract workers have all become much more popular. Today’s business environment demands organizations be nimble, and a contingent workforce helps you navigate this environment more easily.

If you’ve recently started hiring contractors or you’ve hired quite a few of them, you may find you don’t have the resources to manage them properly. In this case, employer of record services could be just what you need.


2. You Don’t Know the Legislation

Are you expanding your operations into Canada?

This situation can quickly become confusing. How well do you know the legislation in Canada? You may be surprised by the number of differences between Quebec and Ontario! Foreign firms have a large challenge ahead of them. The Canadian payroll and taxation system is quite different from that of the US or the UK. Add in the fact that legislation changes between provinces and territories, and you have a recipe for trouble.

Employer of record services help you avoid any trouble with the Canada Revenue Agency. Since the service provider handles everything to do with payroll, you don’t need to worry the CRA is going to come knocking on your door about a tax error you didn’t even know was an error.


3. Your HR Department Is Overwhelmed

Whether it’s because you’ve suddenly expanded your contingent workforce or because you’re operating in many new jurisdictions, you just don’t have the HR personnel to keep up with payroll and taxes any longer. Your people are constantly run off their feet.

What should you do? Hiring is one option, but you’re not sure your budget can take it. Take some of the load off by getting employer of record services. These services are often a more economical solution than hiring more staffers for the HR department. It allows your team to focus on their core tasks, rather than trying to learn Canadian tax legislation and Saskatchewan vacation time rules inside out.


4. You’re Concerned about Compliance

Maybe you’re operating in a new jurisdiction. Maybe you’ve had a tax audit in the past.

Whatever the reason, you want to make sure you’re compliant. Employer of record services make it easy!

If you see these signs in your business, consider employer of record services as a solution. Talk to a provider today and discover how they can help you run your business more effectively and efficiently by taking over the legal management of your employees.


What US Companies Need to Know about Paying Employees in Canada

Topics: Employer of Record

9 Payroll Solutions to Save Your Business Time and Money

Posted by Stacey Duggan

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Jan 22, 2018 9:00:00 AM

11_Payroll_Solutions_to_Save_Your_Business_Time_and_Money.jpgEvery company is unique and has its own strengths, weaknesses, values, and goals. But almost every company can agree on a common source of frustration: payroll. There are many ways to reduce payroll mistakes, but if you’re serious about saving your business time and money, it’s probably time to implement some of the following payroll solutions.

Download our free guide on what US companies need to know about paying  employees in Canada.


1. Switch to Salaries

This payroll solution may seem like a big change, but it could save you lots of money. When you begin paying your employees by salary rather than hourly wages, it simplifies the payroll process and ends up saving you time every payday. Staff hours won’t fluctuate anymore and you won’t need to keep track of hours worked or fiddle with inputting different values every week.


2. Outsource

If you want to save yourself time and you find that the payroll process has become quite arduous, try outsourcing. You save labour hours by taking the task off of your hands and handing it over to professionals who may be able to complete the process faster.

Not to mention, you may be putting your company at risk by handling payroll on your own.


3. Go Green

Still issuing paper pay stubs? It may be time to switch it up. Make online pay stubs mandatory and you could save your company money on paper and postage. You could take it a step further and save money on tasks other than payroll; like these companies, who not only saved money but also made money by going green.  


4. Open a Second Bank Account

Tax professionals suggest that you operate a separate bank account that is used for payroll only. This separates money that is appropriated for payroll and payroll taxes from general business funds. It helps you stay organized and reduces your chances of making a mistake.


5. Make Direct Deposit Mandatory

The more uniform your payroll practices are, the easier they will be. Direct deposit is more convenient for your staff and it saves you money spent on drawing up paper paycheques.


6. Offer Unlimited Holiday Time

By giving your staff unlimited PTO, you reduce the number of pay-codes you have to deal with. Not to mention, it can dramatically increase morale.


7. Use the Cloud

More and more companies are planning to move payroll to the cloud. Doing so can reduce labour time by eliminating manual work. Even better, you can integrate this with other HR software.


8. Start an Internship Program

There’s never a shortage of students looking for professional experience. Consider partnering with a local college or business school and starting an internship program. This way, you can become better involved in the community while receiving additional help.


