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The Hardest Part About Canadian Payroll Tax Calculations

Posted by Karen McMullen

|

Jan 13, 2014 10:15:00 AM

The Hardest Part About Canadian Payroll Tax CalculationsThe hardest part about Canadian payroll tax calculations is not knowing that there are things you don’t know. There are so many subtleties to the law that are impossible to learn strictly by reading the statutes. Different situations can arise that completely change the way certain regulations are interpreted and applied. For many of these situations, experience is the only teacher. Unfortunately, experience can also be a harsh mistress. With Canadian payroll tax calculations, your first indication of a mistake could come in the form of an audit, along with fines and back payments. There’s a steep learning curve, and trying to go it alone can lead to costly errors along the way.

Even the Basics Aren’t Basic

On its face, one of the simplest parts of Canadian payroll tax calculations is determining the appropriate withholdings. There are even payroll tax calculators that can be of great assistance in making these calculations. Unfortunately, no calculator can tell you if you’ve classified your employees correctly, if all of their paperwork is in order, or if any circumstances exist that could change the necessary calculations. Figuring out what to enter in the calculator is entirely up to you. If you get it wrong, the resulting figures will also be wrong.

Knowing the Law is Different from Understanding the Law

Reading a statute doesn’t tell you anything about how it’s being applied in the field, during audits, and in courtrooms. Once the dry text hits real life application, a world of different interpretations come into play. If you’re not dealing with these laws every day, you won’t be developing the experience necessary to understand the complex interplay between legislation and application. To compound this problem, the way the laws interact with each other can be equally complex. Knowing which law to apply in a particular situation can only be learned through experience.

Constant Change Requires Constant Vigilance

The laws governing Canadian payroll tax calculations change, at a minimum, on an annual basis. Extreme situations or legal interpretations can bring about sudden changes to the law at any time. Keeping up with current and proposed changes is difficult enough—having an ear to the ground for sudden, unexpected, changes can be impossible for someone who doesn’t deal with payroll regulations on a daily basis. Some changes have a grace period to give you time to adjust; others will require immediate changes to the way you handle Canadian payroll tax calculations.

Asking for Help when You Need It

One of the hardest parts of Canadian payroll tax calculations can be admitting that you need help. Business owners tend to want to handle as many processes as possible in-house. That’s admirable—until it jeopardizes the company. Handling Canadian payroll tax calculations on your own can spread your staff too thin, cause unneeded stress, and open you up to fines, back payments, and lawsuits. Using a payroll service provider is a quick, easy way to relieve the burden on your staff, while also minimizing your exposure to legal problems. With their experience in the payroll industry, they can give you the peace of mind that comes from knowing that you’re in full compliance with all applicable payroll regulations.

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

Topics: Payroll Tax, Payroll Service Provider, Outsourced Payroll Service, Canadian Payroll, Canadian Payroll Deductions, Payroll Tax Calculations, Payroll Tax in Canada, CRA Audit, Canadian Payroll Regulations

What is the Best Canadian Payroll Calculator?

Posted by Ray Gonder

|

Dec 27, 2013 9:00:00 AM

What is the Best Canadian Payroll Calculator2Any business (including those based in the US) that needs to pay Canadian workers could benefit from a Canadian payroll calculator. These calculators can help you figure out basic withholdings for Canadian taxes, the national pension plan, and unemployment insurance (called employment insurance in Canada). For everyday withholdings and remittances, a Canadian payroll calculator can point you in the right direction. However, there are some limitations to a Canadian payroll calculator that you need to take into account. Failing to address those limitations can cause you to withhold too little or too much money from your workers’ checks. When that happens, you’ll be on the hook for back payments, repayments, fines, and more.

What it Does

A Canadian payroll calculator takes the information you enter, and gives you a quick overview of the most likely withholdings and remittances. It bases the output solely on the information you’ve entered, so be sure to double check what you enter. Using current laws and regulations, the calculator is able to predict the standard withholdings for your employees. This will help give you an idea of what you should be holding back from each paycheck. While it’s certainly not foolproof, it can show if your withholdings are currently way off.

What it Doesn’t Do

A Canadian payroll calculator can’t do advanced error checking, and it can’t offer legal advice. It assumes that you understand, and are correctly applying, all of the Canadian workplace regulations. If you misunderstand or misapply a regulation, the calculator will give you an erroneous result. If you misclassify a worker, or enter the wrong tax information for them, again, you’ll get a false result. The calculation is only as accurate as the data entered, so be sure you know what you’re entering.

