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Expanding Your Business? Canadian Payroll Service Providers Can Help

Posted by Shannon Dowdall


Oct 3, 2017 9:00:00 AM

Expanding Your Business- Canadian Payroll Service Providers Can Help.jpgA growing business is a good thing! It doesn’t ease the growing pains you might encounter as you expand your business. As the business gets larger, there are more and more tasks to be taken care of. You need more hands on deck to keep things running smoothly.

This is true whether you’re a Canadian business expanding into new markets across the country, or an American firm looking to come north of the border. No matter where you’re based, however, the fact remains: The business is getting bigger, and you need a helping hand.

Dealing with Payroll

As businesses expand, many leadership groups consider the possibility of sending certain responsibilities out of house. Often, they choose an expert provider to team up with. The provider then delivers the business service, using their expertise in the area.

Payroll is one of the services business owners commonly think about turning over to a partner. There are numerous reasons for this. First, payroll tends to be a routine function. You perform it week in and week out, often in a very similar way. Second, a partner, such as Canadian payroll service providers, have expertise in the area you and your team may not.

As a result, Canadian payroll service providers can usually deliver superior service in less time. Letting the experts deal with payroll allows you to get back to the really important things in your business!

The Provincial Tangle

Another reason businesses team up with Canadian payroll service providers has a more legal aspect. There are many different laws and regulations governing worker compensation, benefits, and even record-keeping. Working with someone who knows the ins and outs of the legalities can save you a lot of headaches when it comes time to close the books.

Canadian small businesses might not think they need the help of a payroll service provider. After all, they’re already operating in one Canadian province, so they know everything they need to know if they want to open up shop in another.

Rules and laws vary from province to province, however, so most Canadian businesses benefit from the expertise of a Canada-wide payroll service provider. They know the differences between provincial jurisdictions, and they can navigate them with ease.

If you’re a Canadian business looking to expand your operations into other provinces, Canadian payroll service providers can help!

Foreign Affairs

Many businesses from outside of Canada also look to expand into the Canadian market. American companies often look to Canada as their first “foreign” market. Many American firms open up branch offices and run operations in Canada.

Of course, the rules are different in Canada versus the United States or anywhere else for that matter. American companies can benefit from the expertise Canadian payroll service providers offer them when it comes to record-keeping, paying workers, offering benefits and other forms of compensation, and virtually everything else. These payroll experts will keep things running smoothly when you come north of the border.

Businesses with headquarters in other countries can also benefit from this expertise when they look to enter the Canadian market.

What about Lawyers?

If all you need is legal advice about how to keep the books, why bother engaging a payroll service provider? Wouldn’t you be better served by consulting a law firm to get the scoop on what’s different in Canadian and provincial law?

Canadian payroll service providers don’t just dole out advice, which is the difference here. Instead, these providers are your partners in actually ensuring your accounting and bookkeeping are on the up and up.

Legal advice might be helpful when you’re just getting started, but the law firm probably won’t be as much help when the CRA decides to audit your books.

Good Business Sense

If you’re looking to expand your business into Canada, there’s no better partner than Canadian payroll service providers.

What US Companies Need to Know about Paying Employees in Canada

Topics: Canadian Payroll

5 Tips for US Companies Processing Canadian Payroll

Posted by Ray Gonder


Aug 5, 2016 12:00:00 PM

5_Tips_for_US_Companies_Processing_Canadian_Payroll.jpgWhen a US company makes the decision to take on Canadian employees, there is invariably a range of logistical issues to consider before it becomes a reality. One of the main factors is payroll processing. While it may seem like a simple, straightforward concept, when put into practice, many US companies soon discover the road is littered with potential pitfalls.

Here are 5 tips for US companies processing Canadian payroll that will help you stay on the right side of the law and manage all the different aspects of the Canadian payroll process.

