Home Blog

Blog

A Canadian Payroll Class May Not be The Right Choice

Posted by Stacey Duggan

|

Jul 29, 2014 8:30:00 AM

Canadian Payroll Class FrustrationWhen it comes to understanding Canadian payroll, your first instinct may be to enrol in a payroll class to help your payroll and HR department learn the specifics.  For those companies outside of Canada, this search is in effort to understand foreign payroll compliance and is often handed over to someone hesitant to learn a new set of laws when they are already comfortable with their own. 

Canadian rules and regulations when it comes to paying an employee can be vastly different, especially when compared to a country such as the United States.  These differences can exert a level of frustration on the payroll or HR person who is already schooled in one set of legislative compliance.

When it comes to choosing a Canadian payroll class ensure that part of the curriculum covers the following:

  • Federal payroll taxes including the Canada Pension Plan, Employment Insurance and Worker’s Compensation.
  • The additional provincial payroll taxes as they vary from province to province (ensure the class covers the province that most interests you as many payroll classes will avoid Quebec due to its complicated nature)
  • Employee and Employer deductions and the remittance schedules assigned to each tax account.
  • Employment standards when it comes to overtime, statutory holiday pay and vacation pay and a section on how these vary from province to province as well.

Not only should the above information be covered in a Canadian payroll class but the payroll and HR department need to be aware of the over 1700 rules and regulations when it comes to the Employment Standards Act which also varies from province to province.

Ensure that the Canadian payroll class you register your in house payroll person includes information on:

  • Health & Safety and a Return to Work program should your worker be injured.
  • Termination and pay in lieu of notice.  Note: there is no ‘At Will’ employment in Canada.
  • How to properly compose an employment contract ensuring that all clauses meet employment minimums.

What are the chances that not only will the Canadian payroll class offer all of the above, but that your payroll and HR person taking the class will retain all of the information?  How will they keep up to date on the ever-evolving employment regulations and changes to tax law?  Most likely the Canadian payroll class will offer nothing more than an overview of the functions and processes of paying an employee

What outsourcing your Canadian payroll to The Payroll Edge will bring:

  • Complete compliance when it comes to calculating payroll taxation.
  • Correct, on time remittances with all government bodies in every province.
  • Employment standards expertise ensuring you meet your due diligence.
  • Certified experts who understand the law and keep up to date on its changes.
  • The freedom to focus on your business.

Canadian payroll processing doesn’t have to be complicated and you don’t have to take a new field of study to get it done. The Payroll Edge is a Canadian based payroll processing company specializing in helping American and foreign companies expand their workforce into Canada by acting as the employer of record (EOR), a similar service to a PEO in the U.S.  We also take care of small businesses in Canada who don’t have the time or expertise for payroll.

The Payroll Edge offers seamless workforce expansion into Canada without the daunting task of understanding foreign employment compliance. Contact us today for more information on how we can help your business.

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

Topics: Canadian Payroll Deductions, Employee Payroll Deductions, Payroll Tax Tips, U.S. Business operating in Canada, Paying a Canadian, Calculating Taxes in Canada, Canadian payroll class

Employer of Record Service: Your American Business Presence in Canada

Posted by Ray Gonder

|

Mar 26, 2014 10:21:00 AM

American Business Expansion into Canada and when you should contact the Payroll Edge for our Employer of Record Services Great! Your expanding operations north of the border but with your American business expansion into Canada you wonder; How am I going to pay my Canadian employees?

Unless you are using an Employer of Record Service in Canada (similar to a PEO in the U.S.) and want to hire an employee you must register your business with the Canadian government. Federally registering is the first step and then registering a business presence in each province and / or territory (Canada has 13) you are operating in would be the next step. Of course this process can be even more complicated if you are a Limited Liability Company (LLC) in the US as Canada has no similar status and again has different rules depending on the province or territory.

Other Government Accounts U.S. based companies will need to pay Canadian Employees;

Registering your business is not the only registration you will do as a new business in Canada. You must also apply for a payroll tax account number into which you will remit the employer and employee taxes for the Canada Pension Plan and Employment Insurance.

These two taxes are in every province and territory across Canada with the difference being that each province has its own rate in which these taxes are calculated. Keep an eye on the rates as they often change for each province at the beginning of each year and its important to know when paying a Canadian. Some provinces have other payroll taxes such as the Employer Health Tax in Ontario and the Health Services Fund in Quebec so it’s important to know what other type of taxes are associated with the province the work is being done in. It’s worthy to note that as a company in Canada, you will be given a weekly, semi-monthly, monthly or quarterly deadline for these payroll taxes but for those provinces that have extra taxes (like the 4 provinces that have a health care tax) your deadlines might be on a different schedule. The Canadian Government will not hesitate to apply interest and penalties to slow paying accounts.

