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A Compliance Regulation Checklist for Canadian Payroll and HR

Posted by Shannon Dowdall


Jun 11, 2018 9:00:00 AM

A_Compliance_Regulation_Checklist_for_Canadian_Payroll_and_HRPayroll and HR compliance are important aspects of any business. This is certainly true whether you operate in Canada, the United States, or another country around the world.

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Compliance is, of course, a big job. The legislation governing businesses can be quite convoluted, and laws are always changing and evolving. Take a look at the employment legislation in Ontario and Alberta. Both provinces introduced sweeping changes in 2018. Quebec appears poised to follow suit.

Keeping on top of your compliance can thus be a tall task. Using this checklist designed for HR and payroll in Canada can help you get a leg up on your compliance activities.


The first thing you should do when considering your payroll and HR activities in Canada is set up good rules for your record-keeping. The Canada Revenue Agency (CRA) demands good record-keeping from all businesses operating within Canadian borders. In fact, the federal Ministry of Finance outlines exactly what it takes to keep good records.

Take a look at the Ministry’s guidelines. Is your business keeping records in line with the requirements? If not, what can you do to ensure good record-keeping takes place? You may decide to upgrade the technology you use or streamline a process.

What happens if the record-keeping requirements aren’t met? The penalties associated can become quite hefty. If the CRA ever audits your business, you’ll want to be sure you have your records in order.

CRA Payroll Withholding

Payroll has many nuances, which can make it tricky to maintain compliance with the regulations. Tax withholding is a particularly important aspect of payroll compliance. A Canadian payroll calculator can help you determine exactly how much you need to withhold.

You’ll also want to do some reading on the regulations around what qualifies as taxable income, including benefits. The Canadian payroll calculator can help you here as well. Be sure to use an up-to-date version, so that the latest rules and regulations are being applied.

Vacation Pay

Each province in Canada has its own regulations surrounding vacation pay. If you’re monitoring HR and payroll compliance, you’ll want to be sure you’re using the most up-to-date rules for calculating vacation and vacation pay in each province you operate and pay employees in.

Overtime and Shift Scheduling

As mentioned above, both Ontario and Alberta began the process of revising their employment legislation standards in 2017. The code revisions began to take effect in early 2018. Employers will want to pay particular attention to changes regarding overtime, overtime pay, and shift scheduling in both provinces.

This is an important aspect of payroll and HR compliance for businesses operating in any province to pay heed to. Just as Alberta and Ontario have both changed their laws pertaining to each of these subjects, so too do other provinces handle them differently.

Pay Equality, Pay Transparency, and Discrimination

Ontario became the first province in Canada to introduce pay transparency legislation. The province has had pay equality legislation on the books for some time now. Pay transparency is designed to strengthen pay equality by allowing employees to see what an employer pays each and every person.

Discrimination is another long-standing concern for businesses in Canada and Canadian governments alike. HR professionals will want to look at the regulations around anti-discrimination and anti-bias measures and ensure they’re complying. For example, there are certain interview questions you cannot ask during the hiring process. Check your own interview process and be sure to remove any of these questions.

Ongoing Monitoring

Perhaps the most important thing to do when it comes to compliance in payroll and HR in Canada is ensure you’re monitoring your compliance. As demonstrated by Ontario and Alberta, laws can and do change. Keeping an eye on what’s required of you and striving to go above the minimums set out in the law will help you maintain compliance.

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

Topics: Compliance

How to Avoid Employee Misclassification Penalties before They Happen

Posted by Shannon Dowdall


Mar 30, 2018 9:00:00 AM

How_to_Avoid_Employee_Misclassification_Penalties_before_They_Happen.jpg“Penalties” isn’t a word most employers like to hear. Unfortunately, they’re probably more common than you’d like to think. They’re especially common for international companies with Canadian operations, partially because their staff members are less likely to be familiar with the nuances of Canadian employment legislation and payroll taxes.

Employee misclassification penalties are one particularly common type of problem international employers bump into. The good news is they’re relatively easy to avoid.

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What Are They?

Employee misclassification penalties arise when an employee is judged to have been misclassed for tax purposes. For example, you may have classed an employee as a contractor, but then the CRA reviews their employment and suggests they’re actually a full-time employee instead.

