Information for Canadian Small Businesses: Chapter 4 – Payroll deductions and remittances

From: Canada Revenue Agency

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If you are an employer, you must make regular deductions from your employees' remuneration also known as pay for services rendered.

You are an employer if one of the following applies to you:

  • you pay salaries, wages (including advances), bonuses, vacation pay, or tips to your employees
  • you provide certain taxable benefits or allowances such as board and lodging to your employees

An individual is an employee if the employment arrangement between the worker and the payer is an employer-employee relationship. Although a written contract might say that an individual is self-employed (working under a contract for services), we may not consider the individual to be self-employed if there is evidence of an employer-employee relationship. For more information on employment status, see Guide RC4110, Employee or Self-Employed?

Your responsibilities

As an employer, you must:

  • deduct Canada Pension Plan/Quebec Pension Plan (CPP/QPP) contributions, employment insurance (EI) premiums, and income tax from the amounts you pay to your employees
  • send the deducted amounts plus your share of CPP/QPP contributions and EI premiums that you pay to CRA throughout the year for your employees
  • report the employees' remuneration and deductions on a T4 information return and give an information slip to each of your employees

Do you need to register for a payroll program account?

You need to register for a payroll program account if you are in one of the following situations:

  • pay salaries or wages
  • pay tips and gratuities
  • pay bonuses and vacation pay
  • provide benefits and allowances to employees
  • need to deduct amounts, send those amounts, and report amounts from other types of remuneration (such as pension or superannuation)

If you already have a business number (BN), you only need to add a payroll program account to that BN. If you don't have a BN, you have to get one and register for a payroll program account before your first remittance due date.

What to deduct from your employees' remuneration

To calculate the various deductions, you can use the Payroll Deductions Online Calculator, or see Guide T4001, Employers' Guide – Payroll Deductions and Remittances, Guide T4032, Payroll Deductions Tables, or Guide T4127, Payroll Deductions Formulas for Computer Programs. The calculator and these publications can help you determine how much to deduct and what type of income is pensionable, insurable or taxable.

Payroll deductions can be complex. If you need more information, go to Payroll

Canada Pension Plan/Quebec Pension Plan

The Canada Pension Plan (CPP) came into effect as a way to provide financial assistance to Canadians when they retire from the workforce. Every person who works in Canada is eligible to get benefits when he or she retires.

If you run a business in Quebec, instead of CPP contributions, you deduct Quebec Pension Plan (QPP) contributions. Any deducted QPP contributions should be sent to Revenu Québec, instead of the CRA.

For more information on deducting CPP, see "Chapter 2 - Canada Pension Plan contributions" in Guide T4001, Employers' Guide -Payroll Deductions and Remittances.

For information on the QPP, visit the Revenu Québec web site at Québec Pension Plan Contributions.

Employment insurance

The Employment Insurance (EI) Program is a federally administered program that gives financial assistance to people who are unemployed. The program also helps people get training for jobs.

As an employer, you are responsible for deducting employment insurance (EI) premiums from your employees' insurable earnings.

The rates for EI premiums may vary from year to year. For the most current rates, go to Payroll.

Note

You must also make contributions to the EI program for your employees. Generally, the employer's contribution will be slightly more than the employee's.

You also have to deduct provincial parental insurance plan (PPIP) premiums such as the Quebec Parental Insurance Plan (QPIP) premiums. You must contribute employer amounts for PPIP premiums.

Income tax

As an employer, you are responsible for deducting income tax from the salaries, wages, or other remuneration you pay your employees.

To help you calculate the amount of income tax to deduct from the remuneration of your employees, you may need various federal and provincial forms, such as Form TD1, 2017 Personal Tax Credits Return.

For more information on these forms, see Guide T4001, Employers' Guide – Payroll Deductions and Remittances.

Remittances

As an employer, you have to send to the CRA all CPP contributions, EI premiums, and income tax that is deducted from your employees' income. Also send your employer share of CPP contributions and EI premiums.

We must receive your payment for deductions, along with your remittance form on or before your remittance due dates. Due dates vary depending on the type of remitter you are.

Most employers have to send the deducted amounts monthly. Small business employers may be able to send their deductions quarterly.

For more information on the remittance methods, go to Payroll or see Guide T4001, Employers' Guide – Payroll Deductions and Remittances.

You can check your payroll remittance requirements using the "View remitting requirements" service in My Business Account.

How to report payroll deductions

Generally, you report your employees' salary, wages taxable benefits, and deductions on the T4 slip, Statement of Remuneration Paid.

You have to fill out and give your employees their copies of the T4 slip no later than the end of February after the calendar year to which the slip relates. There is a penalty for missing this deadline. For more information on this penalty, go to Penalty for failure to file an information return by the due date.

For more information about T4 reporting requirements and filing methods, go to Completing and filing information returns or see Guide RC4120, Employers' Guide – Filing the T4 Slip and Summary.

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