The best advice an American company should take when hiring workers in Canada is to use a Canadian Based Employer of Record service. Using an EOR like The Payroll Edge enables U.S. based companies to focus on their core business rather than learning a whole new payroll entity. Contact The Payroll Edge today! 

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

Topics: Payroll Tax in Canada, Payroll Tips, EOR, Employer of Record, Payroll Tax Tips, U.S. Business operating in Canada, Paying a Canadian, Canadian Employer of Record, American PEO, Payroll Tax Laws in Canada, American Business in Canada, Canadian-Based EOR, Canadian EOR, PEO Services, Canadian Payroll Services

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

How Payroll Service Providers Remit Taxes

Posted by Ray Gonder

|

Jun 7, 2013 1:22:00 PM

How Payroll Service Providers Remit TaxesRemitting taxes. It's about the last detail you want to worry about as a small business owner. Remitting taxes doesn't advertise your goods and services, it doesn't help you to work more efficiently, and it doesn't train or find new employees for you. It just takes up your precious time that could be better spent in other ways.

That's where payroll service providers can help you. With expertise in every aspect of tax law and logistics, a good payroll service can strike tax remittance from your to-do list, leaving you with time for the tasks that actually help to improve and grow your business.  Ensure that when you are choosing a payroll provider you make sure they remit all of your government taxes as some only remit the general payroll taxes but not worker’s compensation or Ontario EHT. A provider that only does half the job can cause more confusion to an already frustrating process.

There’s more to paying your staff than just using a payroll calculator. If you've been unsure about how tax remittance works or you're wondering what's involved, here's a primer based on common questions from Canadian employers.

What do I have to remit?

As an employer of Canadian workers, you're required to remit employee payroll tax, Canadian Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, your employer's percentage of EI and CPP, workers’ compensation, and (in Ontario) Employee Health Tax (EHT). Each of these remittances must be individually calculated for each of your employees, and the calculations depend on the province or territory where your employees report for work. Each of these contributions must be calculated and remitted correctly if you wish to avoid paying fines.

Where do I send payroll remittances?

Most Canadian employers remit to at least three different government agencies each time they calculate payroll. Depending on which provincial and territorial agencies are involved, you may have many different offices to remit to. Follow the instructions on the remittance tables published by the various provinces and territories where you must remit taxes, and send your funds to the appropriate offices.

When do I remit payroll taxes?

This is an important question to answer because you'll be faced with fines if you fail to make your remittances on time. Each governmental agency has a different remittance schedule, and unfortunately, this variation of remittance schedules consumes a lot of time for the average Canadian business. Most agencies have monthly remittance schedules, but your due dates will probably land on different days of the month, causing issues with cash flow and time management.

How can I streamline my payroll duties?

Clearly, staying on top of Canadian payroll is a time-consuming and headache-inducing affair. If you're tired of managing all of these administrative details, turn payroll over to the pros. Instead of looking through tax schedules and charts, get out from behind your desk and meet with customers and clients. Instead of cutting checks and making phone calls to government agencies, pursue your dreams of expansion.

At The Payroll Edge, we have more than 25 years of tax remittance experience. Recognized as a payroll authority even among administrators at the CRA, we are always on top of changing tax laws and regulations. It's our job, and we do it well. We can save you an immense amount of time and frustration when we assume the payroll responsibilities at your company. You'll be amazed at the reduction in stress when you don't have to worry that you've remitted the wrong amounts at the wrong time. You'll have confidence that the job is being carried out by professionals who guarantee their work.

For more information about what The Payroll Edge can do for your company, contact us. We'll be happy to discuss your company's payroll and tax remittance needs.

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

Topics: Payroll Tax, Payroll Service Provider, Payroll Tax Calculations, Payroll Tax in Canada, Payroll Service, Payroll, Payroll Calculator, Payroll Deductions, Payroll Tax Tips, Remitting Taxes, Employee Payroll Tax

Understanding Payroll Tax Calculations

Posted by Ray Gonder

|

May 6, 2013 10:11:00 AM

understanding payroll tax calculationsPayroll tax calculations can seem like a pretty straightforward affair. Employee income is compared to a tax chart or entered into accounting software, and the corresponding tax amount is remitted to the CRA. Of course, if it were really this simple, nobody would ever need to engage accountants or payroll services. As with most things that involve federal and provincial governments, nothing is as simple as it seems. The regulations affecting taxes are numerous, often vague, and always changing. Understanding exactly what is necessary, and what’s at stake, is critical to avoid costly errors.