Most often, employee misclassification penalties arise when employers classify their employees using one definition while the CRA decides the employee falls into a different category.

The Linguistic Divide

Most often, employee misclassification happens because of a simple misunderstanding of terminology. It’s particularly common for international employers for this reason. In your home country, an “independent vendor” may be defined one way, and you applied that definition to your Canadian employees. However, in Ontario, an “independent vendor” is defined differently, and your employee doesn’t fall into this category.

Employee misclassification is the result.

Sometimes, employers willfully misclassify employees in an effort to avoid payroll taxes or to gain other benefits. An example would be letting an employee go, then hiring them back to do the same job as a “contract worker.” The CRA would identify this as misclassification because the employer has the employee doing the same job, just with a different classification. The employer appears to be abusing classification categories for their own advantage, to the employee’s disadvantage.

How Can You Avoid Misclassification Penalties?

The answer to this question appears to be quite obvious at first. If you don’t want to face employee misclassification penalties, make sure you classify your employees correctly! Since the cause of employee misclassification penalties is employee misclassification, using the correct categories will prevent penalties.

Of course, this is easier said than done in most cases. Most employers, particularly international employers, just don’t realize they’re misclassifying their employees. The “linguistic divide” issue, where different jurisdictions use different definitions of the same terms, causes confusion. Misclassification is often unintentional.

The remedy for this problem is knowing the definitions of each different employee class in the jurisdiction where you’re operating. Just because you class an employee one way in the United States doesn’t mean it will be the same in any part of Canada.

Work with a PEO

It’s a tall task to ask your HR employees to learn the ins and outs of up to 11 different definitions for one employee. The job might be the same across provinces, but each province may have a slightly different definition or require a slightly different classification.

Working with a professional employer organization (PEO) can help alleviate this stress. The PEO’s staff is familiar with these definitions already. They can help you identify the correct way to classify different employees across different provinces. They can even help you manage the payroll implications of each classification.

The PEO is also familiar with Canadian employment legislation, so they’ll be able to tell you how to go about hiring, letting go of, and rehiring employees in the right way.

You Don’t Need to Pay These Penalties!

Avoiding employee misclassification penalties is relatively simple. Review your employees’ classifications and adjust them if necessary. If you need help or clarification, a PEO is a great resource.

You can avoid these penalties before they even happen. Your business doesn’t need to pay these penalties so long as you avoid them before they occur.

What US Companies Need to Know about Paying Employees in Canada

Topics: Compliance

Struggling to Maintain Payroll Compliance? Follow These 4 Tips

Posted by Shannon Dowdall


Feb 26, 2018 9:00:00 AM

Struggling-to-Maintain-Payroll-Compliance-Follow-These-4-Tips---compressor.jpgPayroll compliance is a big concern for many companies today, no matter where they operate. If you’re a firm with international operations, however, you’ll know compliance in your payroll activities is all the more complex and all the more important.

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If you have operations in Canada and you’ve been struggling to maintain your payroll compliance, you can stop fretting. You can make compliance a breeze with these easy-to-follow tips!

1. Keep Tabs on Legislation

Have you looked at the Canada Revenue Agency’s website recently? If not, you should probably head over there and take a look around. The CRA’s website is an invaluable resource. It reports on the current legislative environment for payroll, including updates, penalties, and procedural information. 

You should also keep tabs on the legislatures of the province(s) you operate in. Ontario, for example, passed Bill 148 in November. The legislation was proposed in April, available for public comment during the summer, and finalized in November 2017. The full text of the law, in addition to summarizations, is available from the government’s website. 

Newspapers, magazines, and other periodicals are also important resources for keeping up to date on legislative changes.

2. Keep Good Records

One of the best things you can do is put good record-keeping practices in place if you want to maintain payroll compliance. Good records will show you exactly what was done, by whom, and when. 

Even if record-keeping alone won’t maintain full payroll compliance, it can be very useful if you find an error in your payroll. Going back and correcting the error, and even tracing how it happened in the first place, is much simpler when you have good records to refer to. 

Good records are actually part of compliance in Canada. The CRA can penalize you if you fail to maintain adequate records, as defined by the federal government. Good records are also important should you ever be audited.

