Hiring your first employee: the CRA basics
Hiring help is a good sign. Here's what the CRA expects, step by step, in plain words.
Before the first payday
- A payroll account. Add a payroll program account (it ends in RP) to your business number with the CRA.
- Their details. Your employee's social insurance number, and their TD1 forms (federal and provincial), which tell you how much tax to take off.
Every payday
From the full pay before tax, you take off:
- income tax,
- CPP (the Canada Pension Plan), and
- EI (Employment Insurance).
You also pay your own share as the employer: the same CPP again, and 1.4 times the employee's EI. The rest is what your employee takes home.
Sending it to the CRA
What you took off, plus your share, goes to the CRA. Most small employers send it by the 15th of the next month. Pay it on time: late remittances have penalties.
At year-end
By the last day of February, give each employee a T4 slip for last year, and send the slips and a summary to the CRA. When someone leaves, a Record of Employment (ROE) goes to Service Canada.
In PeaceBooks
Type the full pay before tax and the pay date. PeaceBooks works it out with the CRA's own payroll formulas and shows two plain numbers: Paid to Mike and For the government. It tells you when the remittance is due, shows you how to pay it, and at year-end makes the T4 figures and a T4 file you can upload to the CRA. (Records of Employment aren't in PeaceBooks yet.)
This is general information to help you keep good records, not tax or legal advice. Your accountant knows your situation; check with them before a big decision.
More tips
Which receipts to keep, and for how long
Six years, the details that matter, and how to keep them without a shoebox.
Read it
Do you need to charge GST/HST?
The $30,000 rule, registering early, and what changes once you're registered.
Read it
Paying yourself: what counts and what doesn't
Why money you take out often isn't an expense, for the self-employed and for companies.
Read it