Canada Payroll, Taxes and Contributions
Capital
Ottawa
Official Language
English, French
Currency
Canadian Dollar
Payroll cycle
Bi-Monthly
Quick facts about Canada
Canada is one of the United States' most important economic partners. Home to one of the best public education systems in the world, Canada is a booming talent hub across all industries, including tech, financial services, healthcare, and agriculture. Despite being a relatively small country by population, Canada's GDP is approaching $2 trillion. Companies looking to expand globally can hire top Canadian talent by partnering with an EOR service like Via.
What is payroll in Canada?
Payroll in Canada is the process of managing onboarding, payments, benefits, deductions, compliance, taxes, terminations, and severance for both full-time employees and contractors.
Companies have two options for running payroll abroad: 1) open an entity and partner with a PEO service provider for payroll or 2) use a global EOR service like Via. Effectively processing payroll in Canada payroll is crucial for businesses and companies looking to hire Canadian employees. Employers are responsible for completing a number of tasks and filling out government-mandated forms.
To properly perform Canada payroll, employers will need to carry out the following steps and tasks:
Update your Business Number (BN) from the Canada Revenue Agency (CRA)
Register with the Workplace Safety board for your specific province , if required
For example, the Workplace Safety Insurance Board (WSIB) ensures that businesses provide employees with compensation when an injury or illness occurs at the workplace and is applicable in Ontario.
WorkSafe BC is a statutory agency that works as an insurance system paid by employers to cover physical and psychological injuries sustained by employees on-site and is applicable in British Columbia.
Find out if there are any deductions you may need to make.
Set up the new employee, which includes obtaining all of the below items and documentation:
Full legal name
Current Canadian address
Social Insurance Number (SIN)
Date of hire
Date of birth
Amount to be paid, i.e., salary, hourly wage, bonuses, etc.
Pay type: salaried or hourly
Open a payroll program account. This grants you a 15-character payroll program account number that includes your nine-digit BN (Ex. 12345 6789 CA 0001)
Calculate deductions and contributions
Canada Pension Plan (CPP) contributions
Employment Insurance (EI)
Determine when and how to pay CPP contributions, EI, and Income tax deductions
Remit deductions to the CRA
Report a nil remittance or correct a remittance
Confirm payment
Complete a year-end summary of payroll information returns ( T4 Slip )
If all these HR admin-related processes seem daunting, you have the option of hiring an EOR to handle everything affiliated with payroll. An EOR can also manage background checks, compliance, reporting, contracts, taxes, immigration, and benefits. Feel free to contact us at Via if you want more information about working with an EOR.
How to perform payroll in Canada
To properly perform Canada payroll, employers will need to carry out the following steps and tasks:
Update your Business Number (BN) from the Canada Revenue Agency (CRA)
Register with the Workplace Safety board for your specific province , if required
For example, the Workplace Safety Insurance Board (WSIB) ensures that businesses provide employees with compensation when an injury or illness occurs at the workplace and is applicable in Ontario.
WorkSafe BC is a statutory agency that works as an insurance system paid by employers to cover physical and psychological injuries sustained by employees on-site and is applicable in British Columbia.
Find out if there are any deductions you may need to make.
Set up the new employee, which includes obtaining all of the below items and documentation:
Full legal name
Current Canadian address
Social Insurance Number (SIN)
Date of hire
Date of birth
Amount to be paid, i.e., salary, hourly wage, bonuses, etc.
Pay type: salaried or hourly
Open a payroll program account. This grants you a 15-character payroll program account number that includes your nine-digit BN (Ex. 12345 6789 CA 0001)
Calculate deductions and contributions
Canada Pension Plan (CPP) contributions
Employment Insurance (EI)
Determine when and how to pay CPP contributions, EI, and Income tax deductions
Remit deductions to the CRA
Report a nil remittance or correct a remittance
Confirm payment
Complete a year-end summary of payroll information returns ( T4 Slip )
If all these HR admin-related processes seem daunting, you have the option of hiring an EOR to handle everything affiliated with payroll. An EOR can also manage background checks, compliance, reporting, contracts, taxes, immigration, and benefits. Feel free to contact us at Via if you want more information about working with an EOR.
Suppose you are a new employer in Canada. As such, there is much to learn and several requirements to keep in mind, including creating a business plan, naming your business, registering with the government, applying for permits and licenses, and obtaining financing.
There are many resources and blog posts online to guide new employers in Canada so make sure you and your team are using reliable and vetted sources.
The main thing you’ll have to do is open a payroll in Canada program account, and you’ll need to provide the following documentation in order to process Canada payroll (Note: some of these items may not apply to your situation):
Date employees received their first wages
Months covered for payroll of employees’ wages
Type of pay period
Number of employees
Payroll service name
Country of the parent company, if this is a foreign-owned company
Name of franchisor, if applicable
Country of franchise’s head office, if applicable
Employers are also responsible for obtaining employee Social Insurance Numbers (SIN) and completing form TD1 – Personal Tax Credits Returns.
New employers in Canada
The main thing you’ll have to do is open a payroll in Canada program account, and you’ll need to provide the following documentation in order to process Canada payroll (Note: some of these items may not apply to your situation):
Date employees received their first wages
Months covered for payroll of employees’ wages
Type of pay period
Number of employees
Payroll service name
Country of the parent company, if this is a foreign-owned company
Name of franchisor, if applicable
Country of franchise’s head office, if applicable
Employers are also responsible for obtaining employee Social Insurance Numbers (SIN) and completing form TD1 – Personal Tax Credits Returns.