3. Partner with a Payroll Provider

Keeping tabs on legislation in the US is a big enough task. Asking your HR department to learn and monitor legislation changes in a Canadian province, or maybe two or three, may not be met with great enthusiasm.

If your team members are feeling lost at sea or overwhelmed by the amount of work they need to do, there’s an easy way to maintain compliance and lift the burden from their shoulders. Team up with a Canadian provider to administer payroll for your Canadian employees.

Why work with a Canadian payroll provider? Quite simply, they know the ins and outs of the Canadian payroll environment. They can administer your payroll, monitor legislation for changes, and make recommendations about policy changes for your consideration. Partnering with a payroll provider is one of the easiest steps to take when to comes to maintaining payroll compliance.

4. Not Sure? Ask!

Many business owners and managers make the mistake of muddling through their payroll all by themselves. They mistakenly believe there’s no one to ask, or that if they ask, they’ll be admitting some sort of guilt.

If you’re not sure about payroll, however, the best thing you can do is ask. There are many resources available online, in addition to the CRA and provincial legislatures.

If you’re working with a Canadian payroll provider, you can always call on their expertise to help answer any questions you have. If you run into trouble, they can help you. Even if you don’t work with a provider, many have excellent free resources to help you work through the tangles of the Canadian payroll regime.

Payroll can be complex and changing legislation can make it difficult to keep up and maintain compliance. Following these four tips will help you stay ahead of the game.

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

Topics: Compliance

What Canadian Payroll Rules Do You Need to Know?

Posted by Ray Gonder


Feb 12, 2018 9:00:00 AM

What_Canadian_Payroll_Rules_Do_You_Need_to_Know.jpgDespite Canada and the U.S. being very similar with respect to culture and economics in some regards, operating as a foreign business across the border comes with many unforeseen challenges. Perhaps one of the biggest challenges, other than registering as a Canadian business and establishing an administrative presence, is following the country’s complex payroll rules.

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Canada requires foreign businesses, whether U.S. or international, to follow all Canadian payroll rules. While this requirement might not sound daunting at the outset, consider the following: Canada’s employment standards are constantly evolving and vary on both the provincial and federal levels. What might be the status quo in Québec, for instance, is not so in Ontario.

With little room for error if you fail to make proper government remittances or pay the right minimum wages, your business’ success rests on making Canadian compliance a priority. One way you can do that is by learning what Canadian payroll rules are the most important to know.

Minimum Wages

You are required to pay your Canadian employees at least the minimum wage according to their province or territory. Many occupations in Canada have an hourly wage, but there are some exceptions, such as independent contractors who are paid on a project-to-project basis. The minimum wage is also affected by whether you’re hiring students as well as by the type of work being performed.

For instance, in November 2017, updates were made to Ontario’s pay rules with the passing of the Fair Workplaces, Better Jobs act. Ontario employers are now required to pay a minimum wage of $14.00 to most employees, with the rate scheduled to go up to $15 next year. Students and other special minimum wage workers, such as those who serve alcohol, have different minimum rates, which will increase by the same percentage as the general minimum wage over time.

Tax Deductions

When you hire employees, making the proper deductions from their payroll is crucial. You’ll need to make certain they’ve given you their Social Insurance Numbers (SIN) and their TD1 forms. A TD1 is the form that will help you determine how much tax needs to be deducted from your employees’ employment income. Other deductions include, but are not limited to:

  • Canada Pension Plan (CPP)
  • Employment Insurance (EI)

As with many Canadian payroll rules, how a TD1 is filed varies in different provinces. Québec is the most notable example, in which employees must use both a federal TD1 and a provincial form called a TP-1015.3-V. Source Deductions Return.

You must make regular government remittances on time for these deductions. Failure to remit or late remittances will result in steep monetary penalties, with additional penalties and interest if you are knowingly avoiding remittances.

Proper Classification of Workers

The definition of an employee versus an independent contractor is also part of Canadian payroll rules. An employee in Canada is entitled to vacation pay, public holiday pay, overtime pay, termination pay, severance pay, and benefits, as well as income deductions for taxes, EI, and CPP. An independent contractor is considered self-employed and therefore not entitled to the same benefits as an employee. You also don’t have to worry about deductions.