1. Learn About Canadian Tax Laws

If there is one piece of information many Americans know about Canada, it is that Canadians pay a lot in taxes. For US companies processing Canadian payroll, there are several tax considerations that won’t come up when paying American employees. Elements such as Canada Pension Plan (CPP) contributions, employment insurance (EI) premiums, the proper income tax deductions, and other tax issues must be followed to the letter. 

The Canada Revenue Agency (CRA) doesn’t have a sense of humor when it comes to American companies getting sloppy with their payroll tax practices. If you fail to follow the requirements, you may be looking at some stiff penalties.

2. Vacation, Stat Holidays and Overtime

In most Canadian provinces, employees are entitled to 4% vacation pay that can be accumulated or paid out in each pay period. They also receive holiday pay for statutory holidays, such as Christmas, Easter, Labour Day, Canada Day, etc. Not every province in Canada has the same stat holidays, so any US companies processing Canadian payroll will have to check before they begin the process.

For overtime hours, employers are required to pay 1.5 times the regular rate of pay for any hours an employee works over 40 in a given week. The overtime pay may be calculated on a weekly or a daily basis.

3. Beware the Independent Contractor

In an effort to circumvent some of the tax issues and other payroll laws, some American companies hire Canadian employees as “independent contractors.” Under this scenario, the company would send money from their own US bank account to the independent contractor’s Canadian bank account, and that would be that, nice and neat.

The problem with this type of activity is that, as mentioned above, the CRA doesn’t take kindly to foreign companies trying to game the system. Like the IRS in America, the CRA will investigate, and any US company doing business this way may end up being audited and be handed fines, bills for back taxes, or even have a criminal investigation launched.

4. Navigating the Worker’s Compensation Program

Any US companies processing Canadian payroll need to be aware of the Canadian Worker’s Compensation Program. It differs from the US, as the government runs it and every business that takes on Canadian employees must register an account in every province they have employees. 

Also, the registration process differs from province to province, so it is important to have the correct information and keep all the details in order. Non-compliance by US companies can lead to significant fines, and if an employee does get injured, the process can be lengthy and complex if the employer is not well versed in the rules.

5. Take the Time to Find a Reliable Partner

Naturally, the best way to ensure a smooth transition into the Canadian marketplace is to enlist the help of a partner that has experience in all the complexities of the Canadian payroll process, as it pertains to American employers. At The Payroll Edge, we can act as your Employer of Record in Canada, so everything moves seamlessly and you never have to consider any of the issues mentioned above.

When you have a trusted partner working on your behalf, you can focus on your core business and leave the legalities and tax issues to us. Your employees will be paid on time, and you’ll never have to worry about the minor details that seem to trip up many US companies processing Canadian payroll. Contact us today and we’ll help you get the process started.  

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

Topics: Canadian Payroll

Foreign Employment Compliance is Easy with These 3 Steps

Posted by Shannon Dowdall


Jun 27, 2016 9:00:00 AM

Foreign_Employment_Compliance_is_Easy_with_These_3_Steps.jpgAmerican and other international businesses that want to employ workers in Canada face a number of unique challenges. When it comes to payroll, for example, Canadian legislation lists over 190 regulatory requirements for foreign employment compliance, many of which are very different from human resource laws in the United States.

It might be difficult for U.S. companies operating businesses north of the border to make certain that they're compliant with unfamiliar foreign regulations, especially when it comes to payroll management.

Setting up foreign satellite offices or hiring out-of-country workers isn't nearly as difficult as it might sound, however. The work is still the same. It's just the nature of secure, legal, and proper payment that's tricky.

It's not as simple as putting your Canadian workers through the same payroll system as your national employees. But follow these three steps and foreign employment compliance is easy.

Declare Your Company in Canada

It's incredibly risky—and illegal—to start hiring foreign-based workers for your business without a proper declaration. Make sure that you can legally hire workers in Canada by declaring your company's presence through official means.

