The first step is to register with the CRA for a payroll deductions account. You will need a Business Number (BN) and a payroll program account (often shown as RP followed by four digits and a reference number).

During registration, you provide details about your business structure, the provinces where you employ people, your expected first pay date, and your estimated payroll size. This information helps the CRA assign your remittance frequency.

Before the first payday, gather essential information from each employee. This typically includes legal name, date of birth, Social Insurance Number (SIN), address, start date, position, and compensation details.

You also need a completed federal TD1 form (Personal Tax Credits Return) and, where applicable, provincial TD1 forms. These forms determine the personal tax credits an employee claims and affect how much income tax you deduct.

Canadian employers must withhold and remit several key deductions from employee pay. These typically include federal and provincial income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums.

You may also have additional obligations such as workers’ compensation premiums, provincial employer health taxes or payroll taxes in some jurisdictions, and voluntary deductions like benefits or registered retirement savings plan contributions.

Small businesses generally have three options for processing payroll: manual calculations, payroll software, or outsourcing to a bookkeeper or payroll provider.

Manual methods can work for very small teams but are time-consuming and prone to error. Payroll software automates calculations, updates rates, and often integrates with your accounting system. Outsourcing shifts the work to a professional who handles calculations, remittances, and year-end slips on your behalf.

Decide how often you will pay employees. Common schedules include weekly, bi-weekly, semi-monthly, or monthly. Your choice affects cash-flow planning and administrative workload.

The CRA assigns your remittance frequency based on your payroll volume and business type, not your pay schedule. Most new small businesses begin as regular monthly remitters, but larger payrolls may be required to remit more frequently.

For every pay period, follow a consistent process. Start by calculating gross pay based on hours worked or salary. Then apply the appropriate deductions for income tax, CPP, EI, and any other required or voluntary amounts.

Subtract total deductions from gross pay to determine net pay. Issue pay statements that show gross pay, each deduction, and net pay. Record the payroll transaction in your accounting system, including wages and employer contributions.

Amounts withheld from employee pay belong to the government, not your business. You must remit these deductions according to your assigned schedule, typically monthly for smaller employers and more frequently for larger payrolls.

Remittances can be made through CRA My Business Account, your financial institution’s online banking, or other CRA-approved methods. Late remittances result in interest charges and penalties that can accumulate quickly.

At year end, you have additional reporting obligations. You must prepare and distribute T4 slips to each employee and file copies with the CRA by the required deadline.

You must also retain all payroll records, including timesheets, pay statements, deduction calculations, and remittance confirmations. The CRA generally expects businesses to keep complete and reliable records for six years from the end of the last tax year they relate to.