Canada’s robust economy and progressive labor laws offer great potential for business growth. Managing payroll in Canada requires attention to provincial regulations and tax complexities. Gloroots provides the expertise needed for smooth payroll operations. Employers hiring in Canada or managing payroll via an Employer of Record (EOR) must stay informed about these regulations.

How is payroll calculated in Canada?

As a business owner in Canada, recruiting staff necessitates the establishment of a payroll system. Payroll includes employee information, work hours, deductions, minimum wages, payment records for all pay cycles, and tax payments to the government.

Setting up payroll in Canada is relatively straightforward, but attention to detail is crucial to avoid mistakes. Adhering to payroll policies and procedures is essential for a successful setup.

Steps to Set Up Payroll in Canada

Before you start, gather the following essential information:

Business Information:

• Business Address
• Business Number
• CRA Payroll Account Number
• Workers Compensation Information
• ROEs issued
• YTD amounts owed to employees
• Bank account details
• Tax rates
• Remittance schedule

Employee Information:

• Full Name
• Date of Birth
• Social Insurance Number (SIN)
• Bank account details for deposits
• Home Address
• TD1 forms
• Email ID

How to set up payroll in Canada

When establishing payroll in Canada, all transactions must be conducted in Canadian Dollars. Employers need to provide comprehensive information about their employees and meet all tax registration obligations. Additionally, obtaining a Social Insurance Number (SIN) for each employee is essential.

Key Steps to Set Up Payroll

Employee Registration:

• Obtain Social Insurance Numbers (SIN) for all employees.
• Collect all necessary documentation for new hires.

Required Documentation:

• Provide a written statement outlining the terms and conditions of employment.
• Issue an itemized pay statement for transparency and record-keeping.

Discover the latest insights on Global Payroll Trends for 2024.

Payroll Process in Canada

Federal Registration Requirements

When hiring employees in Canada, it is essential to register with federal agencies. Obtain a Business Number (BN) and a Canada Revenue Agency (CRA) payroll program account. The BN, similar to a Social Security Number for businesses, forms part of a 15-digit identifier used by the CRA. New businesses can register for both on the CRA website.

Information Needed for Registration:

• Number of employees
• Chosen payroll software or service
• Payroll frequency (weekly, bi-weekly, or semi-monthly)

Employers in Ontario may also need accounts with the Ontario Workplace and Safety Board and the Ontario Ministry of Finance for workplace insurance and health tax payments.

Employee Details Collection

Collect the following information from your employees:

• Contact number and residential address
• Social Insurance Number (SIN)
• Date of birth
• Bank details for direct deposit

Employees must complete federal and provincial TD1 forms, available on the CRA website, to determine appropriate payroll deductions. Employers should use a secure records management system for handling sensitive employee information.

Gross Pay Calculation

Calculate gross pay, which includes employees' earnings before deductions for taxes and retirement contributions. The gross wage stated in the employment offer letter is calculated hourly, per pay period, or annually. Include any taxable fringe benefits and reimbursements for expenses such as cell phone or parking. Hourly workers exceeding 40 hours a week or eight hours a day may qualify for overtime pay at 1.5 times their regular rate.

Deduction Calculations

Employers are responsible for withholding and remitting portions of employee salaries for taxes and contributions. Required deductions include:

• Federal and provincial/territorial income taxes
• Contributions to the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP)
• Employment Insurance (EI) premiums
• Optional Registered Retirement Savings Plan (RRSP) contributions

Both employees and employers contribute to CPP/QPP and EI, ceasing once annual caps are reached. Rates and caps are uniform across provinces, except for Quebec.

Payment Distribution

Before finalizing payroll, conduct a reconciliation to identify discrepancies. Review the payroll register against tax records and the general ledger. Correct any errors and then issue employee paycheques. Even when processing payroll manually, provide pay stubs for income verification, track leave accruals, and detect payroll issues. Record payroll transactions in your accounting software, integrating payroll and accounting systems if possible.