Get Employees on a Local Payroll

The main reason for such tough and stringent regulations on foreign hiring practices is that Canadian employees still need to pay Canadian taxes, even if they're working for a U.S. business. That's why it's important to set up a separate payroll system in every country you expand to.

Hire a Canadian Payroll Provider

Your home HR team is likely swamped enough as it is dealing with their own payroll system. When you add a new country to your roster of employees, it involves an entirely new and different system of regulations for compliance. A local payroll company will be better equipped to deal with the nuances of payroll differences between USA and Canada.

Don't let all of your hard work go to waste because you're not in line with foreign employment compliance. When expanding your business overseas—or just over the Great Lakes—it's worthwhile to keep payroll outsourced, too. That way, you can focus your efforts on your company's goods and services, instead of on the fine print. 

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

Topics: Canadian Payroll

Top 5 Mistakes International Companies Make When Processing Canadian Payroll

Posted by Ray Gonder


Oct 21, 2015 9:00:00 AM

Top_5_Mistakes_International_Companies_Make_When_Processing_Canadian_PayrollIt can be hard to imagine, but even major international companies can make mistakes and while most of the time they're simple clerical errors, a mistake when processing payroll can be serious—not just for the employee, but for the company as well. If you're not compliant with the federal Income Tax Act (and the Taxation Act, as in Quebec) it can seriously affect your business.

1. Always Consider Best Practices

It's important to get acquainted with the best practices of a country's payroll methods before you begin any processes within. This will give you a series of guidelines to abide by, not just including information about law but also suggestions on how to streamline the process. Many experts train employees specifically, but you may choose to hire a PEO for processing Canadian payroll, which will save you time and resources while you sort out other aspects of your expanding business.  

2. Familiarize Yourself with CRA Laws

The Canadian Revenue Agency is the federal authority on all tax laws in Canada, so it's a good idea to research and read any material you can find that applies to your situation. The CRA offers a great deal of resources on their own website to ensure that this information is accessible to everyone, but that's not your only option. This is another area a PEO is incredibly helpful in—like CPAs, this is their business and they know everything a business needs to know about processing Canadian payroll in a legal and effective manner.

3. Timing

Timing, as with everything, is extremely important. You'll want to ensure all of your reports are in order, even if the deadlines might be different than you're used to (some even different province to province). In Canada, some provinces have specific laws about how often you are required to pay an employee and for international companies this needs to be taken into consideration as well. Another common mistake is how often people forget to report or remit source deductions on time, which may seem like harmless errors but can cause serious trouble for you in the long run.

4. Miscalculations

Payroll is complicatedthere's more to it than just writing a cheque. Many mistakes are made when things are simply forgotten or miscalculated. Consider overtime and holiday pay, which can vary region to region for example. International companies often have difficulty handling more detailed problems like garnishments, levies, child support, and other fines that employees may owe and that only complicates matters further. It's important to ensure considerable attention is paid to these factors because simple mistakes in data entry alone can cost companies millions of dollars, on top of penalties and fines.

5. Relying Too Heavily on Software

Technology is a major part of any business and while it has expedited a great deal of tasks, it can often become a crutch. Many companies have software that handles a large part of processing Canadian payroll, but perhaps they rely to heavily on it. Make sure you're fully familiar with all the capabilities of each program so you can avoid forgetting to input important data. You also need to ensure that all of your data is well-backed up, so if there's a serious program error or your payroll employee is away, you're still able to access that information if need be.

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

Topics: Canadian Payroll

7 Tips I Wish I Knew before Employing Someone in Canada

Posted by Stacey Jones


Sep 23, 2015 9:00:00 AM

7_Tips_I_Wish_I_Knew_before_Employing_Someone_in_CanadaCanada is the land of opportunity. Many foreign companies see the Great White North as a great business opportunity. Though profitable it isn’t always easy to expand. Specifically, when it comes to employing someone in Canada, there will be hurdles to jump over, challenges to overcome, and a lot of information to know to ensure that you’re being compliant with Canadian employment regulations.