9. Allow for Attrition

Attrition can save you money gradually, over a long period of time, and you don’t even have to do much. Simply eliminate as many unnecessary staff functions as possible in order to consolidate positions. This payroll solution can save you big bucks and even increases efficiency.


7 Signs It's Time to Outsource Payroll

Topics: Payroll Processing

7 Audit Issues Canadian Payroll Companies Must Avoid

Posted by Stacey Duggan

|

Jan 12, 2018 9:00:00 AM

7-Audit-Issues-Canadian-Payroll-Companies-Must-Avoid---compressor.jpgAt some point or another, you might have to deal with the CRA if you’ve been audited. However, audits are easier to get through when the business is compliant with CRA guidelines. 

Download our free guide on what US companies need to know about paying  employees in Canada.

Steer clear of these seven audit issues.

1. Personal Expense Reimbursement

Ensuring business and personal expenses are kept separate maintains a clear distinction. Wider-ranging CRA audit guidelines allow auditors to cast a wide net, and they might look into these reimbursements. You don’t want them to appear as hidden remuneration, and offering these kinds of perks may be found taxable, pensionable, and insurable by the CRA.

2. Employee Reclassification

Canadian payroll companies have to classify employees correctly to ensure the right tax amounts are deducted. Don’t use loopholes to attempt to get around employee classification, like terminating an employee and re-hiring them as a contractor. 

What’s the difference between employees and independent contractors? If you’re unsure whether you’ve defined your employees correctly, the CRA website lists helpful tips.

3. Vehicle Allowances

The standard definition of vehicle allowance is a flat rate allowance to drive for work-related purposes. The benefit of personal use of a company vehicle must be included on staff members’ T4 slips as income. Taxable benefits for vehicles indicate they’re pensionable and insurable, which requires reporting CPP, EI, and income tax.

The CRA recognizes two taxable benefits related to company vehicles: a standby charge similar to car wear and tear, and operating a cost benefit related to the number of kilometres a vehicle is driven. Whether it’s a fleet vehicle or personal, best practice for Canadian payroll companies is to keep a logbook for both types to avoid any auditing issues.

4. The Independent Contractor

Independent contractors are not employees, which means they’re paid differently than your salary staff. Employees must be classified correctly to ensure adequate payroll and tax deductions.

Consider making it a mandatory policy to use the T4A slip for subcontractors or independent consultants.

5. Timely Remittances

Not remitting government deductions on time is a CRA red flag. Money that’s collected from payroll sources and GST has to be submitted on time. Knowing how payroll taxes are calculated is important, in addition to knowing remittance deadlines. Failing to submit them on time results in stiff penalties by the CRA.

The government considers these amounts as their own “funds in trust” held by a business on a government’s behalf. Canadian payroll companies should ensure they submit their payments on time and in the correct amounts. Staying diligent about this duty keeps you clear of any auditing mishaps.

6. Salary Expenses

Bonuses, cash payments, and extra compensation for employees should go through payroll to ensure they’re included on the T4 slip. The CRA looks out for this to ensure you’re keeping an updated record of any staff gifts and to guarantee these gifts are properly reported.

7. “Associated” Companies

Canadian payroll companies with other businesses or “associated” companies are more likely to attract additional attention. Businesses with multiple companies can enjoy lower tax rates on taxable active business income due to small business deductions. But this section can get complex fast.

Ensure clear ownership lines and defined majority shares. Increasing the number of shareholders within multiple groups owned by the same people can get sticky. If you are debating moving people around within your organizations, consider using an accountant to assist and keep an accurate record of changes.

What Are You Leaving to Chance by Handling Payroll on Your Own

Topics: Payroll Processing

How Canada Payroll Service Providers Can Grow Your Business

Posted by Stacey Duggan

|

Dec 27, 2017 9:00:00 AM

How-Canada-Payroll-Service-Providers-Can-Grow-Your-Business---compressor.jpgGrowing a business takes a lot of time, energy, and money. Every business owner is seeking to expand sales and make their business better than the year before. Growth is imperative for a business. 

Canada payroll service providers can help you grow your business. With their help, you’ll be that much closer to success.

Download our free guide on what US companies need to know about paying  employees in Canada.

Saving You Time

As the saying goes, time is money. For a business owner, this is even truer. 

