Payroll

When your company employees people you must pay them a wage or salary. A salary is a consistent amount that the employee received every pay. A wage is usually based on an agreed upon amount per hour. You can also choose to pay them per item of work. For example, they are an artist, you might pay them for the piece of art that they are creating rather than the time it takes them to produce it. The type of pay should be agreed upon by both parties before any work begins and usually in writing.

The employer must choose a payroll schedule and pay them consistently on the expected paydays. The most common payroll schedules are weekly, bi-weekly (every 2 weeks, usually on a Friday), semi-monthly (15th and the end of the month), and monthly.

When hiring an employee the employer must provide the new employee with a Federal and Provincial TD1 form to ensure proper calculation of employee taxes.

For each payroll run the employer must deduct and remit the appropriate income taxes, employee and employer CPP (Canada Pension Plan) and employee and employer EI (Employment Insurance). The employee CPP and EI are payroll deductions, the employer CPP and EI are company expenses. Both sets of deductions and expenses, along with the income deducted are to be remitted to the government. When these amounts are due depends of the type of remitter the company is classified as.

The remitter type is based on the average monthly withholding amount (AMWA) from 2 calendar years ago.

Quarterly remitters: There are 2 types of quarterly remitters. The first are employers whose payroll account has been open for less than 12 months, the monthly withholding amount (MWA) is less than $1,000, and they have a perfect compliance record with all payroll and GST/HST accounts. The second are employers whose payroll account that has been open for at least 12 months, their AMWA in the previous calendar year was less than $3,000, and they have maintained a perfect compliance record is maintained on all payroll and GST/HST accounts over the previous 12-month period.

Remittances/payments are due on or before April 15, July 15, October 15 and January 15 for payrolls processed in the previous quarters.

Regular remitters: to qualify as a regular remitters the employers' AMWA in the previous calendar year was less than $25,000, the CRA has not assigned another remitter type, and they may be a new employer, but does not qualify to remit quarterly as a new small employer.

Remittances/payments are due on or before the 15th of each month for the previous month. For example, the remittance for payroll in May is due on or before June 15th.

Accelerated remitters - Threshold 1: if an existing employer has an AMWA in the previous calendar of at least $25,000 but not more than $99,999.99 and the CRA did not assign another remitter type.

Remittances/payments are due up to twice a month. The first remitting period is the 1st to 15th of each month and is due on or before the 25th of the same month. The second remitting period is the 16th to the end of the month and is due on or before the 10th day of the next month.

Accelerated remitters - Threshold 2: if an existing employer has an AMWA in the previous calendar of at least $100,000 and the CRA did not assign another remitter type.

Remittances/payments are due up to 4 times a month. The remitting periods are: 1st to 7th of the month, 8th to 14th of the month, 15th to 21st of the month, 22nd to the last day of the month. The remittance due dates are: 3rd working day after the 7th, 3rd working day after the 14th, 3rd working day after the 21st, and 3rd working day after the last day of the month.

If the deductions are paid to the government late there is a penalty of between 3% to 10% depending on how late it is and the penalty can increase to 20% of you are late more than once in a calendar year.

Links

TD1 Forms

Types of Remitters

Remittance Due Dates

Remittance Penalty