Introduction
As an employer in Canada, you have a legal responsibility to ensure compliance with payroll and employment standards. This includes making proper deductions, submitting remittances, and respecting employee rights. This guide outlines your key obligations and offers practical tips to manage them effectively.
Payroll Deductions
Employers must deduct the following amounts from employee paychecks:
1. Income Tax
You are required to calculate and withhold federal and, if applicable, provincial income tax from employee wages. The CRA provides tax tables and online calculators to help determine the correct amounts.
2. Canada Pension Plan (CPP) Contributions
Both employers and employees contribute to the CPP. Employers must match the employee’s contribution and remit the total amount to the CRA.
3. Employment Insurance (EI) Premiums
Employers must deduct EI premiums from employee wages and contribute 1.4 times the amount deducted. These funds support employees during periods of unemployment.
Failure to deduct and remit these amounts accurately can result in penalties and interest charges.
Submitting Payroll Remittances
Payroll remittances include income tax, CPP contributions, and EI premiums. These must be submitted to the CRA based on your assigned remittance schedule:
Regular Remitters: Payments are due by the 15th of the following month.
Accelerated Remitters: Larger employers may have to remit bi-weekly or weekly.
Late remittances can result in penalties of 3% to 10% of the amount due, depending on the duration of the delay.
Pro Tip: Use payroll software or set up automatic reminders to ensure timely remittances.
Maintaining Employee Rights
Employers must comply with employment standards laws at both the federal and provincial levels. Key areas include:
1. Minimum Wage
Ensure that all employees are paid at least the minimum wage applicable in your province or territory. Minimum wage rates vary by region and are updated periodically.
2. Overtime Pay
Employees are entitled to overtime pay for hours worked beyond the standard workweek. The rate is typically 1.5 times the regular hourly rate, but rules vary by jurisdiction.
3. Statutory Holidays
Employees are entitled to paid time off or holiday pay for statutory holidays. Ensure compliance with provincial and federal holiday regulations.
4. Vacation Pay
Employers must provide vacation pay, which is calculated as a percentage of gross earnings. The minimum requirement is usually 4% (two weeks) but can increase with tenure.
5. Termination and Severance
When ending employment, ensure you provide proper notice or pay in lieu of notice, as well as severance pay if applicable. Provincial laws dictate the specific requirements.
Workplace Safety and Insurance Board (WSIB)
Employers in Canada may be required to register with the Workers’ Compensation Insurance Board (WSIB) or its equivalent in their province or territory. This ensures that employees are covered in the event of work-related injuries or illnesses. The specifics vary by jurisdiction, but here are the general obligations:
Who Needs to Register: Most employers with employees must register, though exceptions may apply based on the industry or number of employees. Check your provincial WISB regulations for specific requirements.
Employer Contributions: Employers must pay premiums based on their industry classification and payroll amounts.
Reporting and Compliance: Employers are required to report workplace injuries and illnesses to the WISB promptly. Maintaining accurate records and fostering workplace safety are critical for compliance.
Failure to register or comply with WISB requirements can result in penalties and leave your business exposed to liability for workplace injuries.
For detailed information, visit your provincial WISB website, such as Ontario’s WSIB.
Common Compliance Challenges
Misclassifying Workers
Ensure you correctly classify employees versus independent contractors. Misclassification can lead to significant fines.
Incorrect Deduction Calculations
Use CRA-approved tools or software to avoid errors in payroll calculations. For official calculators and tools, visit the CRA Payroll Deductions Online Calculator.
Failing to Maintain Records
Employers must keep payroll and employment records for at least six years. Ensure these are well-organized and secure.
Tools for Managing Employer Obligations
Investing in payroll and HR software can simplify compliance. Popular options include:
Wagepoint: Ideal for small businesses, offering automated payroll deductions and remittance tracking.
QuickBooks Payroll: Seamlessly integrates payroll and accounting functions.
Ceridian Dayforce: Designed for businesses with more complex payroll and HR needs.
Conclusion
Meeting your obligations as an employer is essential for avoiding penalties and fostering a positive work environment. By understanding your responsibilities and leveraging tools to streamline compliance, you can focus on building a successful business. At CA Hub, we provide tailored guidance to help employers navigate payroll and employment standards with ease. Contact us today to ensure your business remains compliant.
Disclaimer
This guide is intended for informational purposes only and does not constitute legal or tax advice. While every effort has been made to ensure accuracy, tax laws and regulations are subject to change. Please consult a qualified tax advisor or legal professional for advice tailored to your specific situation.