Taxable benefits and allowances in Canada
When it comes to Canada payroll deductions, there are several to be aware of, including:
Contributions to aprivate pension plan or union dues, also known as Registered Pension Plans (RPPs)
The above mentioned payroll deductions apply to all employed in Canada, save for the RPPs, which are voluntary employee deductions.
As a new employer, you may not be versed in all of Canada's taxable benefits and allowances; therefore, here’s the Employer’s Guide to Taxable Benefits and Allowances.
Some of the taxable benefits and allowances include motorized vehicles, lodging, gifts, loans, meals, tuition fees, and tool reimbursement.
The province of Ontario is the standard for payroll deductions in Canada. Quebec will have the biggest differences in payroll deduction rules and regulations.
Tax year
The fiscal year in Canada is the 1st of April to the 31st of March.
Employer Health Tax
The Employer Health Tax (EHT) is an additional payroll tax that helps provide funding for healthcare in specific provinces. Participating provinces in the EHT are Ontario, British Columbia, Manitoba, Newfoundland and Labrador, and Quebec. Each province’s tax varies, so it’s good to be familiar with your area’s EHT.
Common penalties and interests
Penalties will be applied to employers who do not comply with taxes connected to Canada payroll. Late filing, failure to file, failure to provide identification numbers, and negligence to correctly fill out a tax return may accrue penalties ranging from fines to imprisonment.
Pay cycle
In Ontario, pay cycles can occur monthly, semi-montly, bi-weekly, or hourly. Monthly employees must receive their pay within ten consecutive day of the end of the pay period.
Ontario payroll contributions
Employer contributions:
5.7%: Canada Pension Plan (CPP)
2.21%: Employment Insurance (EI) premiums
1.37 CAD for every $100 CAD for Workers Compensation contribution
Total Employment Cost: 7.91% + 1.37 CAD for every 100 CAD
Employee contributions:
5.70%: Canada Pension Plan.
CAD1.58%: Employment Insurance
Ontario Health Premium:
0.98%: Up to $200,000 CAD
1.101%: $200,000 CAD to $230,000 CAD
1.223%: $230,000 CAD to $260,000 CAD
1.344%: $260,000 CAD to $290,000 CAD
1.465%: $290,000 CAD to $320,000 CAD
1.586%: $320,000 CAD to $350,000 CAD
1.708%: $350,000 CAD to $380,000 CAD
1.829%: $380,000 CAD to $400,000 CAD
1.95%: More than $400,000 CAD
Total employee cost: 7.28% and Health Premium cost
Canadian payroll deduction calculator
The Canadian government has a great online tool to help determine Canada payroll deductions. This will streamline the payroll process if you’re not collaborating with an EOR.
Income tax
Federal:
15%: up to $50,197.00 CAD
20.5%: $50,197.01 CAD to $100,392.00 CAD
26%: $100,392.01 CAD to $155,625.00 CAD
29%: $155,625.01 CAD to $221,708.00 CAD
33%: $221,708.00 CAD and over
Ontario:
5.05%: Up to $46,226 CAD
9.15%: $46,226.01 CAD – $92,454.00 CAD
11.16%: $92,454.01 CAD – $150,000.00 CAD
12.16%: $150,000.00 CAD – $220,000.00 CAD
13.16%: $220,000.00 CAD and over
Minimum wage
The minimum wage in Ontario is $15 CAD per hour. The minimum wage rate may change depending on the province employees are working in.
Working hours
The maximum amount of hours employees can work in Canada is 8 hours per day with 40 hours per week. The standard working week is Monday-Friday.
Overtime
The maximum amount of overtime employees can work is 8 hours or a 48 hour work week. Employers are required to pay employees an overtime rate of 150% of their normal salary or 1 hour of time off in lieu of overtime payment.
Paid time off
Employees in Canada are entitled to 2 consecutive weeks off after their first year of employment. After 5 years, they are entitled to 3 consecutive weeks off.
Vacation pay is 4% of their regular salary for their first 5 years and 6% of their regular salary after 5 years of employment.
There are 9 national public holidays in Canada that employees should receive off. Employees that work on these statutory holidays must be 1.5x their regular salary plus a different day off with public holiday pay.
Sick days
Employees that have worked for at least 3 consecutive months are entitled to 3 days of unpaid time off for illness, personal emergency, or injury.
Maternity leave
New mothers are entitled to 17 weeks of unpaid time off if they have worked for a company for at least 1 year before their due date.
This leave may not start before the 17th week of pregnancy and can end no later than 18 weeks after the due date.
Parental leave
New parents are entitled to up to 63 weeks of unpaid leave to care for a newborn or an adopted child. Parental leave can only begin the week of the birth or adoption. Leave should begin before 78 weeks after birth or adoption.
Paternity leave falls under the same regulations as parental leave.
In-house payroll vs. third-party payroll processing in Canada
In-house Canada payroll is the hands-on choice that can give a business more control over their processes. For companies looking to greatly expand their business presence in Canada, building an in-house HR team makes sense.
On the other hand, partnering with a third-party EOR or PEO service can free up time and take some of the responsibility off your business’s plate. But, of course, with third-party payroll, there is a fee for the service.
There are pros and cons for both options. As the employer, you have to decide how to spend your budget and where to save. However, if handling each facet of Canada payroll sounds daunting, working with an EOR may suit your needs.
Why companies partner with Via
Companies of all sizes want to hire employees in Canada, but don’t know how to navigate the country’s local labor laws. Via makes hiring Canadian talent and building your global team seamless. With our easy-to-use platform, Via helps you manage local HR processes for direct employment such as benefits, payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts ensure that your company remains compliant while expanding abroad. As your employer-of-record/entity in Canada, Via assumes responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.
With Via’s transparent pricing, you can pay full-time employees or contractors in Canada with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.
