How to do Payroll? A Comprehensive Guide From Professionals

All businesses, no matter small or big, should do a payroll. This ensures adherence to relevant tax laws, and employers pay their employees on time. In short, it plays a crucial part in the survival of any small business.

It is tempting to skip this part because, let’s face it, running payroll is tiring. But, once you are done, you won’t regret your decision.

Here is a simple guide for you to understand the process of running payroll.

How to Run Payroll for your Business?

There are several ways to run a payroll. The method you choose depends on the size of your organization, the time you have and your budget. You make a strategic decision if you are aware of how to run a payroll. So, let’s begin.

1.     Open a payroll account.

You can open a payroll account through these administrative tasks.

●      Get your business number from the CRA

You must run a payroll with a business number. So, get your BN from the CRA. This will make you eligible for remitting statutory deductions like employment insurance and income tax.

You can select the ‘payroll option’ once you have registered your BN.

●      Set up Employer Health Tax remittance

You need to set up the EHT remittance according to the province you want to work in. Let’s say you want to register your business for the EHT in Manitoba or Alberta. So, you will have to set up the EHT based on the respective province’s regulations.

●      Explore Workplace Safety and Insurance Board

Register with the relevant bodies from the Workplace Safety and Insurance Board in your province. It should be done ten days after hiring your first employee.

2.     Pick a payroll schedule

Canadian provinces and territories often have their own pay frequencies, which you have to follow. The frequencies vary depending on various employers, employees or circumstances. In Saskatchewan, for instance, salaried employees should be paid at least once a month. If the employees are paid hourly, then they should be paid at least every 14 days or semi-monthly.

You can choose to pay your employees weekly, semi-weekly, semi-monthly or monthly. You should choose the option that best fits your business.

3.     Gather employee details 

You need specific employee information to process the payroll. Here is what you must obtain from your employees:

●      Name

●      Address

●      Date of birth

●      Phone number

●      Social insurance number

●      Bank account details for direct deposit

You should collect federal and provincial TD1 forms from your employees. The information they share will help determine payroll deductions.

4.     Determine the necessary deductions

Here are some details you need to submit to the CRA:

●      Type of employee

●      Employee number

●      Home phone number

●      Residential province

●      Benefit eligibility date

●      Gender

●      Charity deductions

●      Preferred communication language

●      Internal department names and codes

●      Reduction of tax at the source

Experienced tax consultants can guide you through all the details you need to provide to the CRA. You can make suitable deductions from your employee’s pay once you have figured out the necessary deductions for your organization.

5.     Calculate the taxable benefits

A taxable benefit is something that your company provides an employee with besides wages. If it isn’t included in the employee’s pay, then you have to consider them before taking payroll deductions.

6.     Make the deductions

You can make the deductions once you have calculated the necessary deductions and taxes for each employee. You have to remit these payroll deductions and contribute the employer’s share of Canada Pension Plan contributions and Employment Insurance premiums.[Susanne C1] 

7.     Remit the deductions to the CRA

 Are you a new employer? Then the CRA should receive the deductions on or before the 15th day of the month that follows the month you have calculated the deductions.

8.     Complete the T4 slips

Complete a T4 slip for every employee every year. You should also complete the T4 summary form.

Note: 

You have to remit the employer’s portion of the EI and CPP at the same time as the employee’s portion.”

Final Thoughts,

Running payroll involves several calculations. You have to strictly abide by federal, territorial and provincial laws. You need to account for garnishments, tax deductions, hours, wages and tax benefits.

The process is cumbersome.

In addition, even one error in any of the above-mentioned steps can make all your hard work go to waste. This is where trained accountants come into play. They help you avoid errors in the process.

Need Help Running a Payroll in Manitoba/Alberta/Saskatchewan?

Running a payroll isn’t everyone’s cup of tea. The basic setup is the same. But, you have to choose the right way to run payroll. Have a word with our experienced tax accountants with several years of experience in this field. From creating a payroll schedule to remitting deductions to the CRA, we guide you through everything.

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