If it’s so easy, why isn’t everyone doing it themselves?

There are nearly 200 regulations that impact tax calculations and HR management. Not all of those regulations concern the CRA. Other agencies are waiting in the wings to collect their share. Calculating the remittances for other agencies can be difficult, and the results can vary widely depending on the status of the employee, the province in which they principally work, and any benefits that may affect their reportable income. Mistakes can result in fines and civil penalties, along with potentially being required to repay thousands for a misclassified employee.

Employee status and reportable income are two areas where businesses frequently make errors. There are strict regulations concerning the difference between contractors and employees. A business that oversteps those regulations could owe tens of thousands in unpaid benefits, insurance and pension contributions, and uncollected taxes.

Reportable income is not just what an employee earns in an hour. There are pages of CRA documents describing other benefits that must be reported as income. Subsidized housing, a company car, even something as innocuous as on-site daycare, may be considered income. Again, the regulations can be vague, and vary from province to province. Errors can lead to insufficient remittances, which can lead to a visit from the CRA.

Other remittance calculations, including CPP and EI contributions, are based on these other numbers. If the original calculations are incorrect, they will cause a ripple-effect, creating errors in all subsequent calculations. Misunderstanding a single vague regulation could result in dozens of errors for a single employee. As those errors pile up for months, the eventual cost to the business grows exponentially. When the CRA or other authorities finally catch the error, the resulting expense could be devastating.

How a Payroll Service is Better

Payroll services have the obvious advantage of performing these calculations thousands of times a month. Their entire business is focused on understanding the current laws and regulations, and being informed about proposed and pending regulatory changes. A payroll service that makes costly mistakes for its clients wouldn’t survive long.

High-quality service providers also offer their clients the benefit of professional representation in the event of an audit. They can provide document preparation, legal consultations, and even representation at the audit itself. A company that employs a reputable payroll service provider will never be alone when facing a government audit.

Doing It On Your Own Can Be an Unnecessary Risk

Some businesses believe that they can save money by handling their payroll tax calculations internally. This may be true—in the short term. All of those savings can be wiped out in an instant by an unfavorable government audit. A single error, for a single employee, could consume more than it would cost to engage a payroll provider for months or even years.

Payroll service providers have the experience and expertise to provide reliable, error-free service for hundreds, or even thousands, of businesses. In the event of an audit, they also have the experience and expertise to successfully represent and defend those businesses.

7 Signs It's Time to Outsource Payroll

Topics: Payroll Tax, Payroll Service Provider, Canadian Payroll Deductions, Payroll Tax Calculations, Payroll Tips, Payroll Service, Payroll, Payroll Deductions, Payroll Tax Tips

Understanding Payroll Tax

Posted by Ray Gonder

|

May 2, 2013 9:56:00 AM

understanding payroll taxOne of the most important and, unfortunately, confusing aspects to processing payroll is understanding payroll tax. Knowing how to handle payroll tax is critical if you want your business to run smoothly and not run into any trouble with the CRA. You can learn about payroll tax yourself, or you can hire a payroll service provider to handle issues involved in payroll tax. Either way, payroll tax is not optional. Here's what's involved.

Acquiring a Business Number and CRA Account

Not all businesses in Canada need business numbers assigned by the CRA. "Small suppliers," businesses that have total revenues of $30,000 or less (before expenses) for the last four consecutive business quarters, are not required to obtain CRA accounts and business numbers. If your business has made more than $30,000 before expenses, however, you must comply with this guideline. If you're unsure about whether or not your business qualifies, visit this site to calculate your small supplier status. If your business needs a business number and CRA account, you can open your account online. 

Staying On Top of Employee Information

Once you have a business number from the Canada Revenue Agency, you need to begin collecting information from your employees. Each employee must have completed federal and provincial TD1 forms. Filling these forms out should be part of your hiring process. In addition, employees should each fill out a personal tax credits return form, which determines how much tax should be withheld from the employees' paycheques.

Determining Employees' Taxable Benefits

In most cases, Canadian payroll deductions include three items: income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums. For each of these items, you must use the provincial or territorial tables for the location where your employees report for work. Also, employers who provide board and lodging, the use of a company car, paid parking, or low-interest loans must include these benefits in the calculations.