Processing payroll on your own can be time consuming—you could be wasting time that could otherwise be better spent on other core business tasks. That time could be used to put plans into place or to role out changes to help your business grow, but you can’t do any of that because you’re working on payroll. 

When you hire Canada payroll service providers, you’re able to hand off the payroll management to them. In return, you can get back your valuable time, so you can focus on growing your business. Lose some of your stress and hire a payroll services provider.

Better Technology

Hiring Canada payroll service providers means you automatically update your technology. A payroll service provider always invests in top-of-the-line software. When you hire such a company, you can take advantage of this benefit.

Having access to better technology can help your business grow because everything is now processed faster and more efficiently. Employees have fewer problems with their payroll because everything is on time and on schedule. Using current technology can show investors, employees, and others that your business is organized and running smoothly.

People are more likely to be interested in a company that has its internal processes sorted out. A business is only as a good as its inner workings.

Eliminating Administrative Hold-Ups

Administrative work can hinder your business growth. If you’re not good with the details and the paperwork, your whole business can fall apart.

When looking to grow your business, it can be hard to make any real progress if your internal systems and processes are a mess. You lose time sorting them out or trying to organize them. But you’re also stuck because it’s hard to grow a business when you’re not sure who is getting paid what, who’s working when, who needs benefits, who’s left the company, etc. Your internal systems and processes should function like a well-oiled machine; when they don’t, it hinders your business growth because nothing can get done.

Hiring Canada payroll service providers to help clean up some of your backend processes gives you a better understanding of the state of your business. With that knowledge, you’re in a better position to make decisions about your company.

Canada payroll services providers can grow your business by helping you save time, aiding you with administrative hold-ups and hang-ups, and giving you access to newer and better technology.

What Are You Leaving to Chance by Handling Payroll on Your Own

Topics: Payroll Processing

Wondering How to Pay International Employees? Follow These 5 Steps

Posted by Stacey Duggan

|

Dec 13, 2017 9:00:00 AM

Wondering How to Pay International Employees Follow These 5 Steps--.jpgIf your business has gone international, it’s time to figure out how you’re going to pay your staff in other countries. Even if you’ve expanded from the US to Canada, there’s a number of steps you must take to ensure your business runs smoothly, your employees are paid on time, and it’s all in compliance with international regulations.

Download our free guide on what US companies need to know about paying  employees in Canada.

In terms of paying international staff members, knowing where to start can be tricky. If you’re wondering how to pay international employees, here are some of the steps you must follow.

1. Register Your Business in Both Countries

Depending on where your business has expanded, it’s an essential first step to register your business in both countries. This is the easiest way to create a smooth transition and ensure your employees are being paid properly.

Even if you’re a Canadian business that’s moved South, it’s still important for you to register your business in both countries. Regardless of whether it’s a big expansion or a small one, it’s a simple first step that will create benefits down the road. Plus, for the most part, registering your business in another country is as easy as registering it in your own.

2. Do Some Research

Before you even think about how to pay international employees, you must research the country’s rules and nuances surrounding payroll. For instances, in some countries, it’s expected that employees be paid monthly rather than bi-weekly. In others, overtime pay is rare or restricted by law.

It’s always best to do research or consult experts before you jump into hiring and paying an international employee.

3. Consider Exchange Rates

If you’re planning a trip overseas, you’re definitely going to consider exchange rates. The same thing applies when you’re hiring and paying an international employee.

As you learn how to pay international employees, having a clear outlook of exchange rates is crucial. It would be wise to have an understanding of your budget and how much you can spend on a new employee, and then factor exchange rates into the equation.

As exchange rates begin to fluctuate, you may find yourself going over or under budget due to an international hire. One of the easiest ways around this is paying your international employees in your own currency. So if you’re an American business that’s hired an employee in Canada, paying them US dollars can reduce complications, as long as you’ve considered the policies and rules that are involved.

4. Classify Them Properly

If you want to avoid trouble when hiring an international employee, do the research and make sure they’re classified properly. It might be easier to claim all international employees are independent contractors so you can just cut a cheque and avoid payroll and tax legislature, but if you do so, you run the risk of having the CRA, the IRS, or a dozen other international organizations penalize you.

Just as you would with a seasonal employee, double check which employee classification regulations you must abide by in terms of paying international workers properly.