To help you build a workforce in Canada, here are seven helpful tips.

1. Registering

Even though you’ve registered your business in your own country and have been in business for years doesn’t mean you don’t need to do it all over again when employing someone in Canada. Even if you only have one person on your payroll to start with, you’re going to need to register for a business number (BN). With this number, you can then register for a payroll account with the Canada Revenue Agency. An important thing to remember is that you must open up this account before the first remittance due date.

2. Your Independent Contractors May in Fact Be Employees

Be careful. If you’re employing someone in Canada on a contract basis in order to avoid the cost and hassle of dealing with payrolled employees, such as having to pay into CPP and EI and having to follow specific regulations and laws, make sure you’re classifying properly. Even if you have a written contract that identifies the worker as a contractor, the CRA may still make the judgment that the worker is in fact an employee and you will get hit with fines and penalties for this misclassification.

3. The Job Offer

When employing someone in Canada your company should put the job offer in writing. Ensure that the terms in the offer comply with the employment standards for the province or territory that you are operating in. This includes the salary, benefits, overtime pay, duties and responsibilities, terms of relocation, work hours, starting date, and probationary period, among others.

4. The Paperwork

When employing someone in Canada for the first time, you might not know what type of paperwork you need from the worker. So here it is: when an employee starts work, you will need his social insurance number (SIN) and you will need to have him fill out both a federal and provincial TD1 Form.

5. Employment Standards Vary by Province or Territory

Be careful when it comes to employment standards in Canada. They will differ depending on your location of operation. What might be legal or correct in one province may not be in another. For example, there will be different regulations for hours of work, tax rates, deductions, minimum wage, breaks, overtime, frequency of pay, and vacation pay, among other factors. Additionally, federally incorporated companies may be governed by either federal or provincial legislations depending on the type of work being done. Make sure you are following the correct regulations for your own province or territory.

6. Your First Payroll Remittance

Employing someone in Canada comes with certain obligations, one of which is government remittances. You will be required to remit the correct deductions you’ve withheld to the taxation centre. For your first remittance, you will need to send a cheque or money order for the funds due as well as a letter that states that you are a new remitter, the period that the remittance covers, your company name, phone number, and address, and your business number.

7. You Don’t Have to Do It Alone

Employing someone in Canada for the first time can be risky. If you’re not fully knowledgeable about the employment standards and the payroll and tax regulations, you could be putting your company at risk of penalties. Luckily, you don’t have to do it alone. You can partner with an employer of record (EOR). Your EOR will become the legal employer to your workers and will handle the work that comes with this responsibility.

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

Topics: Canadian Payroll, Payroll, EOR, Canadian EOR

Your Top 5 Canadian Payroll Tax Questions Answered

Posted by Karen McMullen


Sep 21, 2015 9:00:00 AM

Your_Top_5_Canadian_Payroll_Tax_Questions_AnsweredHiring employees in Canada comes with certain risks and responsibilities, especially when it comes to Canadian payroll tax. Payrolling your first employee can be stressful: there’s a lot to know, many regulations to follow, and many processes and procedures to go through to ensure you’re following Canadian law and paying your Canadian workers correctly.

Here are answers to the top five questions you might have about Canadian payroll tax, so you can feel confident about hiring your first employee and handling payroll and taxes in Canada for the first time.

1. What are my responsibilities regarding Canadian payroll tax as an employer?

To begin, you’re going to have to get a business number if you do not already have one, and then you’re going to have to register with the CRA for a payroll account. Next, you will need to have the employees you hire provide you with their SINs and fill out the necessary information forms that will determine how much income tax they will pay.

Once employees start to work and accumulate pay, it will be your responsibility to calculate their salaries and their mandatory deductions, including federal and provincial taxes, employment insurance premiums, and Canada pension plan contributions, along with any other deductions that need to be made.