Willfully misclassifying your workers in order to avoid having to deal with employee costs is illegal and can result in monetary penalties, prosecution, and public disclosure of your prosecution—none of which, I’m sure you know, is great for your brand’s expansion into Canada. So, make sure you know what defines a worker as an employee or an independent contractor.

While it’s great to have working knowledge of how payroll rules work in Canada, all the variances between provinces can become overwhelming. There’s a lot of contradictory information, which can prevent you from maintaining ongoing compliance.

You shouldn’t leave things to chance handling payroll on your own. An employer of record can make sense of even the most convoluted tax legislation and pay employees for you.

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

Topics: Compliance

4 Payroll Compliance Errors and How Much They Cost

Posted by Ray Gonder


Feb 7, 2018 9:00:00 AM

4_Payroll_Compliance_Errors_and_How_Much_They_Cost.jpgPayroll compliance is important to you and your business. After all, you want to be sure you’re doing things on the up and up.

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

Nonetheless, compliance errors are quite common. Some business owners don’t truly realize they’re doing anything wrong. They may think they’re completely compliant with the law. Worse, these sorts of errors can cost you more than a pretty penny. Here are a few of the most common errors and their price tags.

1. Failure to Deduct

Perhaps the most common payroll compliance error is a simple failure to deduct. Some employers think they can pull the wool over the CRA’s eyes by issuing payments off the record. Others may try to pin responsibility for payroll taxes on the employee. Others may not be aware they need to deduct payroll taxes for certain kinds of employment income such as employer-provided housing.

The CRA can levy penalties worth 10 percent of the amount of Canada Pension Plan and Employment Insurance premiums, as well as 10 percent of the income tax you failed to collect.

If you happen to be penalized twice in a single year for failure to deduct, you can be assessed a penalty of up to 20 percent of EI, CPP, and income tax deductions. Depending on how many employees you have and their earnings, it adds up!

2. Late Remittance

The next most common payroll compliance error is late remittance of your deductions. While you did deduct the appropriate EI, CPP, and income tax amounts, you just didn’t get the funds to the CRA. (If you never send the funds, this is known as “failure to remit.”)

The CRA will begin assessing penalties for late remittances almost immediately. The penalty starts at three percent for payments one to three days late, then climbs to five percent between four and five days. If you submit your funds six or seven days later, the penalty is seven percent.

If you’re more than a week late submitting your remittances, you can be assessed a penalty of 10 percent. Again, depending on how much you have to submit to the CRA, these penalties can become quite hefty!

3. Failure to Obtain Employee SINs

As an employer, it’s your responsibility to record your employees’ social insurance numbers (SINs). You’re required to ask employees and record their SINs within three days of their start date with your company.

If you’re judged not to have made a reasonable effort to obtain an employee’s SIN, you could be charged $100. This is also true for employees in pensionable or insurable employment. Employees who do not yet have a SIN need to apply for one and provide it within three days of receiving it. Additionally, you need to report this situation to Service Canada.

If an employee fails to provide a SIN but you’ve made a reasonable effort to obtain the information, the CRA may not assess the penalty. Otherwise, you can be assessed $100 for each SIN you fail to collect. While $100 here or there may not seem like much, it can add up and is easily avoidable.

4. Failure to Maintain or Provide Records

The CRA can also determine whether or not your bookkeeping has been adequate. The Income Tax Act allows the government to determine what records and books must be kept. The CRA may send you a written request to maintain your books in compliance with the law, and they’ll normally follow up within a month to make sure you’ve complied.

If you haven’t, or you fail to provide records as requested, you can be prosecuted. The minimum fine is $1,000. You could even face jail time.

Payroll compliance errors can have some high costs. Don’t wind up on the hook for these penalties and make sure your payroll is compliant with help from the experts.

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Topics: Compliance

Your Guide to Vacation Pay in Saskatchewan

Posted by Anna Mastrandrea


Feb 5, 2018 9:00:00 AM

Your_Guide_to_Vacation_Pay_in_Saskatchewan.jpgSince the federal government largely leaves employment legislation to the provinces, each of Canada’s provinces have been able to make their own rules. If you’re a foreign company opening its first office in Saskatchewan, you’ll want to learn about vacation time rules!

