The following is a brief guide for employers so you can better understand your payroll obligations Although payroll obligations are fairly complex and nuanced, we’ll break down these obligations into three sections: payroll obligations, CPP obligations, and EI obligations.
First, determine whether or not you are considered an employer. Are you paying salaries and vacation pay? Are you providing certain taxable benefits? Do you have people who you call “employees”? You’re probably an employer if any of the above apply. As an employer, you have to register for a payroll program account. The CRA uses this account in order to track, among other things, payments made to your employees.
Every time you hire a new employee, you’ll need them to fill out a Form TD1 and you’ll need to get their Social Insurance Number. You are required to record the amount of salary paid to each employee during the year, any other financial remuneration they receive from you, the number of employees being paid, their and payroll deductions. These deductions can be calculated using the CRA’s Payroll Deductions Online Calculator.
You’ll also have to give each employee a T4 slip on or before the last day of February each year – this slip will include any income and deductions. You’ll share this information with the CRA as well, allowing them to verify the tax filings of all of your employees.
Your obligations don’t stop with payroll because you also need to manage your employees’ CPP contributions. Half of the CPP contributions are paid by you, the employer, while the other half is paid by the employee. As of the writing of this article, CPP contributions are 10.2% of earnings – 5.1% paid by you and 5.1% paid by the employee. Please note that this article was written in 2019. CPP contributions are slated to increase in the coming years so you can expect the contribution you have to make to go up after this year.
The maximum pensionable earnings as of the writing of this article is $57,400 which means that the maximum you’ll have to pay into CPP for any of your employees is $2,748.90. Remember that if the maximum earnings or the contribution percentage increase, the maximum you’ll have to pay may increase as well.
As an employer, you are obligated to pay towards Employment Insurance and you must contribute 1.4 times the premium that your employees pay. You can take a look at the EI premium rates chart to see what the employment rate is. There is a maximum that is insurable under this chart (currently, the maximum insurable rate is $53,100) so that means you won’t ever pay more than 1.4 times the premium rate of the maximum insurable.
As we mentioned at the beginning, this is a VERY brief overview of your payroll obligations. To get the full picture, get in touch with our Compass Accounting.