Payroll facts Canadian business owners need to know
Oct 18, 2019Resources
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A burning desire to process payroll likely isn’t the reason you’ve gone into business. But it is core to running a successful operation. Small business owners know that ensuring employees are paid accurately and on time is mission critical.
In honour of Small Business Month, we’ve put together some facts that Canadian business owners need to know when it comes to paying their employees:
In Canada, payroll regulations are managed at both the federal and provincial level. That means aspects of your company’s payroll, such as employment standards, wages and even income tax, can differ between employees if they are living and/or working in different jurisdictions. Tax reporting and remittances are generally regulated federally, whereas statutory holidays, sick and overtime pay are regulated provincially – these are just a few of the things that need to be calculated and filed properly as per provincial payroll legislation. While the federal government and Canada Revenue Agency (CRA) have a fair amount of oversight, Canadian business owners also have to adhere to the regulations that differ between provinces.
Businesses operating in the Province of Québec have distinct rules, such as reporting and submitting provincial remittances to Revenu Québec. The remittances that distinctly pertain to Québec are: a provincial pension plan called the Québec Pension Plan (QPP), Québec Parental Insurance Plan (QPIP) and Québec Health Insurance Fund (QHSF). These Québec-only remittances, as well a distinct provincial income tax, do not go to the CRA, but rather Revenue Québec.
Remittances are complex
- Your business needs a registered business number in order to successfully pay remittances
- The due dates for remittances for CPP contributions, EI premiums, and income tax are based on the employee’s payday and not the pay period
- Remittances for CPP contributions, EI premiums, and income tax also have different frequencies – businesses can be a regular remitter, quarterly remitter, or one of two types of accelerated remitters. The type of remitter will determine the frequency in which remittances are sent to the CRA, and is based on the average monthly withholding amount or the size of business and remittance standing of your company
- Employers can forgo remittances if they are paying non-taxable salaries or wages, but must still report a 0 remittance to the respective government agency - CRA or Revenue Québec
- Remittances for QPP, QPIP, QHSF, and the province’s income tax can be made annually, quarterly, monthly, semi-monthly, or weekly dependent on the businesses source deductions, employer contributions, or monthly remittance amounts
Mistakes could result in costly penalties and/or fines
If you do not submit, submit the incorrect amount, or submit late to the CRA for Canada Pension Plan (CPP) and Employment Insurance (EI) premiums, or for income tax deductions, you can receive penalties, which are:
- 3% of the amount between 1-3 days late
- 5% of the amount between 4-5 days late
- 7% of the amount between 6-7 days late
- 10% of the amount if it’s more than 7 days late or the amount wasn’t submitted
The same concept applies for those who do not submit, submit the incorrect amount, or submit late to Revenu Québec for QPP, QPIP and Québec Health Insurance premiums, as well as the province’s income tax. Revenu Québec’s late fines are:
- 7% of the amount if more than 7 days late
- 11% of the amount if between 7-14 days late
- 15% of the amount if more than 14 days late
In general, not being compliant with current payroll legislation, both federally and provincially, can result in fines ranging from $1,000 up to $25,000
A reliable pay cheque is important for your employees
- According to The Canadian Payroll Association (CPA), 44% of working Canadians reported it would be difficult to meet their financial obligations if their pay cheque was late by one week
- The CPA also reports that 46% of employees say that financial stress impacts their workplace performance
We understand that operating a small business means wearing many hats and managing an endless to-do list. We also recognize that while processing payroll is on that list, it’s probably not your expertise.
Payworks has been helping Canadian businesses manage payroll and stay compliant with ever-changing legislation since 2001. We handle government remittances and Records of Employment (ROEs) – submitting them directly to the CRA. Our solutions are affordable, easy to use and since payroll is so complex, all clients are assigned an expert CPA-trained service rep.
Let us help you get back to business. Because while payroll certainly isn’t your passion, it IS ours.