The Best Calculator

Right now, the most reliable Canadian payroll calculator is a professional payroll service provider (like The Payroll Edge). They know and understand all of the relevant laws and regulations governing payroll withholdings and remittances. The staff spends every day dealing with every possible payroll scenario, so they don’t get tripped up by the subtleties of the law. They know how to appropriately classify employees, to make sure they’re being entered correctly into the payroll system. A professional payroll service provider can also offer advanced error checking, so simple arithmetical mistakes don’t end up costing you fines and back payments. While a payroll calculator can point you in the right general direction, a professional payroll service provider can ensure that you achieve, and maintain, full compliance with all applicable laws.

Canadian Payroll Tax Deduction Calculator

Topics: Payroll Service Provider, Outsourced Payroll Service, Canadian Payroll, Payroll Tax Calculations, Payroll Tax in Canada, Canadian Payroll Regulations, Canadian Payroll Service, Payroll Calculator, CRA Payroll Tax

A Payroll Calculator that Calculates Canadian Payroll Deductions

Posted by Stacey Duggan

|

Dec 20, 2013 11:30:00 AM

A Payroll Calculator that Calculates Canadian Payroll DeductionsIf you’re a Canadian employer, you may be looking for a payroll calculator to help you determine the appropriate withholdings for your workers. To avoid the expense of fines and back payments, deductions must be accurately withheld and remitted to the proper government agencies. Using a payroll calculator is a quick, easy way for employers to calculate basic deductions. Of course, not all deductions will be basic, and no calculator can fully replace the expertise and guidance of an experienced payroll professional. And, like all payroll calculators, the results will only be as accurate as the data that you enter. Any mistakes, omissions, or regulatory misinterpretations entered by the user will create erroneous results. While a payroll calculator can be a useful tool, it cannot, nor is it intended to, serve as a standalone solution for determining the proper deductions for every employee in every situation.

More than Just the Math

Like all calculators, a Canadian payroll calculator takes the information you give it, does the math, and generates a result. Unfortunately, Canadian payroll regulations are about much more than some simple math. There are complexities and subtleties to the law that only the most experienced payroll professionals are equipped to deal with. A payroll calculator can’t tell you if you’ve properly classified your employees, or if new positions or jobsites have caused changes to their status. It also can’t tell you if you’ve applied the correct payroll regulations in every situation. The calculator assumes that you have entered all of the information correctly, and creates its results based on that information. If you don’t have a firm understanding of all of the applicable laws and regulations, then the results from the payroll calculator can be misleading.

Learning the Ropes

For businesses that try to manage their own payroll, there are quite a few obstacles that can’t be overcome with a calculator. Learning, understanding, and properly interpreting Canadian payroll regulations is just one of these obstacles. There are also government accounts to create and maintain, establishing banking and insurance accounts, and making sure that employees and workplaces adhere to health and safety regulations. Trying to manage everything by yourself can be time consuming and expensive. In the event that any mistakes are made along the way, the costs and time involved can increase exponentially. While a payroll calculator can help you with some very basic needs, you’ll still have a lot of work left before you can start hiring and paying employees.

A Tool, not a Solution

A payroll calculator, like the one found here can be a great addition to your toolbox. However, no calculator can replace the guidance of a qualified payroll professional. Only they can tell you if you’re understanding and interpreting all of the regulations correctly. And, while a calculator can only calculate, a payroll service provider can do so much more. They can manage and administer all of your payroll and personnel needs, freeing you and your staff to focus on your core business pursuits.

They can monitor employees and job sites to ensure continuing compliance with all federal and provincial regulations. And, when it comes time to pay your employees, they have all of the necessary personal, equipment, and training to calculate withholdings, make remittances, and issue paycheques. Use the calculator for the basic needs it was meant to address—for your more complex payroll issues, you need to trust the professionals at a qualified payroll service provider.

Canadian Payroll Tax Deduction Calculator

Topics: Payroll Tax, Payroll Service Provider, Outsourced Payroll Service, Payroll Tax Calculations, Payroll Tax in Canada, Canadian Payroll Regulations, CRA, CRA Payroll Tax, Payroll Regulations

5 Things to Consider When Hiring a Payroll Service Provider in Canada

Posted by Stacey Duggan

|

Dec 2, 2013 9:00:00 AM

5 Things to Consider When Hiring a Payroll Service Provider in CanadaHiring a Canadian payroll service provider isn’t a decision that should be made lightly. Like all of your long-term business partnerships, you should do your due diligence, and make sure you know exactly what you’re getting into. By doing your homework, you’ll be able to enjoy all of the benefits that a reputable Canadian payroll service provider has to offer. To help you get started, here are five things you should keep in mind when hiring a Canadian payroll service provider.

