The Five Steps to Running Payroll in Canada

As your business continues to grow, introducing reliable payroll practices can become a tricky but critical exercise. The bigger your company, the greater the complexities; however, no matter the size, there are certain basic principles you should embrace to ensure you are running payroll appropriately. This blog post will walk you through the five most important steps to build payroll success.

Step 1: Set the stage

Before you can start writing cheques to your employees, you will want to make sure that you have received a valid Business Number from the CRA (Canada Revenue Agency). Without a Business Number, you cannot remit the statutory payroll deductions, such as CPP, income tax and employment insurance. When you register for your Business Number, you will also want to request a Payroll Account. If you already have a Business Number, you can contact the CRA to request the addition of a payroll account.

You will also want to make sure that you register with the Ontario Workplace and Safety Board. In fact, within ten days of hiring your first employee, you are expected to complete this registration. Depending on the nature of your work environment or industry, the premiums you pay will vary, but being registered, and in good standing, is a pre-requisite.

Lastly, you will need to register with the Ontario Ministry of Finance to be able to remit the Employer Heath Tax. You should expect to pay anywhere from .98% to 1.98% of payroll, depending on the total size of your payroll budget.

Step 2: Determine the frequency

You will need to decide how frequently you want to pay your employees. Once you have made the decision, you will stick to the schedule consistently, so be sure you are keeping your cash-flow considerations in mind. The most common cadence is bi-weekly (every two weeks), but some organizations opt for weekly, semi-monthly or monthly pay. There are advantages and disadvantages to all options. Weekly works well for smaller businesses with many short-term or hourly-wage workers. Bi-weekly is the most common, as it is easy to administer in all cases. Semi-monthly works seamlessly in environments where all employees are salaried, but it can be cumbersome for hourly workers. Monthly is a rare model, but is a good option for companies with a workforce that is largely commission-based.

Step 3: Gather data

Before you can process your payroll, you will need access to information. You should consult with your accountant to ensure you are collecting the right data from your employees, but generally, you will need to ask for:

  • Name
  • Address
  • Phone number
  • Social Insurance Number
  • Hire date
  • Birth date
  • Deductions
  • Amounts to be paid
  • Pay type (salary, hourly)

You may also need to gather information about RRSP deductions, banking information (for direct deposit), vacation accrual or reduction of tax at source.

Step 4: Process pay

You can process your payroll in house, by hiring the right internal resources and making sure they are appropriately trained. Or, you can outsource to a third party. If you choose the former, make sure you keep the right records to produce year-end tax documents and Records of Employment. Alternatively, you can outsource to a company like ADP or Ceridian. You are responsible to provide them with the information they need to execute the processing, but in turn, you benefit from their expertise and guidance. They will also provide you with journals, T4s and year-end-reports as needed. Costs vary, depending on the size and complexity of your payroll.

Step 5: Assess

You should always be evaluating your payroll process and determining how you can streamline. As you grow, your payroll needs will evolve, and what worked at one time may no longer be adequate.

At Miller Bernstein, we can help you determine if your payroll practices make sense, and where there may be gaps and opportunities for improvement. Contact us today for your free consultation.