Canadian Payroll Services

Small Business Payroll Services & Payroll Management Services

Canadian Payroll Services

Taxation rules

When it comes to payroll in Canada, there are many rules to follow. Employers must withhold and remit provincial taxes and personal income tax on employees in Canada. There are also penalties for employers who fail to pay.

Payroll taxes in Canada are administered by the Canada Revenue Agency. Detailed records should be kept for six years. A business number is also required. This is a 9-digit business number issued by the CRA.

Employers in Quebec must remit 1% of the employer's payroll to a provincial fund. If the total employer's payroll is over CAD$2 million, the employer must allot 1% to training and development. Those who have an annual gross salary of less than CAD$1 million are not required to contribute.

Employers in the province of British Columbia must register with the BC PST. Those in the province of Saskatchewan levy 6%. Those in Manitoba levy 7%. These taxes are not applied to retail sales.

Employees in Canada must receive a T4 form within seven days after their employment begins. In some cases, a remote work exemption may be available. Also, an employer must remit withholding to the CRA on or before the 15th of the month.

Payroll Requirements In Canada

Register your business with the CRA and get a payroll account
Register to pay provincial/territorial tax in every region you operate
Register for CPP, EI, and Worker’s Compensation
Open a Canadian business bank account
Choose payroll software that complies with CRA rules and employment law
Contact our payroll professional for support and services

How Much Is Payroll Tax In Canada?

Because the laws governing Canada's payroll tax are so complicated, the amount of tax that is withheld from each paycheck in Canada can differ from one to the next. For Canadian employees, taxable income includes wages, bonuses, and certain benefits provided by employers, such as life insurance, home office and travel allowances, and all reimbursed expenses submitted without receipts. Also taxable is any money that is reimbursed to the employee without a receipt. As a result of the fact that every payroll tax has its own limit, it is reasonable for employees in Canada to expect that the total amount of tax that is deducted from each paycheck will change throughout the course of the year.

Payroll taxes in each of Canada's provinces are organised differently from one another. In the year 2023, the tax rate for the lowest income bracket in Nunavut is 4%, while the tax rate for the lowest income bracket in Manitoba is 10.8%. These rates reflect the various tax brackets that apply in the provinces and territories. Due to the fact that various provinces use a variety of distinct methods to compute taxes, the brackets themselves are subject to change. In comparison, the province of British Columbia has seven different tax brackets, while the province of Alberta only has three. At the federal level, there is a total of five distinct tax brackets and rates to choose from.

Provincial/Territorial Payroll Laws

Employment standards governing minimum wage, vacation pay, holidays, sick pay, and notice period differ by province, and provincial employment law jurisdiction applies to 90% of Canadian workers.

Canada Pension Plan (CPP)

All working Canadians between the ages of 18 and 70 are required to contribute to the CPP (or QPP in Quebec). Employers deduct CPP and remit it to the CRA along with their own equal contribution every payroll cycle.

Employment Insurance (EI)

EI is mandatory for all working Canadians between the ages of 18 and 70. Employers deduct EI and remit it to the CRA along with their own contribution, which is 1.4 times the employee's.

Penalties For Payroll And Tax Non-Compliance

Both the payroll in Canada and the taxes that are deducted from it are subject to a significant number of rules and regulations. Employers who do not deduct taxes from their employees' paychecks will be subject to a fine equal to ten percent of the taxes that are owed. In the event that taxes were not withheld knowingly, grossly negligently, or repeatedly, the fine will be increased to 20% of the total amount of taxes that were not withheld. Employers who are late with their tax payments may be subject to a penalty that has a range that goes from 3% to 20% of the total amount of taxes that are still owed by the business. This penalty is determined by the amount of time that has elapsed since the taxes were due, as well as the employer's payment history regarding whether or not they have ever paid their taxes late.

The risks involved in quitting a job are significant and should not be taken lightly. The minimum wage, vacation time and pay, severance pay, and numerous other aspects of payroll are some of the many areas that are governed by the rules that are established by individual provinces. Employers have a duty to ensure that they have a thorough working knowledge of the employment standards that are applicable in their own states and regions. The courts in Canada typically rule in favour of employers during labour disputes, and not a single province or territory recognises the concept of "employment at will."