1. Are They Full Service?

Don’t let the name fool you; high-quality payroll service providers usually offer a full range of services along with payroll management. If your Canadian payroll service provider does nothing more than turn timesheets into cheques, you’re not getting a lot for your money. Full service providers can handle remittances, error-checking, audit protection, and more. Find out what services are available, even if you don’t need them immediately. Adding new services from a full-service provider is easier than changing providers as your business grows.

2. Are They Easy to Work With?

The best Canadian payroll service provider isn’t much good to you if you can’t use their services. Engaging a payroll service is about convenience and cost reduction. If they aren’t convenient, there’s almost no chance you’ll save money using their services. Ask about features like online access and monitoring. If they use a proprietary time tracking system, make sure that they’re available to help you make your system compatible with theirs. Find out ahead of time what is expected of you, and what they’ll do to help you meet those expectations.

3. Are They There When You Need Them?

Problems don’t always arise during normal office hours. This is especially true if you’re running multiple shifts. When a problem does crop up, is your Canadian payroll service provider available to help you? No payroll provider operates on a 24/7 basis; however, quality payroll providers always have someone available to address emergencies. Whether it’s a callback service, a mobile number, or an emergency email address, there should always be a way to get in touch with someone.

4. What Help do They Provide?

Support services can vary widely from one Canadian payroll service provider to the next. Some offer little to no support, leaving you on your own when problems arise. Other, more reputable providers, offer a robust support network, covering everything from timesheet reconciliation to audit preparation. Wider support options may cost a little more, but can quickly pay for themselves if you ever need them.

5. Can You Afford Not To?

Handling payroll services on your own is expensive, labour-intensive, and risky. You’ll have to handle all of the expense of training and buying software and equipment on your own. In the event of any errors, you’ll be on your own when the CRA comes calling. Given all of the obvious and hidden expenses of managing your own payroll, payroll service provider is a safer, more affordable option.

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

Topics: Payroll Service Provider, Outsourced Payroll Service, Payroll Tax Calculations, Canadian Payroll Service, Dependable Payroll Service, Full Service Payroll Provider

Make Sure You Don’t Miss Any Canadian Tax Withholding

Posted by Stacey Duggan

|

Nov 27, 2013 9:15:00 AM

Payroll Service Providers Ensure You Don’t Miss Any Canadian Tax WithholdingMissing Canadian tax withholdings can be an expensive mistake for your business. The fines and penalties for improper withholdings can easily exceed the cost of hiring a Canadian payroll service provider to do it right the first time. In the event of an audit or formal hearing, you’ll also have to factor in the expense of legal representation. Of course, you also have to consider the amount of time you’ll spend dealing with multiple levels of government bureaucracy. In the end, the services of a Canadian payroll service provider would end up saving you a lot of money, time, and aggravation. Whether you’re a Canadian employer or a US-based employer paying employees in Canada, a Canadian payroll service provider can make sure that your withholdings are accurate and timely.

Canadian Businesses

Payroll regulations in Canada are incredibly complex. They also change frequently, and with little notice. To make matters worse, the application of those regulations can change depending on your situation. Filing deadlines may change, depending on your previous withholdings. The necessary withholdings may change, if the nature or place of employment for a worker changes. Keeping up with changes to the regulations, and changes to the way they apply to your business, can be more than a full-time job. If you get it wrong, even once, the fines and penalties can be staggering. Engaging the services of a Canadian payroll service provider helps ensure that you never get it wrong.

US Businesses

If you’re a US-based business paying Canadian employees, things are even more complicated. You have to deal with all of the same rules and regulations that govern Canadian businesses. You also have to deal with all of the issues inherent in running a business across international borders. And you have to do it all while still dealing with all of your payroll issues in the States. You will essentially be running two separate, and incredibly complex, payroll departments. Mistakes on either side of the border can cost you dearly.