In the long run, when you don’t run into trouble, you’ll be glad you took the extra time to classify them properly.

5. Get Professional Help

While it might sound easy, knowing how to pay an international employee is difficult. With varying laws and fluctuating exchange rates, managing payroll can become quite the burden.

To make the process easier and to give you peace of mind, consider reaching out to a payroll service provider. When you outsource payroll, you can rest easy knowing your employees are being paid efficiently and within the laws of the country you’ve expanded to.

What US Companies Need to Know about Paying Employees in Canada

Topics: Business Expansion

How Is Your Payroll Affected by Employing a Canadian?

Posted by Stacey Duggan

|

Nov 22, 2017 9:00:00 AM

How Is Your Payroll Affected by Employing a Canadian--.jpgDo you operate a branch office in Canada? Are you thinking about opening a Canadian subsidiary? Maybe you just finished acquiring a Canadian firm. Any of these situations could leave you wondering, “How does employing a Canadian affect my payroll?” 

It’s a good question to ask! Preparing payroll in Canada isn’t necessarily hard, but it is different. A nuanced understanding will help you avoid mistakes.

Download our free guide on what US companies need to know about paying  employees in Canada.

Two Levels of Government

Employment standards and taxation are handled at two levels of government in Canada. Both the federal and provincial governments are involved in regulating how payroll is conducted. 

Federal employment standards only apply to federal employees, who make up about ten percent of the workforce. The other 90 percent of Canadian employees are covered by provincial legislation. 

Provincial legislation covers topics like vacation pay, minimum wage, and shift lengths. Federal legislation is more important when it comes to social programs such as the Canadian Pension Plan and Employment Insurance.

Where Do You Operate?

Different provinces have different legislation pertaining to payroll, so you first need to figure out what legislation applies to your operations. You’re employing a Canadian, but where do they work? You’ll need different calculations if they work in Montreal than if they work in Saskatoon. 

Once you’ve determined the legislation

x cvoverning your operations, you can begin calculating payroll.

What You Need to Consider

In all provinces and territories, businesses employing a Canadian will need to consider calculations for CPP and EI. You’ll also need to calculate and set aside federal income tax for your employees as well.

Next, you’ll turn your attention to provincial withholdings. Most provinces also assess income tax. Income tax brackets range from as little as four percent for the lowest earners in Nunavut to 21 percent for high earners in Nova Scotia!

The provinces also lay down the law when it comes to vacation pay, leaves of absence, parental leaves, and other types of paid and unpaid leaves.

The federal government also regulates what is considered a “taxable benefit.” This definition is shifting, so be sure to check. Employers commonly misunderstand what is a taxable benefit and what’s not. Avoid any trouble by double-checking.

The Role of the CRA

The Canada Revenue Agency (CRA) is the governing body for almost all tax- and payroll-related issues in Canada. You’ll submit your tax return to the CRA for both provincial and federal taxes and calculations.

The CRA assesses your return and determines if it’s accurate. It’ll also assess any penalties if you’ve submitted an erroneous return. It also has the power to audit your business operations in Canada.

The CRA offers many tools for employers to avoid tax penalties related to payroll. Not only do they explain the payroll tax regulations in Canada, they also provide tools such as calculators designed to help you calculate your return correctly.

Getting Help

If you need help with payroll because you’re employing a Canadian, don’t worry. There are many free tools designed to help you calculate your withholdings. The CRA itself is a good resource, as already mentioned.

Other resources exist. A Canadian payroll service provider may be your best bet. Some offer free resources to help you understand how employing a Canadian could affect your payroll. You could also team up with them to ensure payroll is done right.

Getting Things Right

If you’re employing a Canadian, you’ve taken the first major step by asking how this affects your payroll. The next step is making sure you use this knowledge to good effect. Discover more about your obligations as an employer.

If you’re still having trouble with payroll calculations, consider employing a Canadian payroll services provider. They know the ins and outs of payroll in Canada, and they’d be more than happy to help.

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: Business Expansion

Top 6 Resources For Understanding Canadian Payroll Tax Regulations

Posted by Stacey Duggan

|

Nov 3, 2017 9:00:00 AM

Top 6 Resources For Understanding Canadian Payroll Tax Regulations--.jpgTo the casual observer, Canadian payroll tax regulations may not seem all that complicated. There’s more than meets the eye, however, as all good employers are aware. Understanding Canadian payroll tax regulations can be a bit tricky. 

