At first glance, payroll can seem quite cut and dry. You tally up how many hours an employee worked, then multiply it by their wage. Then you pay them.
Anyone who has ever been involved in payroll knows there is more to it than that. There are deductions to be made, taxes to be withheld, and a dozen other calculations you must take into account. Then there are deadlines, tax remittances, and more.
For international employers like you, payroll could be even more complex. You may be dealing with the payroll rules in several other countries. Even learning just one set of regulations can be time-intensive. Your team might feel mixed up as they sort out the rules.
Now take a country like Canada, where payroll isn’t managed at one level of government. Instead, each province in Canada has their own rules, which you’ll need to learn and follow.
So, how do you do Canadian payroll the right way? You can start with this guide.
Set up an Account with the CRA
The first step to doing payroll in Canada is to get set up with the Canada Revenue Agency. You’ll need to register for a business number. Once you have this number, you can log in to the CRA’s website and set up a payroll account.
This account allows you to remit tax withholdings and other deductions for your employees. You’ll have to file these in installments throughout the year.
Determine Your Remittance Schedule
The next step in conducting your Canadian payroll is consulting with the CRA about your remittance schedule. You must send payments to the CRA in line with your payroll schedule. Similar to the US, you’ll have a certain amount of time to remit your payments, based upon when and how often you collect payroll.
It also depends on how much you collect. If you remit over a certain amount each year, you’ll need to remit to the CRA more frequently. If you conduct payroll once a month, you will remit once a month as well. If you pay weekly, you’ll likely end up sending in your remittances much more often.
Calculate Hours and Wages
The next step in payroll should be familiar. You’ll collect information about hours worked by your employees, then calculate their earnings.
Keep in mind that you’ll need to consult with the minimum wages for each province to determine the correct earnings. There may be additional rules for students and minors. In some provinces, they can be paid less than workers over the age of 18.
Some provinces also have different rules for different occupations. Bartenders and wait staff are one example. Since these employees are often tipped, they may be subject to a lower minimum wage. Other industries may have higher mandated minimums.
You must keep track of overtime hours your team members work. In most provinces, you’ll be required to pay them a higher wage for any hours they work over the set “maximum.”
For most occupations, this is 40 hours a week, but you’ll want to double-check the rules. In some provinces, certain industries and jobs have higher or lower maximums. A good example is in Quebec, where mill workers can work more than 40 hours of “straight” time before overtime hours start.
Also be aware of rules around alternate arrangements, such as lieu time. Most provinces allow employers to offer extra time off instead of paying overtime, but you should always make sure you’re complying with the law.
Calculating Holiday and Vacation Pay
Finally, check the regulations around holiday and vacation pay in your province. In Canada, most workers are entitled to “statutory holidays.” These are often holidays designated by the federal government and observed by provincial governments.
You may be allowed to operate on a statutory holiday, but there could be restrictions. Employees might have to volunteer to work the day, and you might have to offer them a higher rate of pay.
The provinces can also set holidays, so each province’s holiday schedule can look different. These holidays are generally considered “optional,” meaning you don’t have to offer them. You may instead choose to offer other paid holiday time, such as an extra day around Christmas and New Year’s.
Vacation pay is another consideration for payroll, although it’s not deducted or paid by your employees. Instead, you’re expected to calculate the appropriate amount from your employees’ earnings and contribute that to a paid vacation fund. When an employee takes their vacation entitlement, you’ll use these funds to continue to pay them. The calculations let the employee see how much time they have earned.
The rules on calculating vacation pay are different from province to province. In Saskatchewan, you’ll need to withhold around five percent. The amount of time available for employees also changes between provinces. Most provinces increase paid vacation entitlements with length of service, but exactly when and how much are different.
Dealing with Deductions
There are quite a few deductions you will handle as well. The first is income tax.
Income tax depends partially on how much your employee earns, but it also depends on where they live. Residents of different provinces pay different provincial tax rates.
There are also deductions for federal social programs like the Canada Pension Plan and Employment Insurance. Again, the rates depend on where the employee lives, as well as how much they earn. The rates are split between employer and employee, so you’ll need to fund part of your employees’ EI and CPP payments.
In Quebec, you’ll pay into the provincially operated programs rather than the federal ones. Finally, there are some differences between provinces. In BC, for example, employees had the option to deduct their contributions to the public healthcare system from their paychecks. Since BC has since done away with these fees, this is no longer necessary.
You may also need to make deductions for “perks” or benefits you offer. Pension plan contributions or benefit co-pays may be deducted directly from the employees’ paycheck if they consent to this arrangement.
You may also need to make the proper calculations for payments such as moving expenses, reimbursement for business expenses, or other forms of payment. You’ll need to determine what the CRA considers a taxable benefit.
The final step in conducting Canadian payroll is maintaining your compliance with the laws in your jurisdiction. Many provinces have seen big changes in employment legislation in the last few years. In BC, the minimum wage is set to rise in 2020 and again in 2021.
Compliance programs help you stay on top of changes and ensure you’re conducting payroll correctly.
Need a Helping Hand?
This guide should help you get started with Canadian payroll, but it will still take time to learn the ins and outs of conducting payroll for your Canadian team.
If you feel a little overwhelmed, don’t worry. You can work with an expert provider, like a PEO. Their knowledgeable staff can help you conduct Canadian payroll the right way every time.