Using a Canadian payroll service provider as an Employer of Record (EOR) offers you some key advantages. Similar to a US Professional Employer Organization (PEO), an EOR acts as your administrative presence in Canada. They can handle all of your payroll needs, including withholdings and remittances. They can also help you establish a business infrastructure, meet insurance requirements, and other practical and legal necessities. With their help, you don’t have to worry about missing withholdings, managing multiple payroll departments, juggling international legal compliance, or other issues.

Work More, Worry Less

Using a Canadian payroll service provider allows you to spend more time focused on mission-critical tasks. You don't have to spend time managing multiple payroll departments, learning international payroll requirements, or dealing with bureaucrats from two separate countries. Instead, you can let a Canadian payroll service provider handle all of those issues for you, while you remain focused on more important business pursuits.

Canadian Payroll Tax Deduction Calculator

Topics: Payroll Tax, Payroll Service Provider, Outsourced Payroll Service, Canadian Payroll, Canadian Payroll Deductions, Payroll Tax Calculations, Payroll Tax in Canada, Canadian Payroll Regulations, Payroll Service, Canadian Payroll Service, U.S. Companies operating in Canada

Manage Your Payroll the Right Way with an Outsourced Service Provider

Posted by Ray Gonder

|

Nov 20, 2013 9:00:00 AM

describe the imagePayroll processing is an important part of any business. Making sure everyone is paid accurately, and on time, is critical. Making sure all of your reporting and remittance obligations are met is equally critical. Mistakes in any part of your payroll processing can lead to labour issues, audits, and expensive legal entanglements. There are several ways to handle your payroll processing, some more difficult than others. Handling your payroll the right way will save you time, effort, and money. Handling it the wrong way can end up costing you way more than you bargained in the long run.

DIY Payroll Processing

You always have to option of just doing it all yourself. Most businesses start out this way, with the owner handling payroll until it becomes too large to manage. You can take the time to learn all of the regulations, attend conferences to learn about new legislation, and even buy yourself some expensive software. Of course, then you have to learn to use the software, and keep up with updates and changes to the software. Once you have the knowledge and the software, you can spend hours every week handling all of the paperwork for payroll processing, as well as addressing any employee issues with payroll. As your business grows, you’ll spend more and more time on payroll, and less time focused on your business.

Pass it Along

Often, when payroll processing gets too complex for the owner, it gets handed down to the growing HR department. They inherit the responsibility of keeping up with changing legislation, learning new software, and dealing with employee issues. They often have little or no previous experience with payroll processing. They get to start from scratch, and learn the ins and outs of payroll service as they go. Of course, they aren’t liable for any mistakes they might make along the way. That burden still falls directly on the company. Incorrect payments or improper remittances can trigger a visit from the CRA. If they find problems with compliance, the fines and penalties go to the company, not to the HR staff.

Amateurs vs Experts

Payroll processing is a lot like other business services. It’s best to leave it in the hands of agencies that specialize in making sure it’s done right. Most businesses use accountants for taxes, shipping companies to deliver goods, and service agencies to repair equipment. Why do they outsource all of those needs? Because smart owners know that no business can do everything. Letting trained, experienced experts handle your tangential business needs just makes sense. When you try to do everything, you end up putting too much stress on your personnel, and pulling their focus away from your core business pursuits. By outsourcing some of your needs, you allow your staff to maintain laser-focus on growing and improving your business.

An outsourced payroll service relieves pressure on your staff, and relieves you of the stress of worrying about potential audits and penalties. They have years of experience interpreting and applying new and existing legislations, allowing them to easily navigate the complex payroll requirements. They undergo frequent, rigorous training, and have access to the latest and best software. Using their services is just like engaging a tax professional or repair service. If you want the best service, you hire someone who specializes in the service you need, and who has a proven track record of success.

7 Signs It's Time to Outsource Payroll

Topics: Payroll Processing, Payroll Service Provider, Outsourced Payroll Service, Canadian Payroll, Canadian Payroll Deductions, Payroll Tax Calculations, Payroll Tax in Canada, Canadian Payroll Regulations, Canadian Payroll Service, Payroll Calculator, CRA, CRA Payroll Tax, CRA Compliant

Canadian Payroll Tax Calculations - What You Need to Know

Posted by Stacey Duggan

|

Nov 18, 2013 1:20:00 PM

Canadian Payroll Tax Calculations   What You Need to KnowIn an effort to save money, it can be tempting to try to handle as many tasks as possible in-house. Many businesses are asking their personnel to handle a growing list of responsibilities, regardless of their training or expertise. While some tasks afford a margin of error, and allow for time to learn the responsibilities, handling Canadian payroll tax responsibilities isn’t one of those tasks. If you’re considering handling Canadian payroll tax compliance in-house, there are a few things you should know beforehand.

