How to Set Up Payroll for Your First Employee in Alberta

Hiring your first employee is a major milestone for your Calgary business — but it also triggers a set of legal obligations around payroll. Getting the setup right from the start saves headaches and avoids CRA penalties down the road. Here is your step-by-step guide.

Step 1: Register for a Payroll Account with CRA

Before your first pay run, you need a payroll program account with CRA. You can register online through CRA Business Registration Online or by calling CRA's business enquiries line. CRA will assign you a payroll account number and tell you your remittance frequency.

Step 2: Collect Employee Information

Have your new employee complete a TD1 (federal) and TD1AB (Alberta provincial) Personal Tax Credits Return form. These forms determine how much income tax to withhold from their pay. Also collect their Social Insurance Number (SIN), full legal name, address, and banking information for direct deposit.

Step 3: Determine Pay Frequency and Structure

Decide how often you'll pay (weekly, bi-weekly, semi-monthly, or monthly) and whether the employee is salaried or hourly. Alberta's minimum wage is $15.00 per hour as of 2026. Ensure your pay rate complies with Employment Standards.

Step 4: Set Up Payroll Software

Use payroll software that handles Canadian source deduction calculations. QuickBooks Online Payroll is a popular choice for Calgary small businesses — it calculates deductions, generates pay stubs, handles direct deposit, and prepares T4s. Other options include Wagepoint, Humi, and ADP.

Step 5: Run Your First Payroll

For each pay period, calculate gross pay, then deduct federal and provincial income tax, CPP (employee and employer portions), and EI (employee and employer portions). The net amount is what the employee receives. The deductions plus employer contributions are what you remit to CRA.

Step 6: Remit to CRA

Remit source deductions by your assigned due date (typically the 15th of the following month for new, small employers). Late remittances attract penalties from 3% to 20% depending on how late and whether it's a repeat offence.

Step 7: Keep Records

Maintain payroll records for at least six years: pay stubs, TD1 forms, time records, and remittance confirmations. These are essential for T4 preparation and CRA audits.

Castle Makes Payroll Simple

Setting up and running payroll correctly is one of the most compliance-sensitive tasks a business owner faces. Castle Bookkeeping handles payroll setup, ongoing processing, CRA remittances, and year-end T4s for Calgary small businesses. Contact us for a free consultation.