Hiring your first employee — the Canadian checklist

The first hire changes what your business is, administratively. Money you pay out is no longer just an expense — part of it belongs to the CRA before it ever reaches the employee. Here is the sequence, in the order it actually needs doing.

1. Confirm they are an employee

Before anything else, settle whether this person is an employee or a contractor. Getting it wrong is expensive in one direction only: if the CRA reclassifies a contractor as an employee, the business owes the deductions that should have been withheld, plus the employer’s share and penalties. The tests are set out in our guides to worker classification and subcontractor vs employee. Where it is genuinely unclear, the CRA issues rulings on the question.

2. Open an RP payroll account

Payroll runs on a program account attached to your business number — the RP account. If your business number already exists for GST/HST or corporate tax, you are adding a program account rather than starting over. Open it before the first pay date, not after, because the account is where deductions are reported and remitted.

3. Get the SIN and the TD1s

Two documents before the first cheque:

• The social insurance number. You need it to report the employee’s earnings.
• Completed TD1 forms — federal and provincial. The TD1 tells you which personal tax credits the employee is claiming, which is what sets the income tax to withhold. A BC employee completes both the federal TD1 and the TD1BC. New forms are published for each tax year.

You also need to determine the employee’s province of employment, since that decides which provincial table and TD1 apply. For remote staff this is a real question, not a formality.

4. Withhold the right amounts

From each pay you withhold the employee’s income tax, CPP contributions and EI premiums. The business then adds its own employer share of CPP and EI on top — that portion is a cost of employment, not a deduction from the employee. The CRA publishes the rates and thresholds each year and provides the Payroll Deductions Online Calculator to do the arithmetic; use the current year’s figures rather than last year’s.

5. Know your remittance due date

Your remitter type sets when the money is due, and it is generally based on your average monthly withholding amount from two calendar years ago. For a first-time employer that number is zero, which normally puts you in the most forgiving category.

Where a due date falls on a weekend or a public holiday recognised by the CRA, payment is on time if it is received or processed at a Canadian financial institution on or before the next business day. If you have employees but made no deductions in a period, report a nil remittance rather than staying silent. Our guide to payroll remittances and the RP account goes further into this.

6. Register for workers’ compensation

This one is provincial and separate from the CRA. In British Columbia, employers register with WorkSafeBC for coverage, and premiums are set by the classification unit your business falls into rather than by a single flat rate. Register when you hire, not when something goes wrong. Other provinces have their own boards and their own rules.

7. Employment standards and the paperwork nobody enjoys

Payroll deductions are federal; employment standards are provincial. Minimum wage, overtime, statutory holiday pay, vacation entitlement and termination notice come from BC’s Employment Standards Act, not from the CRA. Keep a written offer, a record of hours, and payroll records you could reproduce on request. In BC you may also cross the payroll threshold for the employer health tax as you grow.

8. Year-end

After the calendar year closes, each employee gets a T4 and the T4 summary goes to the CRA. Deadlines and slip types are covered in slip filing deadlines. And whenever someone leaves or has an interruption of earnings, a record of employment is required on a short clock.

The bottom line

Classify correctly, open the RP account, collect the SIN and TD1s before the first pay, withhold and remit on your assigned schedule, register for provincial coverage, and keep the records. It is a short list, but every item on it has a deadline attached. Running payroll properly from the first hire is part of our payroll services.

This article is general information for Canadian business owners and is current as of July 2026. It is not tax, legal or accounting advice, and it does not create a client relationship. Tax rules change and your situation is unique — please speak with a CPA before acting on anything here.