It’s Not Easy

Canadian payroll tax laws are complex and difficult to learn, let alone master. To make matters worse, the application of those laws can change from one situation to the next, and may not be applied the same way by every agency. Learning which laws apply in which situation takes time and experience. During that time, any mistakes can cost the business dearly. The CRA, and other agencies, won’t accept ignorance or inexperience as an excuse for non-compliance. At best, mistakes will result in back payments, along with the associated costs of processing and distributing new cheques. At worst, fines and criminal penalties can be imposed for any errors in reporting or remittances.

It’s Not Constant

Learning Canadian payroll tax laws is a constant process. The laws, at all levels, change frequently. These changes can be in the form of new legislation, changes to existing legislation, or differences in application from year to year. Staying on top of these changes requires constant vigilance on the part of your personnel. They’ll have to attend seminars, training sessions, and read up on proposed and actual changes. This investment of time and effort will come directly out of their overall productivity. If they make any mistakes with the new legislation, any savings you enjoy by handling Canadian payroll tax in-house will quickly disappear.

It’s Not Without Risk

All of the time, effort, and money invested in training your personnel can vanish after a single CRA audit. Government agencies have stepped up their compliance checks, meaning more agents looking for more mistakes. The fines and penalties for first-time offenders have risen steadily in recent years, making any errors more costly. Even the best training, and intentions, aren’t a substitute for experience. While your personnel are trying to develop that experience, the CRA will be watching for any slip-ups.

There’s an Easier Way

Using your in-house personnel to handle Canadian payroll tax compliance may appear to save you money on upfront costs. You’re already paying your personnel, so why not add to their responsibilities? However, when you add in the cost of training, the lost productivity, and the potential fines and penalties, it becomes a losing proposition. There are ways to cut expenses that don’t put your business at greater risk of a government audit. Using an outsourced payroll provider saves you the expense of constant training, and keeps your personnel focused on tasks that directly benefit your business pursuits. A payroll provider also minimizes the risk of a government audit, saving you money on fines and legal representation during government actions. When you do the math, it just makes sense to let a payroll provider handle your Canadian payroll tax obligations.

Canadian Payroll Tax Deduction Calculator

Topics: Payroll Service Provider, Outsourced Payroll Service, Canadian Payroll, Canadian Payroll Deductions, Payroll Tax Calculations, CRA Audit, Canadian Payroll Regulations, Employee Payroll Deductions, Payroll Calculator, CRA, CRA Payroll Tax, Payroll Deductions

How to Avoid Staying Educated on Always Changing CRA Payroll Tax Rules

Posted by Stacey Duggan

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Nov 11, 2013 9:00:00 AM

How to Avoid Staying Educated on Always Changing CRA Payroll Tax RulesMany businesses still choose to handle payroll using in-house personnel. This is usually done either out of habit, or out of the belief that it saves the business money. Whatever the reason, it’s becoming increasingly expensive and risky to handle CRA payroll tax compliance using your own staff. As the CRA payroll tax rules continue to evolve and change, it’s becoming more difficult to keep up with all of the complexities. Any money saved by using your own staff can be instantly wiped out by a single error.

A Better Use of Time

Keeping up with CRA payroll tax legislation requires in-depth training and retraining. Even with all of that training, it still takes constant practice to meet all of the legislative requirements quickly and efficiently. Unless you have a dedicated payroll staff, your personnel probably only deal with CRA payroll tax requirements on a weekly or semi-weekly basis. This leaves gaps in their experience that can allow mistakes to creep in. With all of the other daily tasks your HR personnel are responsible for, it can be difficult for them to find the time to keep up with all of the payroll requirements. When they’re focused on payroll, they aren’t as productive in their other tasks. When they’re focused on their other tasks, they’re not gaining experience in CRA payroll tax compliance.

Employee Issues

Part of handling payroll involves handling employee questions and concerns. Employees always have questions about insurance and tax withholdings, overtime pay, missing hours, and myriad other concerns. Addressing these issues will consume even more time that your staff could be spending on more productive pursuits. Any mistakes must be corrected, CRA documentation must be changed, and new checks must be issued. The hours lost fixing minor errors can quickly add up to far more than the company is saving by using in-house personnel to handle payroll.

