Introducing payroll - Segment 6
Host: Welcome to the segment called Introducing Payroll part of the Starting Your Business video.
This segment mentions webpages where you can get more information. You can find links to these webpages in the Related links for this video.
I'm your host Kathleen Sinclair.
With me is Frank Stewart.
Subject matter expert: Thank you Kathleen.
Host: If a small business is just starting up and would like to hire an employee, what do they need to know to get started?
Subject matter expert: When you have an employee you will have to deduct, remit, and report salaries and deductions.
Having an employee also means needing to get a business number and a payroll program account.
Once you have a payroll program account, you can start remitting payroll deductions.
If you are hiring an employee, you must get their social insurance number (known as a SIN), and you must have them fill out Form TD1, Personal Tax Credits Return.
Host: What if an employee has already been hired?
Subject matter expert: If the employee works for you and you have been delayed in getting the SIN or Form TD1, you still have to start payroll deductions.
For more information, go to the CRA webpage about hiring an employee.
Host: When is the appropriate time for me to register for a payroll account?
Subject matter expert: You have to register before the first remittance due date.
Generally your first remittance due date is the 15th day of the month following the month in which you began withholding deductions from your employee's pay.
For more information, go to the CRA webpage about opening a payroll program account.
Host: What deductions do I have to make?
Subject matter expert: As an employer you are responsible for calculating and deducting Canada Pension Plan or CPP contributions, employment insurance or EI premiums, and income tax from amounts you pay to your employees.
Host: Now, is it the same across Canada?
Subject matter expert: Income tax rates are different in each province and territory. With the exception of Quebec, the requirements for CPP and EI are the same. For more information about the rates in Quebec, go to the Revenu Quebec website at revenuquebec.ca.
Host: What happens after I make the deductions?
Subject matter expert: You hold these amounts, in trust, for the Receiver General for Canada. You must keep these amounts separate and apart from your operating business account until you remit them.
Host: What do you mean by the term "remit"?
Subject matter expert: Remitting means paying to the CRA the money you deducted from your employee's gross pay, plus the employer's share of the CPP contribution and EI premium deductions.
That's why you need to have a payroll account, so that you can remit the income tax, CPP contributions and EI premiums deducted from your employee's wages along with the employer's share of CPP and EI.
Host: So, employers need to contribute a share of CPP contributions and EI premiums in addition to the CPP, EI and income tax that they have deducted from their employee's pay? That may come as a surprise to some new employers.
Subject matter expert: That’s right, and it’s important that new employers know they must contribute an employer’s share of CPP and EI.
Host: How much does the employer have to contribute?
Subject matter expert: Well, the employer's share of CPP is the same amount as the CPP contributions deducted from the employee's pay.
The employer's share of EI is 1.4 times the amount of EI premiums deducted from the employee's pay.
Host: What happens if I forget?
Subject matter expert: If you fail to deduct or if you remit late, you may be assessed a penalty and you may have to pay interest.
For more information, go to the penalties segment of the CRA video called Payroll Information for a New Small Business or go to the CRA webpage about penalties and interest.
Host: And what would be my next obligation?
Subject matter expert: Well, you need to report your deductions and contributions, and you need to fill out T4 slips for your employees. For more information, you can go to the CRA webpage on payroll.
To get information about other filing requirements such as the T4 information return and the T4 Summary, you can go to the CRA webpage about T4 - Information for employers.
Host: Frank, one more thing before we end this segment. How would an employer figure out how much to deduct from each employee's pay? Is there an easy way to do this?
Subject matter expert: You can use the CRA's Payroll Deductions Online Calculator, or PDOC. It calculates payroll deductions for any pay period, province (except Quebec) and territory. The calculation is based on exact salary figures. You can use PDOC by going to the CRA webpage for the Payroll Deductions Online Calculator.
Host: Thank you Frank.
This concludes the segment called Introducing payroll, from the CRA's Starting Your Business video.
Thank you for watching.
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