Resources

The Payroll Steps

  1. Determine that you are an employer.
    See "Employee or Independent Contractor" on our site.

  2. Obtain a business and payroll account number from the Canada Revenue Agency (CRA).
    Once you have determined that you are an employer, you must apply for a business number and a payroll account with the Canada Revenue Agency. The business number is your unique 9-digit business number. Unless you are opening a society with a micro board you will register this business as a sole proprietorship. For a payroll account, the two letter program identifier, RP, will be added to the 9-digit business number along with four digits (eg.0001 for an employer with one payroll account). You can open a business and payroll account online by going to CRA Business Registration online or go to CRA How to Register to choose a phone, mail or fax option for registering.

    Once you have registered your business the CRA will mail you a confirmation of your business and payroll account number.

    You must open a payroll account before your first payroll deductions are due. Payroll deductions for income tax, Canada Pension Plan (CPP) and Employment Insurance (EI) must be submitted to the CRA by the 15th of the month following the month that you paid your employees and made payroll deductions.

  3. Hiring Employees
    Once you hire an employee you must obtain their social insurance number and have them fill out a Form TD1, Personal Tax Credits Return (federal) and a TD1 BC (provincial). If there is a delay in obtaining this information from your employees you are still responsible for making payroll deductions and submitting those deductions to the CRA. See CRA Hiring an Employee.

  4. Calculating Deductions
    You have to calculate the CPP contributions, EI premiums, and income tax deductions based on the amounts you pay your employees. You also have to calculate your share of CPP and EI. The Canada Revenue Agency has an online calculator to make this process easier.

    Full information about payroll deductions can be found at CRA Calculating Deductions

  5. Remitting Deductions
    You have to remit the CPP contributions, the EI premiums, and income tax you deducted, along with your share of CPP contributions and EI premiums to the CRA. If you are a new employer you are considered a regular remitter and have to remit your deductions so the CRA receives them on or before the 15th day of the month following the month you made the deductions.

    When you make your first payment, send a cheque or money order to your tax centre. Make the cheque or money order payable to the Receiver General, and print your business number on the back. Include a letter stating:

    • that you are a new remitter;
    • the period your remittance covers;
    • your complete employer name, address, and business telephone number; and
    • your business number.

    After you make your first remittance, the CRA will send you a remittance form in the mail for your next remittance, and the CRA will continue to send you a remittance form after each remittance.

    If you do not receive a form in time for your next payment, send in the payment as described above. In your letter, be sure to indicate that you did not receive your remittance form.

    All information about remitting deductions can be found at CRA Remitting Deductions.

    All information about making your first remittance can be found by going to CRA New Remitter.

  6. Completing and Filing Information Returns
    All employer summaries (T4 Summary) and Employee Slips (T4) are due on the last day of February following the calendar year to which they apply.

    You have to complete T4 slips for all individuals who received remuneration from you during the year if:

    • you had to deduct CPP/QPP contributions, EI premiums, PPIP premiums, or income tax from the remuneration; or
    • the remuneration was more than $500. See CRA When to Complete a T4 Slip.

    A PDF of a T4 slip is available at CRA T4 Slip.

    A T4 Summary is a total of all of the amounts reported on the T4 Slips. A PDF of a T4 Summary as well as instructions for completing it is available at CRA T4 Summary.

    Both T4 and T4 Summary can be filed electronically.  See CRA T4 Summary of Renumeration Paid.

  7. Keeping records
    All businesses must keep records see CRA Keeping Records

    The Payroll Steps: All information taken from the Canada Revenue Agency website and can be accessed by going to Canada Revenue Agency- Employer Responsibilities-The Payroll Steps

  8. Record of Employment
    When an employee leaves or is terminated, you are responsible for issuing a Record of Employment (ROE) within 5 calendar days of the last day worked.

    ROE forms are registered with a number identifier and can only be obtained by special order from Service Canada so it is always a good idea to have a few extra on hand (if you do your own payroll and do not use a payroll company). By telephone: call Service Canada's toll free line at 1-877-317-0797. Be sure to have your business number on hand, along with the name, phone number, and address of your business—home in the case of most family/individual employers. By fax: fill out the ROE order form, then fax the form to Service Canada at 1-866-667-8560.

    The ROE can be a bit confusing to fill out for the first time. There is a guide available online to assist you with the process.

  9. Vacation Pay
    In all cases you are required to pay every employee vacation pay or give paid vacation time.

    For employees who have been with you under 5 years, you are required to pay for 2 weeks vacation/year prorated by the number of hours they work for you. The vacation paid leave or vacation pay for non-paid time taken is prorated at 4% of gross rate.

    In one scenario you may have a full-time employee who takes 2 weeks vacation annually with no interruption of their regular pay cheque. You may have a part-time employee who takes unpaid time off and is paid vacation on each pay cheque at 4% of gross earnings.

    For employees who have been with you for over 5 years, you are required to pay out, or give time off, 3 weeks vacation a year, prorated at 6% of gross wage.

    When an employee leaves your employ then any unpaid wages, including vacation pay, must be paid within 6 days. If an employee is terminated then unpaid wages, including vacation, must be paid within 2 days.

    Above rates are as at July 15, 2009 and are subject to change. For more information on Employment Standards that govern all BC employment relationships see Employment Standards Act.

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