Remitting Deductions and Contributions to the CRA

Each time a payroll deduction remittance is due to the CRA, you must remember to send the funds to the CRA along with your business number. Depending on your business' status, you may have to remit your deductions and contributions quarterly or more frequently.

Completing Year-End Forms to the CRA

Your payroll tax duties don't end when you finish payroll after each pay period. You're also required by law to file year-end forms with the CRA and distribute year-end tax information to your employees. T4 Slips are due to your employees by the last day of February each year, and you must also send a T4 Summary to the CRA. These slips and summaries help the CRA to collect funds and maintain accurate records on taxes paid by Canadian employees.

Payroll tax is a complex and ongoing task for any business. If you don't have a full-time employee who can see to these matters, it may be wise to employ a payroll service to manage them. It will cost much less than hiring someone – even part-time. A competent payroll service stays on top of ever-changing tax codes and rules, so you don't have to spend precious time tracking changes that may affect your payroll. Payroll services are experts in tax reporting, so you know the job will be done right the first time, and you won't have to worry about paying fines for missed deadlines or costly mistakes.

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

Topics: Payroll Tax, Payroll Service Provider, Payroll Tips, Payroll Service, Payroll, payroll solution, Payroll Tax Tips

Payroll Tax – What You Need to Know

Posted by Ray Gonder

|

Mar 25, 2013 10:48:00 AM

payroll tax what you need to knowProcessing payroll is one of the most basic responsibilities of an employer, but small-to-midsize businesses sometimes struggle with keeping up with the paperwork and ever-changing payroll tax regulations. In Canada, processing payroll includes, among other things, complying with the Canada Revenue Agency's requirements and remitting accurate payroll deductions.

Instead of wading through seemingly endless payroll tax rules and regulations, employers can break down their payroll tax tasks into the following five steps:

1. Open and operate a Canada Revenue Agency (CRA) payroll account.

Canadian businesses that run payrolls must have a Business Number, which is a 15-character identifier for a business. The first nine digits consist of numbers, and the remaining six characters identify a particular tax account. Businesses that have not yet secured Business Numbers can register online or send in their paperwork via mail or fax.

A business that already has a Business Number simply needs to add a payroll account to its existing CRA accounts. To do this, use CRA's Represent-a-Client service online, have an employee or representative take care of the process through your CRA business account online, or complete a Business Consent Form and mail it in.

2. Collect information from employees and complete TD1 forms.

Once your payroll account is operational, verify employees' social insurance number (SIN) and have them complete federal and provincial TD1 forms. This task should be taken care of as part of the hiring process.

In Canada, most non-monetary perks, such as employee-provided room and board, the use of a company car, or free parking, is considered a taxable benefit and must be added to employees' income prior to making payroll deductions.

3. Assign payroll deductions for employees.

Once employees' income has been adjusted, deduct the following three items from each employees' pay: income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums.

4. Remit payroll deductions and employer contributions to the CRA.

After the first time a business remits payroll deductions and employer contributions to the CRA, they will receive a remittance form in the mail each time remittance is due. The first time, however, the business has the responsibility to send a cheque or money order to the Receiver General with the appropriate amount of money. It's important to write the Business Number on the back of the cheque to avoid confusion.

In addition to the cheque, send along a letter explaining that the business is a new remitter. Include in the letter the period the remittance covers, the Business Number, and complete contact information for the business.

5. Complete year-end T4 Slips and the business's T4 Summary form.

All Canadian employers with payrolls must complete a T4 Slip for each employee. These forms may be filled out electronically or on paper, but they must be delivered to employees by the last day of February.

The T4 Summary form summarizes the T4 slips given to a business's employees. All totals on T4 slips must match totals listed on the T4 Summary form. Again, the T4 Summary form may be filled out and submitted electronically.

Other Information

All business records that support claims made on payroll documents must be kept for a period of six years, either at the place of business or at the owner's residence. Failure to comply with Canadian payroll requirements may result in fines ranging from $1,000 to $25,000, imprisonment up to 12 months, or both.

For help with handling payroll tax, contact The Payroll Edge to speak with professionals with years of experience. Our professionals stay up-to-date on the ever-changing laws and requirements affecting payroll taxes and are well known by federal and provincial authorities.

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

Topics: Payroll Tax, Payroll Service Provider, Payroll Service, Payroll, payroll solution, payroll provider, Payroll Tax Tips

Subscribe to Email Updates

Recent Posts

Posts by Topic

see all