Download our free guide on what US companies need to know about paying  employees in Canada.

Fortunately, there are many resources to help. These are the top six resources you need in your corner if you want to understand the Canadian regulations around payroll tax.

1. The Canadian Revenue Agency

The Canada Revenue Agency (CRA) is the number-one resource for understanding Canadian payroll tax regulations. The CRA is the body responsible for administering the regulations. 

The CRA provides a number of helpful resources through its website, including different aspects of payroll tax regulations, such as penalties associated with payroll.

2. The Canadian Payroll Association

The Canadian Payroll Association (CPA) is an industry association for those involved in providing payroll in Canada. One of its primary goals is payroll excellence and leadership through education. As a result, the CPA provides plenty of educational materials, publications, and other resources for those trying to understand Canadian payroll tax regulations. 

Members of the CPA can also attend training seminars and other educational events. If joining the CPA isn’t high up on your to-do list, you can still get access to free resources, such as payroll guidelines and information about relevant legislation online.

3. Your Payroll Provider

If you’ve contracted payroll services in Canada, your provider can be another great source of information for understanding Canadian payroll tax regulations. Your provider’s team will have the expertise and knowledge to help you not only understand but fully comply with payroll expectations.

If you haven’t signed up with a Canadian payroll provider just yet, you can still look to these providers as great sources of information. Many offer free resources, including informational blog posts and whitepapers.

4. Canada Business Network

Another Government of Canada resource, the Canada Business Network provides resources on many aspects of operating a business in Canada. Topics include hiring, employment legislation, taxes, and yes, payroll.

5. Provincial Regulations and Legislation

Understanding Canadian payroll tax regulations means you should also look at provincial regulations and legislation. Different provinces administer taxes differently. For example, the provincial rules around calculating and paying vacation time are different in Quebec than the rest of Canada.

Be sure to visit provincial resources pertaining to payroll in the province your business operates in. If you’re not sure where to look, your payroll provider may be able to help you.

6. The Legal Field

A law firm or lawyer specializing in payroll and corporate taxes may also be able to help you better understand Canadian payroll tax regulations. Of course, they’re not going to be able to tell you much your payroll provider doesn’t already know.

Individual pieces of legislation can also be enlightening for understanding Canadian payroll tax regulations, as can court cases. Legislation and court cases are freely available for your review. You may need some help deciphering what these documents mean. Your payroll provider or a legal consultant would be more than happy to help.

Information You Trust

Since Canadian payroll tax regulations have legal implications about how you operate your business, you should always get your information from trustworthy sources, such as the CRA or your payroll provider.

Since Canadian payroll regulations and tax tables are always changing, you should keep up to date with your knowledge too. Be sure the payroll provider you’re working with is also committed to keeping their understanding of Canadian payroll tax regulations up to date.

Canadian Payroll Tax Deduction Calculator

Topics: Payroll Processing

What You Need to Know about the Outsourcing of Employees

Posted by Stacey Duggan

|

Oct 23, 2017 9:00:00 AM

What You Need to Know about the Outsourcing of Employees--.jpgOutsourcing is a hot topic in business circles today. Most often, discussion centres on outsourcing certain processes or tasks, such as payroll or customer service functions. Accounting and other human resources functions are often considered for outsourcing as well. 

Download our free guide on what US companies need to know about paying  employees in Canada.

One trend in outsourcing right now is actually the outsourcing of employees. It’s a popular option for many businesses around the world. Here’s what you need to know about employee outsourcing.

What Is It?

The terminology used for this particular type of outsourcing might seem a little baffling at first. After all, the difference between “outsourced” and “in-house” hinges on the idea of employees: Employees perform internal functions for the company in an in-house department, while in an outsourcing situation, there are no employees. How can you outsource employees if employees are, by definition, in-house? 

The outsourcing of employees is an HR solution more businesses are opting for. What happens in this situation is a service provider, sometimes called a Professional Employer Organization (PEO), looks after all or most of the human resources tasks relating to employees for a company. 

In this situation, the PEO looks after the hiring, firing, and training of employees for the client company. The PEO may even look after the paperwork, such as records of employment and payroll. It may also provide benefits and worker compensation for the employees.

