Setting up payroll for your business for the first time can be quite daunting, and the penalties of failing to do it right could be financially and legally costly.
On top of all that, a cursory Google search wouldn't help much either.
It is for this reason that we have prepared this detailed business owners' guide to set up Payroll.
We have done our best to anticipate the specific hurdles you might encounter as you go about setting up payroll for your business.
Let's start with the basics.
Payroll refers to the aggregated compensation structure and procedure that your organization follows when paying employees for the work they have done for the business.
To pay your employees, you need to have specific systems and protocols in place.
For instance, who are the employees? How much does each of them earn? How often are they to be paid? All these and more are the business of Payroll.
Canadian payroll means that you are going to be dealing directly with the Canadian Revenue Agency, as opposed to any other govermnent body.
Setting up payroll can be long, tedious and quite costly if you get it wrong.
It can also be very inconvenient for your employees if they don't get their pay on time or the right amount in the right account.
Studies have found that 6% – 13% of employees have payroll related issues in every pay period, let's make sure you aren't part of that demographic!
Once you have your BN, you can now use the BRO service to register for the various program accounts relevant to you, including the payroll deductions account.
However, to register for the payroll deductions account, you will need to provide critical information on your business and employees. This required information is the next question we answer below.
You're all set!
Once you are done providing this information accurately, you can register your Payroll program account. Now you may hire employees and pay them legally through the law.
Once you hire some employees, you will need to set each of them individually on your payroll account.
To do this, you will need some information from each of them individually and make some policy decisions regarding how you will pay your employees.
Below is how to go about registering employees on your company's payroll account.
When hiring new employees to set them up on the payroll account, you need to get some information from them as part of the onboarding process. information you need to get includes;
To register your employee on your payroll account, you need to decide the employee's pay period. Most companies have a standard pay period policy that is not unique for every employee. If you already have a pay period policy, then you can use that.
However, if you don't, then now is as good a time as any to decide your business's pay period frequency. There are two main pay periods used by most startups and small businesses in Canada which are;
While the two pay period types seem very similar to each other, they differ somewhat. The best way to decide which one to use is to figure out whether you will be paying employees on a monthly salary or per hour of work. If you are paying per hour, then the bi-weekly format is the best for you. The twice a month format is better for employers paying on a monthly salary.
After you have gathered the relevant information from your new hire and decided which pay period you are using for them, you can now complete the new employee form on your payroll account.
Many employees opt for the direct deposit option. With direct deposit, employees get their payments deposited directly into their accounts, minus the deductions that were supposed to be withheld and remitted. Direct deposit is fast, convenient and entirely secure.
To qualify for a direct deposit from the CRA, you need to have a Canadian bank account first of all. Beyond that, you need to be a recipient of one of the following payments from the CRA to qualify;
If you qualify for a direct deposit, you can sign up in one of two main ways. You can either sign up online on the CRA portal or sign up through a financial institution.
As an individual, your employees can sign up individually via MyAccount. My account is a secure portal that lets you view your personal income tax and benefit information and manage all your tax affairs conveniently online.
Therefore if some of your employees don’t already have MyAccount set up, you should encourage them to do that before they can register for a direct deposit online.
You can also sign up online via the mobile application; MyCRA to conveniently apply for and edit your direct deposit applications.
You can sign up for a direct deposit using any one of the many financial institutions that can now sign up people. You need to give your consent to the financial institution to access your information, and once that happens, your CRA direct deposit information will be updated the next day. You should visit your financial institution website for more information on how they could help you sign up for a direct deposit.
You can also sign up for direct deposit via mobile phone. You can call CRA at 1-800-959-8281. Before you call, please make sure you have the following;
To set up payroll remittances for workers compensation for your business, you should follow these steps, which were taken directly from the support website;
To set up payroll deductions, you have to take inventory of all the benefits and rewards that you are offering your employees, making sure to include the tax-deductible ones. There is a list of all the taxable benefits and allowances here that you can use to identify the various benefits and allowances.
Once you have all the taxable benefits and allowances accounted for, you can then make payroll deductions.
There are three main government program deductions that employers have to make. These programs include the following;
Now that you have seen the level of detail and the amount of work required to set up Payroll for your company, you are in abetter placed to decide whether to use payroll software or to do it manually by yourself.
We would advise you to use a payroll system to manage your employee payroll because it is easy to make a costly mistake when doing payroll manually and iut is time consuming and inconvenient for both employers and employees.
There are many more benefits offered by payroll software beyond just payroll management.
Companies like Push offer a myriad of services like time tracking, hiring and onboarding, scheduling, and payroll, and can save you hundreds of hours a week by using an integrated software solution.
We hope this guide was helpful on your journey as a business owner! See you next time.