Once these calculations have been correctly made and your employees have been paid, it is also your responsibility as an employer in Canada to remit the workers’ deductions as well as your own employer contributions to the CRA regularly. You will also have to file taxes annually.

2. How can I easily calculate Canadian payroll tax and deductions?

It might seem pretty straightforward to calculate Canadian payroll tax and deductions, but it can become increasingly complex. The amounts will vary according to the TD1 forms your employees filled out as well as the year of operation and the location you’re operating in. Specific rules and exceptions for tax, CPP, and EI deductions can be found in the Income Tax Act, Canada Pension Plan and Employment Insurance Act. The easiest way calculate deductions is to check out the CRA’s tax tables and use an online deductions calculator.

3. What do I need to know about preparing T-4 Slips?

You are responsible for preparing T-4 slips for all of your company’s past and current employees who received income that year. You must send these slips out by February 28 of each year, and keep records of all income paid as part of your Canadian payroll tax obligations.

4. How do I remit deductions to the taxation center?

You will need to send remittances to the government on a regular basis, by the required deadlines, by cheque or money order. The first time you do so you will also need to add a letter stating that you’re a new remitter and provide your business number, company name, address, and phone number, and the period the remittance is for. The deadlines you will have to follow will vary depending on your average monthly withholding amount. Penalties for missed deadlines are 10 to 20 percent of the money owing.

5. Can anyone help?

Absolutely. If your payroll needs do not warrant a full-time, permanent payroll clerk, you can either outsource your Canadian payroll tax needs to a payroll provider or engage an employer of record (EOR). In both cases, you will hand over the responsibility to a third party.

Both the provider and the EOR will ensure that your employees are paid accurately and on time, ensure that all appropriate taxes and other deductions are withheld, that your remittances are filed on time, and that your company is processing payroll in compliance with Canadian regulations. The only difference is that with a payroll provider, you are still the employer of your workers and have full responsibility towards them while an employer of record takes over as the legal employer and you enter into a co-employment relationship.

Learn What Makes Us Unique

Topics: Payroll Tax, Canadian Payroll, Payroll Service, Payroll

How International Companies Can Deal with Canadian Payroll

Posted by Stacey Jones


Jul 13, 2015 9:00:00 AM

How_International_Companies_Can_Deal_with_Canadian_PayrollInternational companies can build brand awareness and increase sales by expanding their business operations in Canada. Canadian consumers want more buying options, and international companies tend to do well here.

However, expanding into Canada isn’t an easy task. The logistics alone can be incredibly time-consuming and tedious—like getting a Canadian resident on the board of directors, applying for a business number, deciding on the most advantageous jurisdiction to incorporate in, learning new labour laws, and setting up banking and insurance infrastructure. Your to-do list just to be settled in Canada will be incredible long.

However, once the start-up administrative headaches have been dealt with and you can start doing business, it’ll all be worth it. But the hard work won’t be over yet—far from it. You’ll still have to learn how to process Canadian payroll—and the payroll regulations in the country are complex and stringent, so you have to do it right. And this isn’t a one-time responsibility; it’s an ongoing process, it’s going to change, and you’re going to have to keep up.

International companies have two options when it comes to dealing with Canadian payroll: manage it internally or outsource the responsibility. Let’s take a closer look at both options.

Deal with It Internally

Your natural inclination might be to deal with Canadian payroll in-house. This way, you have full control of the process, and you might think it’s the most cost-effective option. If you’re dedicated to learning the ins and outs of the local payroll regulations and have the time to spend processing payroll every pay period, this could work out in your benefit.

Unfortunately, that’s not usually the case. You’re busy on core business activities and probably won’t have the time it takes to handle it properly; you might rush the process and make mistakes. And if you’re not learning the payroll regulations—how to set up the right government accounts, which mandatory and voluntary withholdings to deduct, what remittance deadlines apply to you, what forms to fill out, and so much more—you risk damaging your company’s image by improperly paying your Canadian workers and getting hit with interest charges, penalties, and fines. 