Convoluted Compliance

Even if your personnel have the right training and adequate experience to handle most payroll needs, that’s no guarantee that they’ll understand all of the nuances of the CRA payroll tax requirements. Worker classifications, insurance requirements, reporting documents, and more, can all change without notice. Something as simple as a trip to another work site can change the reporting requirements for a worker. If your staff isn’t familiar with the triggers that can cause these changes, they can fail to comply with the most current legislation. When that happens, fines, penalties, and back pay can quickly add up to tens of thousands of dollars.

Expensive Errors

Over the past year, the CRA has drastically increased their compliance efforts. This means more audits, more time spent navigating bureaucracy, and more potential for fines and penalties. Once you’re involved in a CRA payroll tax audit, you’ll probably want to engage legal counsel. At current hourly rates, it won’t take long for a labour attorney to cost far more than a payroll service.

Payroll Peace of Mind

Engaging a payroll service can eliminate all of these problems and concerns. Their dedicated staff is focused on payroll, and payroll regulations, every single day. They have the education, training, and experience to maintain compliance with the most recent legislation. Many of them are involved in shaping upcoming legislation, so they can be prepared for changes before they even happen.

Using a payroll service allows your personnel to focus on tasks for which they are better suited, and which are more productive for your business. The payroll service can handle everything from employee queries to CRA audit preparation. With their professional CRA payroll tax services, you save time, aggravation, and avoid compliance issues.

7 Signs It's Time to Outsource Payroll

Topics: Payroll Service Provider, Outsourced Payroll Service, Payroll Tax Calculations, Payroll Tax in Canada, CRA Audit, Payroll Service, Payroll Calculator, CRA, CRA Payroll Tax, Payroll Deductions, CRA Compliant

Bigger May Not Always Better When it Comes to Payroll Processing

Posted by Karen McMullen

|

Nov 1, 2013 9:00:00 AM

Bigger May Not Always Better When it Comes to Payroll ProcessingBusiness owners too often fall for the idea that bigger is always better. The huge payroll processing service with the flashy ad campaign must be great, right? They can afford huge billboards, sharp uniforms, and take up an entire floor of the new office building downtown—so they must be great, right? Of course, if they’re that great, why are they spending so much money and effort to convince you of how great they are? Maybe they do have great products and services, but something is lacking that makes them have to work so hard to attract new clients. Often, with large payroll processing providers, the thing that’s missing is personalized service. In a large office, with so many clients, it can be impossible to get to know each business on an individual basis. If you don’t know the business, how can you ever really know what the business needs?

I’ll Have to Refer You to Our Website

When you have tax or payroll questions, it would be nice to get an answer that’s specific to your business. A generic, one-size-fits-most web document isn’t going to address your particular concerns. You’ll have to read the document, decide what’s relevant to you, and then interpret how it applies to your business. Aren’t you using a payroll processing service to avoid these kinds of hassles?

A large organization isn’t going to take the time to research topics and how they apply to your business. When you call with questions, you’ll get generic answers and a web address for supporting documents. After that, it’s up to you to do the research and apply your findings.

Looks Good Enough to Me

At the end of the pay period, your payroll processing service will take the information you send them, enter it into their system, and cut the cheques. Error checking, if it exists, will only look for obvious arithmetical errors. Mistakes that would be obvious to anyone who knows about your business will be ignored or overlooked. It will be up to you to rectify any errors, and you could be charged extra by the payroll processing service.

What happens if there’s a data entry error, or somebody forgets to log in or out? Transposition errors could have your janitorial and senior marketing staff switching salaries. A simple, common-sense check of your data would reveal these errors, and correct them before they result in erroneous cheques. A large payroll service isn’t going to have the time, or the familiarity with your business, to catch these errors in time.

Sorry, We Don’t do That

Do you make remittances for any taxes other than the payroll tax? If you’re an employer in Canada you make worker’s compensation remittances and if you’re in Ontario or Quebec you have other taxes as well. Large payroll services typically only provide remittance services to your payroll tax account. This leaves you responsible for all of the others. Even though you’re paying for a payroll processing service, you could still end up doing some of the work you’d expected them to handle.

If you’re handling some remittances, you might as well be doing them all. If you’re outsourcing remittances, they should all be handled by a single provider. Having half of them done in-house, and half done by a payroll processing service is an invitation to errors. Having multiple service providers handling your remittances is also an invitation to disaster. A large agency may not have the time, or interest, in handling remittances to other agencies.

