Expanding into Canada and utilizing Canadian workers can be a great way for an Australian company to increase brand awareness and profitability in a new market. Though it may seem pretty cut and dry, calculating Canadian payroll isn’t as simple as it seems. An Australian company must follow the country’s payroll laws in order to be above board. You have to learn a whole new batch of rules and regulations if you want to pay your workers legally. The first step to paying your workers is to learn to effectively calculate Canadian payroll.
Here are some of the things you should know before you get started.
Mandatory Deductions—The Big Three
As the owner of an Australian company, this first step will surely differ from what you’re used to. The deductions you must make in Canada are unique to this country. There are three mandatory deductions that you must make based on your employees’ gross income. First, you have taxes; this includes federal and provincial taxes. The amount you deduct from pay cheques for taxes will vary based on what province or territory you’re operating in and how you’ve classified each employee. It will also depend on how much income your employees are making.
The other two mandatory deductions are CPP and EI. Canadian Pension Plan and Employment Insurance withholdings will depend on many factors—such as employee age, classification, employment type, and location, as well as the maximums and exceptions set forth by the government.
It is your responsibility to calculate Canadian payroll effectively, to understand the regulations that affect your business and employees, and to keep up with any changes. You can use a free online payroll calculator or access the Canada Revenue Agency’s website for help with this step.
Your Company’s Remittances—Get It Right
Your employees aren’t the only ones paying contributions. Even though you run an Australian company, you will have to match a percentage of your workers’ contributions. Again, it’s your responsibility to get the total contributions correct—if you pay too little, you could face fines, but if you pay too much, you won’t get a refund.
When you accurately calculate Canadian payroll you’ve got your first step down. Next, you have to remit the withholdings that you’ve deducted to the government. This takes diligence. You can’t be late on your payments or you’ll have to pay interest fees. You must know your deadlines—which will vary depending on your remittance amounts.
Reporting—the Last Step
Lastly, you need to report your payroll information to the Canadian government on an annual basis. You’ll have to let the government know how much income your employees earned and how much you’ve deducted for taxes, CPP, and EI. You must complete this step so your Canadian workers can file their own taxes.
Get a Partner—Outsourcing
At first glance, it might seem easy to calculate Canadian payroll, but there is a lot of paperwork to fill out, a lot of regulations to understand, many deadlines to remember, and tons of calculations that need to be exactly right in order to stay compliant with Canadian payroll laws.
Luckily, you don’t have to do it alone. An Australian company has the option to form a partnership with a payroll service provider or employer of record. The firm you choose to work with can expertly handle all of these administrative tasks for you, so you can get back dealing with the more important work that needs your attention.