A Joint Responsibility

The idea of “outsourcing” employees first cropped up in the 1970s. Employee leasing became very popular in the 1970s and 1980s, but the system was rife with abuse. In the 1990s, PEOs began to replace problematic employee leasing situations. 

One of the key differences is the PEO and the client company share responsibility in an employee outsourcing situation. They become, in effect, joint employers. While the PEO may handle most of the HR functions related to the worker, the client company still bears some responsibility for day-to-day operations and employee safety.

A Helping Hand

Many businesses can choose to outsource just a small number of the services a PEO can take care of. For example, your business might outsource payroll and hiring functions, although you may send these tasks to different firms. You might also opt to outsource employee training. You might send benefits and compensation work to another third party.

A PEO is different. This provider takes all of the above services and combines them to deliver a seamlessly integrated service. Your employees will be hired, trained, paid, appraised, and even fired by the PEO, depending on what services you contract.

Essentially, a PEO is an employee management system for your business! The organization can work with your internal HR department or its team can become your HR experts. Depending on the size and needs of your business, a PEO can adapt to your specific situation to provide a customized solution for you.

Good Business Sense

Why is the outsourcing of employees a good idea?

Once you understand what the term means, it’s easier to see why the outsourcing of employees is a good idea. For the most part, you’re likely outsourcing most of the functions the PEO would provide anyway. Instead of sending payroll to this firm and assigning hiring responsibilities to another, you’re simply consolidating all of your HR functions with one company that can do it all.

This is good business sense. First, there’s the rule of quantity: If you purchase more services, you’ll likely get a better rate for each service. There’s also the issue of integration. If you have several firms providing different, yet related, services, you’re likely going to run into issues. Perhaps payroll keeps records differently than the recruitment firm you’re working with, leading to trouble reconciling the books about compensation.

The outsourcing of employees helps you streamline your operations, reducing time and saving money. It’s just good business sense!

What Are You Leaving to Chance by Handling Payroll on Your Own

Topics: Professional Employer Organization

Calling Businesses in Canada: Payroll Audit Fines & How to Avoid Them

Posted by Stacey Duggan

|

Oct 9, 2017 9:00:00 AM

Calling Businesses in Canada Payroll Audit Fines & How to Avoid Them--.jpgYou’ve been selected for a payroll audit. It’s not exactly pleasant news, and few business owners want to hear it. Yet, provided you’re doing everything on the up and up, an audit shouldn’t have you too strung out. Yes, it’s additional work, but you’re on the right side of the law. 

For many Canadian business owners, however, audits often leave them with a few payroll audit fines for things they didn’t even know they weren’t supposed to be doing. Here are some of the common payroll audit fines and how you can avoid them.

Download our free guide on what US companies need to know about paying  employees in Canada.

Unreported Payments

The CRA is very concerned about the underground economy in Canada, and one of their goals is to eliminate it. It’s easy to see why: Workers paid “under the table” rarely pay income tax on their wages. For businesses, there’s incentive to pay people above board, such as writing off the expense, but there’s equal incentive to pay people and keep it off the books. 

If you’ve been paying individual workers under the table for their services, you could end up paying costly fines if your payroll is audited. Instead, keep everything above board. There’s one major advantage for you in doing this: You can write off these payments against your taxes.

Improper Reporting of Securities and Stock Options

Employees aren’t taxed for securities or stock options until they exercise or dispose of the option. You, as the employer, however, need to be keeping track of employee stock options and reporting on them. If you don’t, you could end up paying fines for improperly reporting this information.

Reclassifying Employees

You’ve probably heard about businesses firing people, only to rehire them, often at a lower wage. Another common practice is to fire someone, then hire them to perform similar or the same services as a contractor. 

The CRA frowns on this. The act of firing and rehiring may be enough to initiate an audit in the first place. If the CRA finds the rehired worker is conducting similar work in the same or a similar workspace, they’re likely to fine you. 

Avoid this by ensuring you use proper contracts and have the worker agree to all of the clauses laid out therein.

Personal Expenses

Some employers in Canada offer their employees additional “perks,” such as reimbursement for living expenses. The CRA sometimes finds these perks taxable, pensionable, and insurable. If that’s the case, you might be accused of hidden remuneration. 

Avoid fines on this front simply by reporting your employees’ personal expenses, if you offer this perk.