Some international companies think the process is simple: just classify all your Canadian workers as independent contractors, convert some funds, and cut some cheques in order to avoid complying with tax regulations. But the government is wise to this deception, and it will cost you far more in the end than if you were to comply with the regulations in the first place.

Outsource Canadian Payroll to an EOR

An employer of record, or EOR, can take the burden of processing Canadian payroll off your hands. This can be beneficial for several reasons. If you’re not ready to establish a Canadian presence yet, if you don’t have the time to process payroll, or if the payroll regulations are just too complex and stringent for you to comply with on your own, then partnering up with an EOR is a great idea.

This is how it works: the EOR will become the legal employer of your Canadian workers so it will take on all of the responsibilities and liabilities that come with it.

Your EOR will send out pay stubs and pay cheques, fill out all of the correct paperwork, work with the government, ensure full compliance with Canadian law, send remittances, and file the necessary forms on your behalf. It will deal with tax deductions, CPP and EI contributions, allowances, expenses, benefits, vacations and holidays, and everything else that’s required.

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

Topics: Canadian Payroll, International Companies

3 Things a UK Based Company Needs to Know About Payroll in Canada

Posted by Stacey Jones


Jul 1, 2015 9:00:00 AM

3_Things_a_UK_Based_Company_Needs_to_Know_About_Payroll_in_CanadaWhether you employ one or a thousand Canadian workers, you must understand the concept of payroll in Canada if you’re considering processing payroll on your own. Payroll in Canada can be difficult for a UK based company to figure out, but it’s your legal and financial duty as an employer to make sure it’s done right.

You can’t just convert some funds into Canadian dollars and make a bank transfer. Your payroll processing must take into account federal and provincial or territorial income tax and other deductions, filing deadlines, remittances, and account registration.

To get you started on the right track, here are three things that you, as the owner of a UK based company, should know about payroll in Canada.

The Canada Revenue Agency Is Stringent

We’re going to warn you right now: dealing with the Canada Revenue Agency, the Canadian government body that deals with all things payroll, is going to be stressful. The sheer amount of paperwork you’ll have to fill out alone is going to be incredibly time consuming and complex. Everything must be filled out perfectly—no exceptions—or you could face a fine.

Then, there are the remittance deadlines—the specific days that your UK based company will need to keep track of in order to send your payroll tax deductions to the government in a timely manner. If you miss a deadline, you’ll be automatically smacked with a penalty—and it can be pretty hefty. It could range from 3 to 10 percent of the interest owed depending on how late you are. And then, if you’re late a second time, you can get hit with a 20-percent penalty! When you have a lot of employees, this can hurt your bottom line considerably. Unfortunately, the CRA doesn’t care that you’re new to doing business in the country. It doesn’t care that you don’t have a handle on payroll in Canada yet. It doesn’t care why you remitted late. You’ll get a penalty. No ifs, ands, or buts about it.

Mandatory vs. Voluntary Deductions

For almost all of your UK based company’s Canadian employees, you’ll have to deduct federal and provincial income tax, Canada Pension Plan premiums, and Employment Insurance contributions. These three withholdings are mandatory.

On the other hand, voluntary deductions can also be requested. These can include employee contributions towards the cost of a retirement plan, health and dental insurance, life insurance, or child support payments. 

You Must Consider Applicable Variations

Payroll in Canada is not cut and dry. There are variations, exceptions, and maximums that you’ll have to consider when you process payroll. A company operating in the province of Ontario won’t deduct the same amount of tax from employees as a business operating in British Columbia. Even holidays and overtime pay regulations vary by province or territory—so you’ll need to get acquainted with the ones that are in effect in your location.