Smaller is Sometimes Better

Individualized attention can be a huge benefit when it comes to payroll processing. Those large agencies may do a lot of things very well, but personalization isn’t one of them.

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

Topics: Payroll Service Provider, Outsourced Payroll Service, Payroll Tax Calculations, Government Compliance, Payroll Calculator, CRA, Payroll Deductions, Remitting Taxes, Worker's Compensation

What Are Payroll Taxes in Canada?

Posted by Ray Gonder

|

Aug 1, 2013 9:00:00 AM

Payroll Taxes in CanadaWithout an understanding of payroll tax laws in Canada, you'll have a hard time operating your business. Payroll taxes are one of the most fundamental aspects of legally employing people in Canada. As soon as you hire people to work for you, you have responsibilities to pay them properly, and that includes paying payroll taxes.

Personal income taxes, both at the federal and provincial levels, are the most significant revenue sources for Canadian government. Payroll taxes account for over 40% of Canada's tax revenues, and employers pay an integral part in the government's collection of these taxes.

Canadian employers are required to register an account with the CRA, collect information about their employees, calculate deductions, and then remit various types of payroll taxes applicable for the jurisdiction, or jurisdictions, where the work was done. Here's a basic list of payroll taxes applicable using the example of two of Canada’s largest provinces:

Federal

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

Ontario

  • Employer Health Tax

Quebec

  • Quebec Pension Plan (QPP)
  • Health Services Fund
  • Quebec Parental Insurance Plan
  • Compensation Tax
  • Workforce Skills Development and Recognition Fund
  • Commission des nores du travail

Workers' Compensation Premiums

  • All provinces will also have you needing to pay premiums into that province’s Workers’ Compensation program, for example WSIB in Ontario.

For each person in your employ, the proper amounts need to be calculated for each of the above, applicable funds (not all employees will have to pay all of these taxes). These amounts can be found by referring to the published tables for each tax or by using the CRA's online calculator. Then, you must hold the funds in trust until it's time to remit to each of the agencies.

As an employer, you will probably have to answer payroll tax questions, including the question of what all these taxes are for. Let's take a brief look at each one.

Canada Pension Plan.

Established in 1965, this payroll tax funds Canada's social insurance program, which helps to fund Canada's public retirement income system. All Canadian workers who are 18 years of age and over are required to contribute to the CPP. However, there are certain rules around CPP deductions for those workers who have reached retirement age. There is a maximum amount of CPP that each employee pays per year so once that threshold is reached you no longer have to deduct the tax for the remainder of that year. Employers match workers' contributions to increase funding to the pension plan.

Employment Insurance.

Formerly called Unemployment Insurance, this payroll tax provides benefits to workers if they lose their jobs. Canadian employees pay a percentage of their salaries into the insurance fund; the amount they receive if they lose their jobs depends on their previous salaries, the length of their employment, and the unemployment rate in their local jurisdiction.

Workers' Compensation.

Like Employment Insurance, Workers' Compensation is a form of insurance for workers who face unexpected hardship in the form of wage replacement and medical benefits. This was Canada's first social program because both workers' groups and employers hoped it would reduce lawsuits. It's still managed by local jurisdictions, as it has been since the early 20th century, and it's still funded by employers based on their payrolls. Each province has different rate groups based on the risk of the work being done. The bigger the risk, the higher the premiums the employer will pay. These rates have a tendency to change on a yearly basis across each province.

Ontario Health Tax.

Introduced in the 2004 Ontario Budget, the Ontario Health Premium contributes around $3 billion to the health care system each year. The payroll taxes remitted to the Ontario Health fund are invested directly into the health care system, and only those who are residents of Ontario must pay this tax.

For more information about payroll tax questions, especially how they vary from province to province, contact us at The Payroll Edge. Whether you have difficult questions from your employees that need to be answered or you need help becoming compliant with payroll tax laws and guidelines, we can get you the help you need. A third-party payroll tax expert can make all the difference in the way your company operates.

7 Signs It's Time to Outsource Payroll

Topics: Payroll Tax, Canadian Payroll Deductions, Payroll Tax Calculations, Payroll Tax in Canada, Payroll Tax Tips, Canada Revenue Agency, Payroll Tax Laws in Canada, Payroll Tax Laws

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