Payroll for Canadian small business

Payroll is the obligation with the least tolerance for lateness. Corporate tax has a six-month filing window; payroll remittances are due on a fixed schedule regardless of whether the invoice you were counting on has been paid. The money withheld from an employee’s pay is held in trust, and CRA treats a shortfall there differently from an ordinary balance owing.

The guides below start with the mechanics of running payroll at all, move through the slips and benefits that come with employing people, and end with the question most owner-managers actually arrived for — how to pay themselves. Read the section that matches your situation.

If you are still deciding whether to run payroll at all, note that the decision is rarely permanent. Many owner-managed corporations start on dividends alone, add a salary once contribution room or borrowing capacity matters, and revisit the mix each year as income changes.

Running payroll: the mechanics

• Payroll services — what running payroll properly involves and where the recurring work sits. Read it if the current process is a spreadsheet and a reminder in your phone.
• Remittances and the RP account — opening the account, the remitter type CRA assigns you, and the schedule that follows. Read it before your first pay run.
• Payroll deduction calculator — estimates income tax, CPP and EI on a given gross pay. Useful when quoting a wage and wanting to know the true cost.
• Remittance calculator — works out what has to reach CRA and when, including the employer portions. Run it alongside each pay period until the pattern is familiar.
• The full CRA deadline calendar — payroll dates alongside corporate, GST and personal ones, so nothing gets tracked in isolation.

Slips, year end and provincial payroll taxes

• T4, T4A and T5 slip deadlines — which slip goes to whom and the filing dates, with T4s due by the last day of February. Read it in January, not late February.
• BC Employer Health Tax — the provincial payroll tax that applies above a payroll threshold in British Columbia, separate from anything CRA collects. Read it as your BC payroll grows.
• T5018 for construction subcontractors — the reporting obligation that applies to payments outside payroll in the construction sector.

Employees, contractors and benefits

• Hiring an employee vs a contractor — what each model commits the business to, from the hirer’s side. Read it before making an offer.
• How CRA classifies a worker — the factors that decide the question if it is ever challenged, and what misclassification costs the payer. The companion to the guide above.
• Company car taxable benefits — the standby charge and operating benefit that have to go on a T4 when a company vehicle is available for personal use.
• Vehicle benefit calculator — puts a number on that benefit before you commit to buying the vehicle in the company.
• Health spending accounts — a way to fund medical costs through the corporation, and the conditions that make it work.

Paying yourself and your family

• Salary vs dividends — the full reasoning, including the non-tax consequences owners often discover late. Read it once, properly, then revisit annually.
• Salary vs dividends calculator — models both routes on your own numbers so the choice is arithmetic. Run it before year end.
• CPP for incorporated owners — why paying dividends means opting out of CPP contributions, and when that trade is worse than it looks.
• Paying a spouse a salary — when it is legitimate, what “reasonable” means, and the documentation that supports it. Read it before setting up the payment, not after.
• Bonus vs dividend at year end — the timing decision that comes up in the last weeks of the fiscal year. Read it alongside the year-end checklist.

Payroll intersects with two other areas more than any owner expects. The year end hub covers the compensation decisions that have to be made before the fiscal year closes, and the corporate tax hub covers where those decisions land on the return.

Payroll by city

Payroll obligations are federal at the base and provincial on top, and the provincial layer is where the same business gets a different answer depending on where its people report for work. These pages take the topic city by city.

• Abbotsford — seasonal agricultural payroll and how it reaches the BC employer health tax exemption.
• Chilliwack — family wages, and one company carrying more than one WorkSafeBC classification.
• Langley — company vehicles, standby charges, commission withholding and bonus pay.
• Mission — the first hire — opening the RP account and the remitter type that follows.
• Surrey — the move from monthly to accelerated remitting as payroll grows.
• Maple Ridge — statutory holiday pay and vacation accrual on a variable-hours payroll.
• Aldergrove — the one-person payroll, and what salary buys that dividends do not.
• Vancouver — province of employment when staff are spread across the country.
• Toronto — Ontario employer health tax, where the rate is chosen before the exemption.
• Ottawa — when a Gatineau employee brings Quebec deductions, QPP, QPIP and RL-1 slips.
• Calgary — no provincial payroll tax, and general holiday pay on Alberta’s 4.2% basis.
• Edmonton — Alberta’s separate employment standards for construction employees.
• Winnipeg — the Health and Post Secondary Education Tax Levy and the cliff at $5 million.