1. Register with federal agencies
To run payroll in Canada, you need a Business Number ( BN ) and payroll broadcast report through the Canada Revenue Agency ( CRA ). A BN identifies your occupation to the federal politics. It ’ s the business adaptation of a Social Insurance Number ( SIN ). A payroll program report is a 15-digit count that contains your nine-digit BN. It ’ s your business ’ south singular identifier to the CRA. New businesses can register for a BN and payroll program account simultaneously on the CRA web site.
The registration process requires the follow information :
- Pay schedule, whether it’s weekly, bi-weekly, or semi-monthly
- Number of employees
- Payroll software or service you intend to use
You may besides need to set up accounts with the Ontario Workplace and Safety Board and the Ontario Ministry of Finance to remit workplace policy and health tax payments .
2. Gather employee information
following, collect the following data from your employees :
- Phone number
- Social Insurance Number (SIN)
- Date of birth
- Bank account information for direct deposit
Employees must submit federal and provincial TD1 forms. The information they provide determines some payroll deductions. You can download TD1 forms on the CRA web site. Enter this data into your payroll software. Employers who do payroll manually should create a procure records management system to store sensitive employee information .
2. Calculate gross wages
Gross wages are an employee ’ s earnings before payroll deductions, such as taxes and retirement contributions. An employee ’ second gross wages are the sum you put on his or her offer letter. Gross wages can be expressed per hour, pay period, or year.
Include taxable periphery benefits in the megascopic wages calculation. If you reimburse your employees for their cell phone or parking costs, add those benefits to gross wages. Check the CRA web site for the taxability of benefits and allowances. hourly employees who work over 40 hours in a workweek or over eight hours in a day might be subject to clock and a half overtime wage. Consider Olivia, who works at a flower shop in British Columbia. She makes CA $ 60,000 per year and is paid doubly monthly. Her annual gross wage is CA $ 60,000. She doesn ’ t receive any fringe benefits. She besides brings a antic bouquet whenever she ’ sulfur invited to a dinner party. Olivia ’ s crying wages for the yield period are CA $ 2,500 ( CA $ 60,000 / 24 pay periods per year ) .
3. Calculate and deduct taxes and contributions
Both employees and employers buck up for Canadian payroll taxes and contributions. As an employer, you ’ re creditworthy for withholding and remitting a part of employees ’ wages for taxes and contributions. CRA payroll deductions include :
- Federal income tax
- Provincial or territorial income tax
- Canada Pension Program (CPP) or Quebec Pension Program (QPP) contributions
- Employment Insurance (EI) premiums
- Registered Retirement Savings Plan (RRSP) contributions
All but RRSP are required CRA deductions. CPP/QPP contributions apply to employees ages 18 to 69, and EI premiums apply to employees of all ages. Both employees and employers pay into CPP/QPP and EI, based on employee earnings. Contributions stop once they ’ ve reached their annual utmost. All provinces but Quebec follow the like contribution rates and limits. 2020 CPP/QPP limits are :