And one employee’s deductions might not match exactly how much you deduct from the guy working next to him. For example, age makes a difference in whether or not you can deduct CPP premiums from employees, and deductions must stop after a maximum. The amount of taxable earnings an employee claims will also make a difference in how much tax you deduct.

A EOR Can Help

When you employ the services of an employer of record, you don’t have to try to navigate the complexities of payroll in Canada on your own. You’ll have access to hands-on experts, resources, and advice to ensure your payroll is done right, every time.

Canadian Payroll Tax Deduction Calculator

Topics: Canadian Payroll, UK Company

How an Australian Company Can Calculate Canadian Payroll

Posted by Stacey Jones


May 6, 2015 9:00:00 AM

How-an-Australian-Company-Can-Calculate-Canadian-PayrollExpanding 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.

Remittances—Be Timely

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.

Canadian Payroll Tax Deduction Calculator

Topics: Canadian Payroll, australian company, calculate canadian payroll

3 Easy Steps to Calculating Canadian Payroll

Posted by Stacey Jones


Jan 26, 2015 9:00:00 AM

3_Easy_Steps_to_Calculating_Canadian_PayrollIf you’ve hired Canadian employees to work for your business, you’re going to have to learn about calculating Canadian payroll. Part of your responsibility as an employer is to pay your workers properly, which means complying with the regulations set forth by the Canada Revenue Agency and making the correct payroll deductions and remitting them to the government. If this is your first try at calculating Canadian payroll, here are three easy steps to get you started.

1. Before You Start Calculating Canadian Payroll

Before you even start thinking about the calculations, you will need to open up an account with the CRA. This is the payroll account you will be operating as part of your payroll process in order to properly remit deductions from your employees’ paycheques. You’ll need a registered business number for this step.

Next, you’ll need to collect the required information from your workers, such as their SIN numbers and completed provincial and federal TD1 forms, which are the employees’ personal tax credits returns. These forms are necessary since they will tell you how much tax to deduct for each employee.

2. Make and Remit Deductions

Effectively calculating Canadian payroll means making the appropriate deductions at each pay period. This step starts with adding the worker’s taxable benefits , which are anything that you provide him other than his regular wage, such as a company car or board and lodging. The total income amount will affect how much tax is deducted, so the value of these taxable benefits needs to be added to the total first in order to get the right calculations.

Next, make the deductions. These include income tax, Canada Pension Plan contributions, and Employment Insurance premiums. To deduct the appropriate amount of income tax, you can use a payroll deductions calculator online or the provincial/territorial deduction tables where the employee works.

Canadian Pension Plan deductions are for employees aged 18 to 70, who aren’t disabled, are in pensionable employment, and aren’t receiving a CPP or QPP pension already. There are maximums and exceptions to these deductions, so calculate carefully. The rates can be found online through the Canada Pension Plan website.

For Employment Insurance, you can also use the Canada Revenue Agency’s charts on rates and maximums or an online calculator. Employee EI deductions have a maximum—so once you’ve reached it, you must stop deducting them, which means precise calculations are important here. There are also some EI exceptions, such as with special payments and hiring family members.

The first time you send a remittance to the Canada Revenue Agency, you’ll need to send a money order or cheque to the Receiver General with your business number on the back, along with information saying you’re a new remitter and which period the remittance covers, as well as all your contact information. Every time after the first, CRA will send you remittance forms in the mail once they are due.

3. Reporting

Lastly, you’ll need to report all of your workers’ income and appropriate deductions on T4 or T4A slips, along with an information return and T4 summary form before the end of February of each year. All of your payroll records and supporting documents must be kept in Canada, either at your company office or at your residential home for a period of six years.

Effectively calculating Canadian payroll while making, remitting, or reporting employee deductions is vital. Mistakes can lead to hefty fines and even time in jail. The penalties certainly aren’t worth the risk of poor payroll management, so make sure your calculations are accurate and in order.

Canadian Payroll Tax Deduction Calculator

Topics: Canadian Payroll

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