Tax Remittance

After issuing paychecks, inform the employer of deductions and taxes. Typically, payroll deductions must be submitted by the 15th of the month following the pay period, either on paper or electronically. Established businesses may opt for different remittance schedules, such as quarterly or bi-monthly.

Submit federal taxes, provincial taxes, CPP contributions, and EI premiums to the CRA. QPP contributions should be sent to Revenu Quebec.

By following these steps, you can ensure a compliant and efficient payroll process when hiring employees in Canada. Partnering with a payroll management provider like Gloroots can further streamline this process, ensuring all legal requirements are met.

Payroll Cycle

The payroll cycle in Canada determines how frequently employees are paid, ensuring they know when to expect their earnings. Employers can choose from several schedules: weekly, bi-weekly (every two weeks), semi-monthly (twice a month), or monthly, adhering to a consistent payroll frequency for their workforce.

Payroll Processing

To comply with Canada’s labor laws, consider partnering with a payroll processing company like Gloroots. We streamline the payroll process in Canada, making it smooth and efficient. Let Gloroots handle your payroll requirements, allowing you to focus on growing your business.

Payroll Management

In Canada, payroll management services offer extensive solutions to handle employee records and ensure compliance with statutory laws. These services meticulously maintain records of incentives, track employees' gross and net income, and provide a set number of pay slips, ensuring seamless and accurate payroll management.

Payroll Components

Minimum Wage

The basic hourly minimum wage in Ontario is 16.55 CAD. For employees working in federally regulated organizations, the applicable minimum wage rate will be the current rate specified by the jurisdiction where the work is performed.

Working Hours

According to the Employment Standards Labor Code, employees can work a maximum of 8 hours per day and 40 hours per week. The total hours, including overtime, should not surpass 48 hours per week.

Overtime

Overtime regulations differ across jurisdictions, with some enforcing daily limits (usually after 8 hours) and others setting weekly thresholds (typically between 40 and 44 hours). Overtime is generally paid at 1.5 times the regular rate, and in some areas, this increases to double the rate after a certain limit. Not only hourly workers but also salaried employees may qualify for overtime pay.

Social Security 

Employer

Employee Payroll Contributions in Canada

Explore our  A Complete Guide to Payroll Management | Gloroots for in-depth insights

Sick Days

• Sick leave entitlements in Canada vary by province and are generally unpaid, except for specific cases like British Columbia (5 paid days), Quebec (2), and Prince Edward Island (1). Federally regulated employees receive 10 paid sick days, and some provinces have COVID-19-related paid leave. 
• Most provinces offer a mix of unpaid and occasionally paid sick days, with many employers providing additional paid leave and disability benefits. Employees without these benefits may qualify for Employment Insurance. Several provinces also grant unpaid family responsibility leave. Employers must accommodate leave for disabilities or family needs, possibly extending beyond statutory limits.

Parental Leave

Parents can take up to 63 weeks of leave to care for a newborn or adopted child, starting no earlier than the week of birth or legal adoption, and no later than 78 weeks after.

Employment Insurance offers maternity and parental benefits for those away from work due to pregnancy, childbirth, or caring for a new child.

Benefit Details:

• Standard Parental: Up to 40 weeks shared between parents, with a maximum of 35 weeks per parent. Benefit rate: 55%, up to $650 weekly.
• Extended Parental: Up to 69 weeks shared between parents, with a maximum of 61 weeks per parent. Benefit rate: 33%, up to $390 weekly.
  

Employee Income Tax Rates

Federal Income Tax Rates

Ontario Income Tax Rates

Find the Best Canadian talent for Your Business Today

To discover the top talent in Canada, Gloroots streamlines hiring and payroll processes by offering comprehensive payroll management and ensuring adherence to local labor laws. Our proficiency in risk management, efficient onboarding, and payroll integration allows businesses to focus on growth while we handle payroll complexities. Rely on Gloroots to expertly manage payroll and talent acquisition in Canada, ensuring a seamless and effective process.