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Saskatchewan is something of a hotspot right now. If you’re thinking about setting up shop in Regina or Saskatoon, take a look at this guide to vacation pay in Saskatchewan.

Why Saskatchewan?

The first thing for any employer to ask is why they’re going to Saskatchewan. Although the province has a reputation as being exceedingly rural, flat, and nothing but prairie, the truth is Saskatchewan has become something of a hotspot for several different industries.

Perhaps the best example is the potash industry. Uranium mining has also been common in the province’s north. Biotech is another hotspot. Retail and manufacturing are also important and growing.

If you have operations relating to any of those industries, Saskatchewan may be the place for you!

Vacation Time

If you’re going to employ workers in Saskatchewan, you need to know employment legislation. One of the important aspects of that is how vacation time is accrued and paid.

Vacation pay in Saskatchewan is governed by The Saskatchewan Employment Act. Employees who work more than one year and less than ten years are entitled to three weeks of vacation each year. If an employee works more than ten years for you, they are entitled to a minimum of four weeks’ leave.

Employees who have worked less than a year are not entitled to vacation pay. In order to be eligible, employees must work for 52 consecutive weeks, without a break in service of 26 weeks or longer.

Who Is Entitled?

In Saskatchewan, vacation days accrue on an annual basis. After 52 weeks of service, an employee becomes eligible for three weeks of vacation. Most employees are entitled to vacation pay, no matter how many hours they work or how they’re paid.

Exceptions include seasonal and short-term employees who work fewer than 52 weeks or who have absences of 26 weeks or more. If you hire an employee to work in the summer and fall and terminate their employment in the winter before rehiring them in the spring, they would not be entitled to vacation. An employee who took a leave of absence over the winter would be.

Calculating Vacation Pay in Saskatchewan

Once you’ve determined who’s entitled to vacation pay in your company, you’ll want to know how you can calculate pay.

The rules for vacation pay in Saskatchewan are relatively straightforward. A salaried employee would receive 3/52 in vacation pay. Take their total annual wages and multiply it by 3/52. This accounts for the three weeks of vacation out of the total 52 weeks of the year. For an employee with ten years of service or more, the rate is 4/52.

You can also choose to pay vacation pay per pay period. In this case, take the total wages for the pay period and multiply it by 3/52 or 4/52. This will give you the vacation pay the employee has earned for this pay period.

Paying Annually or per Pay Period

Employers can choose to pay vacation pay in Saskatchewan annually or per pay period. Annual payment may be best for those who have salaried staff. Those who pay their employees by the hour may prefer to tally vacation pay per pay period.

Keep in mind you must calculate vacation pay on total wages (including commissions and bonuses). Vacation pay must also be calculated on the vacation pay amount.

Vacation pay in Saskatchewan isn’t overly complicated, but you do want to be sure you’re administering it correctly. Talk to a payroll provider today and see how they can help.

Canadian Payroll Tax Deduction Calculator

Topics: Compliance

2017 Holiday Preparation: Vacation Policies in Canada

Posted by Corinne Camara


Dec 6, 2017 9:00:00 AM

2017 Holiday Preparation Vacation Policies in Canada--.jpgVacation policies in Canada are not as straightforward as you may think. Each province has different rules and regulations regarding how much vacation time and pay each employee is permitted to take and when they can take it. With dozens of regulations, it’s only fair that companies find themselves a little confused, especially companies that are based in the United States.

To prepare for upcoming vacation requests, brush up on vacation policies in Canada. Keep reading to see some of the more common vacation policy questions and their simplified answers.

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How Much Vacation Time Are Employees Entitled To?

Starting with the basics—every employee in Canada is entitled to vacation time after working for a company for 12 consecutive months. After one year, employers must grant employees two weeks’ vacation, apart from Saskatchewan, which offers three weeks, and Quebec, which offers one day per month.

This, however, is the minimum amount as described in the employment standards legislation of each province. Companies can offer employees more if they wish.

There are exceptions for students in work-experience programs, federal employees, and some other employees.

Can You Relinquish Vacation Time?

