You’ve hired your first employee or maybe a small team. You’ve probably already figured out how much to pay them, but now what? Many of the small business owners I talk to remember having a bunch of unanswered questions:
What forms do I need to collect?
What information do I need from my staff member?
What do I need to know about taxes?
What legislation do I need to be aware of?
What rules and penalties do I need to know about?
Like most small business owners, you’ve probably already taken the most logical first step … you googled it – “How to pay an employee?” Unfortunately, this results in 21 million articles, blogs and websites offering about 21 million different pieces of advice. It can be really hard to know where to begin. Provincial legislation? Canada Revenue Agency? Payroll deductions? Yikes! That’s why I’m writing this blog. I want to share the most important things every small business owner needs to know about paying employees. Whether it’s your first employee, or your fiftieth, I hope you’ll find these tips helpful.
Also we’ve got a super helpful Payroll Calendar that contains all the information you need to pay your employees on time and accurately. You can download the calendar here.
Here are the 3 rules every small business owner needs to know about paying employees:
Rule #1 – Get Your Forms Completed on Day 1
When each employee first starts, make sure you:
- Collect their social insurance number
- have your new staff member fill out Form TD1, Personal Tax Credits Return (Form TD1 is a form used to determine the amount of tax to be deducted from an individual’s employment income)
Rule #2 – Make Sure You’re Compliant with Employment Standards
As an employer you must conform with the Employment Standards legislation for your province or territory. This typically includes:
- guidelines regarding the payment of wages;
- minimum wage thresholds;
- vacation pay rules; and
- guidelines for hours of work, breaks, and payment of overtime
There are also Federal source deductions you need to consider including:
- Federal tax
- Canada Pension Plan contributions
- Employment Insurance premiums
After you withhold source deductions, you must remit them to the Canada Revenue Agency (CRA) outside Quebec.
Rule #3 – Know the Penalties so You Can Avoid Them
If you deduct amounts and either don’t send them, or send them late the penalties start at 3% if one day late and can go as high as 10% if more than seven days late, as stated by the Canada Revenue Agency.
There’s too much at risk not to get your employees paid properly.
Ontario, Manitoba, Quebec and Newfoundland each have employer-paid taxes based on total payroll (EHT, MB HE Levy, QHSF, HAPSET). Every growing business that has employees in these provinces should be aware of payroll-based provincial taxes.
Every year there are legislative updates and changes that affect the way you need to pay your employees. 2017 is no different. Ceridian has a Payroll/HR Calendar and Guide to help you stay on top of these changes and avoid the fines and penalties that can come if you’re not careful.
Download the calendar now because your business is growing and there’s no time like the present to prepare for growth!