Failure to Maintain Records

This is a particular danger for small business owners: The CRA may cite you for failure to provide or maintain adequate records. You may be struggling to keep the books yourself, or you may have passed the duty to someone else. 

While inadequate bookkeeping is unlikely to sink your business, it could result in a request for compliance from the CRA and a fine of up to $1,000. 

The biggest problem is usually business owners who believe they have proper bookkeeping, but may not have kept records in accordance with the Income Tax Act. If the bookkeeping hasn’t been up to snuff, the CRA may find additional problems during an audit, resulting in more payroll audit fines for the business. 

The solution? Hire someone to keep the books properly! Many services are much more affordable then you think they are. Getting expert help in simply keeping proper records can help you avoid many of the payroll audit fines you’re likely to encounter.

Getting Help

Partnering with a payroll services provider can help you avoid many of the payroll audit fines in Canada. They know the ins and outs of the law and the best practices to keep you on the up and up.

7 Signs It's Time to Outsource Payroll

Make Sure You Know These 5 Audit Issues

Posted by Stacey Duggan

|

Oct 6, 2017 9:00:00 AM

Make Sure You Know These 5 Audit Issues--.jpgWhether you’re managing it in-house or working with a PEO company, the importance of managing payroll correctly isn’t lost on you. 

Yet many companies still struggle. This is especially apparent when tax time comes along and the CRA selects you for a payroll audit. Keep these five issues in mind during the entire payroll process to help prevent an audit.

Download our free guide on what US companies need to know about paying  employees in Canada.

1. Salary Expenses

Salary expenses are among the most common infractions the CRA looks for when it conducts an audit. You might think this is the easiest factor to get right, yet many businesses get nailed on it. 

Why? It seems simple enough: You pay your employees, you note it down on their T4s, and you call it a day. But some businesses forget about bonuses, commissions, and cash payments made to employees, so they don’t go through payroll properly. Other businesses purposely leave these items off the payroll, in effect paying employees “under the table.” 

The CRA is very concerned with the underground labour market in Canada, so you can bet it’ll be watching for irregularities relating to payments.

2. Shareholder Benefits

Shareholder benefits are often incorrectly reported or calculated. Part of the problem is the misunderstanding between accounts payable and human capital managers. They might be on different pages about how shareholder benefits should be handled! 

The best thing you can do to avoid audit issues related to the calculation of shareholder benefits is to check out the CRA’s website. The agency provides exact guidelines about when to report shareholder benefits and how to calculate them. 

Of course, if you don’t follow the CRA’s guidelines, they’re going to find out when they audit you. It’s better to play it safe.

3. Director Fees

Another sticking point is director fees. There’s often confusion about when and how to calculate director fees. Most of the time, these fees aren’t insurable, but in some circumstances, they are taxable and pensionable.

Much of it depends on how directors are selected in your company and the benefits bestowed on them. Some directors are elected while others are appointed. Some are entitled to a stipend. Different situations mean different rules when it comes to paying and reporting these fees.

Again, the CRA’s website lays down the law, so use its guidance to avoid audit issues later on.

4. Parking

Did you know parking is a taxable benefit? Many employers don’t! While there are exceptions, you should treat parking you offer to your employees as a taxable benefit. Doing so will help you avoid audit issues if the CRA decides to investigate your books.

Parking isn’t always a taxable benefit. For example, providing parking for a disabled employee is non-taxable. The same is true of parking situations where there are fewer spaces than employees. In most other situations, however, the CRA considers the provision of parking as a taxable benefit, whether or not you own the lot.

You should report the fair market value of this benefit, less any cost your employee bears. If you pay for your employees’ parking, talk to your payroll provider about how to report this benefit.

5. Automobile Operating Expenses

Do your employees often drive for work? If they do, you’ll need to keep accurate logs about who is driving, when, where, and how far. If you have fleet vehicles—company-provided cars, trucks, or vans—you must keep logs. 

Employees who use personal vehicles for company purposes should also keep a log. You’re not necessarily required to, but it’s a good idea for both you and the employee. Employees often report inaccurately, which leads to you having incorrect data for your books. Use an app to cut down on incorrect reporting.

If you keep an eye on these five audit issues, audit time will be much less stressful!

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: Compliance

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