Running payroll can be a daunting task, but it is an essential part of managing your business. As an employer in Canada, it is your responsibility to ensure that your employees are paid accurately and on time. In this article, we will provide a comprehensive guide on how to run payroll in Canada, covering topics such as payroll deductions, payroll taxes, and payroll software options.

Run Payroll in Canada

Payroll Deductions in Canada

Payroll deductions are the amounts that employers withhold from their employees’ paychecks to cover taxes, benefits, and other expenses. In Canada, there are several mandatory payroll deductions that employers must make, including:

1. Canada Pension Plan (CPP) Contributions

The CPP is a government-run retirement benefit program that provides Canadians with a stable income during retirement. As an employer, you are required to deduct CPP contributions from your employees’ paychecks, and you are also responsible for contributing an equal amount on their behalf.

The current CPP contribution rate is 5.45% of an employee’s earnings up to a maximum annual contribution of $3,166.45. As an employer, you must deduct the appropriate amount from each employee’s paycheck and remit it to the Canada Revenue Agency (CRA) on their behalf.

2. Employment Insurance (EI) Premiums

EI is a government-run program that provides temporary financial assistance to eligible Canadians who have lost their jobs. As an employer, you are required to deduct EI premiums from your employees’ paychecks, and you are also responsible for contributing an equal amount on their behalf.

The current EI premium rate is 1.58% of an employee’s insurable earnings up to a maximum annual contribution of $889.54. As an employer, you must deduct the appropriate amount from each employee’s paycheck and remit it to the CRA on their behalf.

3. Federal and Provincial Income Taxes

As an employer, you are required to deduct federal and provincial income taxes from your employees’ paychecks based on their taxable earnings. The amount of tax to be deducted is determined by the employee’s income, the province or territory they work in, and the tax brackets and rates set by the government.

To determine the appropriate amount of income tax to deduct, you can use the CRA’s online payroll deductions calculator or consult a payroll software program. You must deduct the appropriate amount from each employee’s paycheck and remit it to the CRA on their behalf.

4. Other Payroll Deductions

In addition to the mandatory deductions listed above, employers may also need to deduct other amounts from their employees’ paychecks, such as:

  • Canada Student Loan or Provincial Student Loan Repayments
  • Union Dues
  • Pension Plan Contributions
  • Group Insurance Premiums
  • Wage Garnishments

The amount of these deductions will vary depending on the employee’s situation and any agreements or contracts in place. It is important to keep accurate records of all payroll deductions and remit them to the appropriate parties on time.

Payroll Taxes in Canada

In addition to payroll deductions, employers in Canada are also responsible for paying certain payroll taxes. These taxes are calculated based on the total wages and salaries paid to employees during the year and must be remitted to the CRA on a regular basis.

1. Canada Pension Plan (CPP) Contributions

As an employer, you are responsible for contributing an equal amount to your employees’ CPP contributions. You must remit your portion of CPP contributions to the CRA on a regular basis, along with the amounts deducted from your employees’ paychecks.

2. Employment Insurance (EI) Premiums

As an employer, you are responsible for contributing an equal amount to your employees’ EI premiums. You must remit your portion of EI premiums to the CRA on a regular basis, along with the amounts deducted from your employees’ paychecks.

3. Federal and Provincial Income Taxes

In addition to deducting income taxes from employees’ paychecks, employers are also responsible for paying their share of federal and provincial income taxes. This amount is calculated based on the total wages and salaries paid to employees during the year and must be remitted to the CRA on a regular basis.

4. Quebec Pension Plan (QPP) and Quebec Parental Insurance Plan (QPIP) Contributions

If you have employees in Quebec, you are also responsible for deducting and remitting QPP and QPIP contributions. These programs are similar to CPP and EI, but they are specific to the province of Quebec.

5. Employer Health Tax (EHT)

In some provinces, such as Ontario and British Columbia, employers are required to pay an Employer Health Tax (EHT). This tax is based on the total payroll of the company and is used to fund the provincial healthcare system.

Payroll Software Options in Canada

There are many payroll software options available in Canada that can make running payroll easier and more efficient. These programs can help you calculate payroll deductions and taxes, generate pay stubs and T4 slips, and remit payments to the CRA on time. Here are some popular payroll software options in Canada:

1. QuickBooks Online Payroll

QuickBooks Online Payroll is a popular payroll software option that is designed for small business owners. It offers a variety of features, including automatic payroll calculations, direct deposit, and T4 and ROE generation. QuickBooks Online Payroll also integrates with QuickBooks accounting software, making it easy to manage all aspects of your business finances in one place.

2. PaymentEvolution

PaymentEvolution is a cloud-based payroll software option that is designed for Canadian businesses of all sizes. It offers features such as direct deposit, automatic payroll calculations, and T4 and ROE generation. PaymentEvolution also integrates with a variety of accounting software options, including QuickBooks, Xero, and Wave.

3. Wagepoint

Wagepoint is a cloud-based payroll software option that offers features such as automatic payroll calculations, direct deposit, and T4 and ROE generation. Wagepoint also offers an employee self-service portal, which allows employees to view their pay stubs and T4 slips online.

4. Ceridian Dayforce

Ceridian Dayforce is a comprehensive payroll and HR software solution that offers features such as automatic payroll calculations, direct deposit, and T4 and ROE generation. It also offers HR features such as onboarding, performance management, and time and attendance tracking.

Also Read : Top 10 Free Tax Filing Software in Canada.

Conclusion

Running payroll in Canada can be a complex and time-consuming process, but it is an essential part of managing your business. As an employer, it is your responsibility to ensure that your employees are paid accurately and on time, and that all payroll deductions and taxes are remitted to the appropriate parties. By using a payroll software program and keeping accurate records, you can simplify the process of running payroll and focus on growing your business.