Payroll Basics for Small Business Owners

Hiring your first employee or contractor is an exciting milestone — but it also comes with new responsibilities. Payroll isn’t just writing a cheque; it’s about complying with CRA rules, deducting the right amounts, and keeping your records in order. Done properly, payroll keeps employees happy and protects your business from penalties.

Key Payroll Responsibilities

• Register with the CRA — You’ll need a payroll program account before paying employees.
• Deduct at source — Income tax, CPP, and (in most provinces) EI must be deducted from each paycheck.
• Remit to the CRA — Your share of CPP and EI, plus the employee’s deductions, must be sent in on time.
• Issue slips — Employees need T4 slips annually; contractors may require T4A slips.
• Keep records — Timesheets, contracts, and pay stubs should be clear and accessible.

Employee vs. Contractor

One of the most common mistakes is misclassifying workers. Employees require deductions and remittances. Contractors handle their own taxes but need proper invoicing. The CRA takes this distinction seriously, so get it right.

Using Payroll Software

Modern payroll software (like Wagepoint, QuickBooks Payroll, or Ceridian) makes compliance much easier. These tools calculate deductions, generate pay stubs, and even file remittances automatically.

Pro Tip

Never guess when it comes to payroll. If you’re unsure about deductions or classifications, consult a professional. The CRA imposes heavy penalties for payroll errors, and prevention is far cheaper than correction.

The Big Picture

Payroll may feel intimidating at first, but with the right setup and tools, it becomes routine. Proper payroll practices keep your team paid, your records clean, and your business on the CRA’s good side.

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