Employers have the right to schedule vacation time according to an employee’s entitlement year or stub period. This ensures all employees are given the appropriate amount of vacation time. 

However, employees can give up vacation time with the employer’s agreement and the Director of Employment Standards written approval. It’s important to note that while employees can give up vacation time, employers are still obligated to pay the employee vacation pay.

How Much Vacation Pay Are Employees Entitled To?

When it comes to vacation policies in Canada, employees are to be given at least four percent of the gross wages earned in the 12-month vacation entitlement year. 

For example, if you earned gross wages of $16,000, you are entitled to $640 as your vacation pay. However, some companies offer competitive vacation benefits at a higher percentage than the minimum four percent.

What Happens to Vacation Pay after Employment Ends?

If an employee quits or is terminated, they are still entitled to be paid vacation pay. The employee must be paid any vacation pay that has not yet been paid out, including pay from the previous vacation entitlement year. This unpaid vacation pay must be paid to the employee within seven days of the employment ending or on the employee’s final pay stub—whichever is later. 

Outsourcing payroll and HR services is a great way to ensure your vacation pay is tracked, reducing the amount of risk your company faces regarding vacation policies in Canada.

Why Should Employees Use Their Vacation Time?

Recent studies suggest that more than 41 million vacation days are left unused by Canadians each year. Fiscally, that adds up to approximately $6.3 billion in unused paid time off. In the US, the number jumps to a whopping $52.4 billion. Many employees don’t understand the benefits of taking time off, leaving it up to employers to ensure their employees understand what it means for them and why it’s important. 

A study suggests that employees who leave 11 to 15 PTO days unused are 6.5 percent less likely to receive a raise or bonus than those who used their time off. On the other hand, taking even two days off can leave the mind and body refreshed, creating a more positive mindset and increasing productivity. 

For both employers and staff, vacation days are important. Keeping track of vacation policies in Canada can make a huge difference in the well-being of your employees and the quality of work they bring to the office every day.

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

Topics: Compliance

A Guide to Understanding Canadian Payroll Tax Regulations

Posted by Ray Gonder


Dec 4, 2017 9:00:00 AM

A Guide to Understanding Canadian Payroll Tax Regulations--.jpgUnderstanding Canadian payroll tax regulations can be tricky. Whether you’re operating a small business, expanding your operations into another province, or expanding into Canada from another country, you need to understand the nuance of these regulations. 

The good news is it doesn’t need to be difficult to understand the tax regulations around payroll in Canada. This guide is here to help.

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The Legal Framework

The first key to understanding Canadian payroll tax regulations is to understand the legal framework around the regulations. 

In Canada, two separate levels of government deal with payroll. The federal government legislates on national taxation levels and employment standards for federal employees. The federal government also governs social programs like the Canada Pension Plan and Employment Insurance. 

The provinces also get in on legislating employment, payroll, and taxation. Each province has its own rules covering minimum wages, vacation time, and more. They also differ in terms of income tax. In the case of Quebec, the province manages its own pension plan, the Quebec Pension Plan (QPP).

The Governing Body

Although the provinces have their own legislation regarding payroll tax regulations, the national Canada Revenue Agency (CRA) is responsible for administrating the regulations. The CRA collects all tax returns, assesses them, conducts audits, and penalizes those who have submitted erroneous or fraudulent returns. 

The CRA has the power to initiate an audit if it suspects your payroll practices aren’t on par. It can also fine you for violating the payroll tax regulations.

What Kinds of Regulations?

Understanding Canadian payroll tax regulations also entails understanding what kinds of regulations there are.

For the most part, the regulations declare how you should calculate your tax withholdings and returns to the CRA. For example, the CRA publishes handy tables to calculate CPP withholdings from an employee’s pay. The tables are based on current rates and take into consideration where the employee works, their status as part time or full time, and the industry and type of work.

The regulations also discuss the penalties for violating the regulations. In most cases, the penalty for breaking a rule is a fine. The fines can get quite hefty, so it’s best to avoid them.


Understanding Canadian payroll tax regulations is easier than ever. There are many helpful internet resources you can use to further your knowledge and understanding on this subject.

The CRA’s own website is one of the most important and best resources available. The website contains plenty of explanatory information about what you need to collect, how to calculate and submit your return, and even information about what might happen if you break the rules.

