Small Business Payroll in Canada: Complete 2026 Guide

Starting Payroll for Your Canadian Small Business

Running payroll can seem daunting for new business owners, but understanding the basics makes it manageable. This guide walks you through everything you need to know.

Step 1: Register for a Payroll Account

Before your first pay run, register with the CRA for a payroll program account:

1. Get a Business Number (BN) if you don't have one
2. Register for payroll deductions (RP account)
3. Register online at canada.ca/cra-business or call 1-800-959-5525

You'll receive a 15-character account number: 123456789RP0001

Step 2: Collect Employee Information

For each new employee, collect:

Required Documents

• TD1 Federal - Personal Tax Credits Return
• TD1 Provincial - Provincial Personal Tax Credits Return
• Social Insurance Number (SIN)
• Direct deposit information (optional)

Additional Quebec Requirements

• TP-1015.3 - Quebec Source Deductions Return

Step 3: Choose Your Pay Frequency

| Frequency | Periods/Year | Best For | |-----------|--------------|----------| | Weekly | 52 | Hourly workers, retail | | Bi-weekly | 26 | Most common choice | | Semi-monthly | 24 | Salaried employees | | Monthly | 12 | Executives, sales |

Tip: Bi-weekly is most popular because it's predictable and aligns with two-week work periods.

Step 4: Calculate Deductions

For each pay period, calculate:

Statutory Deductions

1. CPP/QPP - Pension contributions
2. EI - Employment Insurance premiums
3. Federal tax - Based on taxable income
4. Provincial tax - Based on province of employment

Employer Contributions

Employers must also contribute:

• CPP/QPP: Match employee contribution (5.95%/6.4%)
• EI: 1.4× employee premium (2.296%/1.848% QC)

Step 5: Remit to CRA

Remittance Due Dates

| Remitter Type | Average Monthly Withholding | Due Date | |---------------|----------------------------|----------| | Quarterly | Under $1,000 | 15th of month after quarter | | Regular | $1,000 - $24,999.99 | 15th of following month | | Threshold 1 | $25,000 - $99,999.99 | Up to twice monthly | | Threshold 2 | $100,000+ | Up to 4 times monthly |

Most small businesses are regular remitters - due the 15th of the following month.

What to Remit

• Employee CPP deductions
• Employer CPP contributions
• Employee EI premiums
• Employer EI contributions
• Federal and provincial tax withheld

Step 6: Provide Pay Stubs

While requirements vary by province, best practice is to provide pay stubs showing:

• Earnings breakdown
• All deductions itemized
• Net pay
• YTD totals

Year-End Requirements

T4 Slips

By February 28, provide T4 slips to employees showing:

• Total earnings
• CPP contributions
• EI premiums
• Tax deducted
• Other benefits

T4 Summary

File the T4 Summary with CRA by February 28, reporting all T4s issued.

Quebec: Relevé 1

Quebec employers must also issue RL-1 slips by February 28.

Common Small Business Payroll Mistakes

1. Missing Remittance Deadlines

Penalty: 3% if 1-3 days late, up to 10% if over 7 days late, plus interest

2. Incorrect Worker Classification

Employees vs. contractors have different tax implications. Misclassification can result in back taxes and penalties.

3. Not Keeping Records

Keep payroll records for 6 years including:

• Pay stub copies
• Timesheets
• T4s
• Banking records

4. Forgetting Provincial Differences

Each province has different:

• Tax rates
• Minimum wages
• Overtime rules
• Labour standards

5. Not Updating for Rate Changes

CPP, EI, and tax rates change annually. Update your calculations each January.

Payroll Software Options

DIY with PaystubPRO

• Generate professional pay stubs
• Accurate tax calculations
• No monthly fees
• Pay per stub

Full Payroll Services

• Automatic remittances
• Direct deposit
• Year-end filings
• Higher cost

Tax Deductible Payroll Expenses

As an employer, deduct:

• Gross wages paid
• Employer CPP/QPP contributions
• Employer EI premiums
• Group benefits paid by employer

Getting Help

CRA Resources

• Payroll deductions online calculator (PDOC)
• T4001 Employers' Guide
• Webinars and guides at canada.ca

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