Legal documents, such as the text of laws themselves, are freely available. They can be difficult to read, so you also might look for interpretations offered by qualified and expert legal teams.

Your Canadian payroll services provider is another reliable source of information. Many providers offer helpful tools, such as blogs and whitepapers, which are chockfull of great information. If you need more help or have another question, you can always talk to them too!

Summing Up

Understanding Canadian payroll tax regulations doesn’t need to be difficult. In fact, with great resources from the CRA and your Canadian payroll services provider, it’s quite easy!

Always be sure to check the regulations pertaining to the provinces and territories you’re operating in. Doing so will tell you which laws you need to pay attention to. The legal framework governs what employers need to do when it comes to payroll.

Remember about the CPP and EI, as well as taxable benefits. If you’re not sure, look something up. There are many calculator tools available to help. Your payroll services provider may provide one. Its experts are ready to help you better understand Canadian payroll and the tax regulations surrounding it.

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Topics: Compliance

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

5 Audit Issues You Can't Ignore

Posted by Ray Gonder


Oct 4, 2017 12:45:00 PM

5 Audit Issues You Cant Ignore.jpgSometimes, it’s easy to turn a blind eye to potential issues with payroll. After all, you’re not planning on being audited any time soon.

Unfortunately, who and when the CRA decides to audit isn’t up to you, so you may find yourself facing an audit sooner than you’d like. While it’s an unpleasant situation to find yourself in, you won’t have much to fear if you’ve kept payroll on the up and up.

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

With that in mind, here are five common audit issues you can’t afford to ignore.

1. Unreported Payments to Independents

Businesses hire independent contractors for any number of different services these days. You might have a contractor deliver services on an ongoing basis or you might decide to contract out a one-time project or job. Services rendered range from HR functions to maintenance jobs around the office.

You must report every payment you make to your independent contractors. Many business owners don’t, instead paying by cash or otherwise leaving the payment off the books. This is especially the case for services such as office maintenance, but it happens with other contractors as well.

If you’re audited, however, the CRA will notice gaps in your accounting and question where the funds went. Since it is trying to crack down on the underground labour market, you could find yourself facing legal trouble.

2. Reclassifying Employees

Another issue the CRA watches for is the reclassification and misclassification of employees. Some unscrupulous employers might “reclassify” employees in order to reap particular benefits, such as lower overheads or tax write-offs.

One particular way of doing this is letting an employee go, then re-hiring the same person, sometimes as an independent contract, to do the same or similar work. The CRA frowns on this practice in particular.

If this happens, make sure you have a written agreement with the contractor laying out the facts. It’s best to have your bases covered.

3. Reimbursement of Personal Expenses

Do you offer your employees perks, such as a subsidized living expense? If you have a travelling sales team, you might reimburse them for their travel time and costs through an expense account.

If you do offer anything of the sort, the CRA is likely to consider it taxable, pensionable, and insurable. Do yourself a favour and ensure reimbursement payments of all personal expenses are reported. It’ll save you a lot of trouble at audit time!

4. Vehicle Allowances

If you offer your employees a flat-rate allowance to drive for work-related reasons, you’ve provided them with a taxable, insurable, and pensionable benefit. This kind of benefit is not reliant on the number of kilometres driven but is instead a flat-fee you pay your employees if they have to drive on your behalf.

Some employers administer a vehicle allowance instead of reimbursing by the kilometre because their employees have to drive often. Yet a surprising number of employers fail to report this benefit, which spells trouble when the CRA audits payroll.

Be sure to report vehicle allowances and collect the appropriate CPP and EI amounts. A good plan of action is to use payroll software to automate this or hire a PEO to help.

5. Security and Stock Options

Do you report your employees’ securities and stock options? You probably should since this can be classed as a taxable benefit. If you fail to report, the CRA may consider it hidden remuneration.

The situation is tricky since securities and stock options only become taxable when employees actually exercise or dispose of their options. In theory, if none of your employees took advantage of the option, there would be no need to report.

Your employees are likely to exercise or dispose of their stock options, however, so it’s just as easy to keep tabs on them and report them.

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Topics: Compliance

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