Payroll For Small Businesses in Canada: 2022 Free Employer Guide

by | Jun 2, 2022

Do you know how employee payroll for small businesses works in Canada? Some business owners either pay their employees or handle payroll deductions themselves. Or they may hire a payroll expert to fulfill the payroll duties for small businesses. 

Even if handling payroll may seem simple, you still need someone like Yogi & Associates who is knowledgeable about the payroll guidelines.

This post will explain what you must do for payroll. And how to get started if you are a small business owner in Ontario with new hires. And how to manage your payroll system by yourself.

1. How Do Small Businesses Set Up Payroll In Canada?

Following are the important steps for setting up payroll for small businesses in Canada:

  • Verify whether you should make payroll deductions.
  • Create a new employee.
  • Create an account for a payroll program.
  • Calculate contributions and deductions
  • Pay (remit) source deductions
  • Send your payroll information returns to the CRA. 

“For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”–Winston Churchill

2. What Duties Do You Have As An Employer?

As an employer, you must carry out the following obligations:

  1. First, you must collect the employee’s Social Insurance Number (SIN) and a completed TD1 form.
  2. You are responsible for calculating employer and employee deductions from your employee’s salaries.
  3. You are also in charge of remitting payroll to the CRA on schedule.
  4. Likewise, you must set up an account for your firm in the CRA payroll program account.

3. Can You Do Payroll Yourself In Canada?

You require a Business Number (BN) and a payroll program account through the Canada Revenue Agency (CRA) in order to manage payroll in Canada. The federal government can identify your company by its BN. 

4. When and How to Pay Your Employees?

A perfect payroll for small businesses means you make timely employee payments. Consult the federal and provincial employment rules to determine payment amounts and deadlines. Thus, you must maintain all employment requirements, such as those for:

  • Pay structures for regular, overtime, and emergency work hours.
  • Minimum wage
  • Vacation and termination pay
  • Statutory holidays

Here are a few examples of employment contracts that can help for setting up your payroll system:

1. Employee Agreements

You can avoid financial issues in the future by using employee agreements. Employee agreements can help you in creating employee’s:

  • Salary, hourly pay, commission
  • Work hours and employment responsibilities
  • Trial period
  • Employee benefits

2. Averaging Agreements

In some companies, an averaging contract is signed by the employer and the employee. It enables averaging the hours worked for one, two, three, or four weeks.  

3. Employee Benefits Agreements

Any personal goods or services you buy or give to an employee are termed employee benefits. For example, allowances, reimbursements, and use of products, services, or your company assets. Other employee benefits include:

  • Meals
  • Mobile phones
  • Business vehicles, transport passes, or parking permits
  • Childcare costs, group insurance premiums
  • Membership fees to recreational facilities


You must know which employee benefits need tax reporting and which are non-taxable

5. What Can You Do With Your Payroll System?

With a well-managed payroll system, employees can get their salaries on time. Thus, through perfect payroll software like QuickBooks, you can:

  • Calculate and send the majority of payroll deductions. Such as income tax deductions, Employment Insurance (EI) payments, and CPP contributions
  • Create T4s and make sure that employees receive them on schedule at the end of the year, 
  • Produce Records of Employment (ROEs). And submit them to Service Canada to fulfill the requirements for terminating an employee.

Additional Information!

Many small business owners choose direct deposit payroll over manually processing paper checks. With direct deposit, you only need your employees’ banking information. You can then send their payments to their bank accounts using a program like QuickBooks payroll. 

6. Need Help For Your Payroll?

Setting up employee payroll for small businesses is a continuing problem. Also, managing payroll and deductions can become challenging and time-consuming. But it’s also essential that you are fully aware of payroll deductions and the amount you must submit to the Canada Revenue Agency. 

You can work with a full-service payroll administration expert like Yogi & Associates to manage your payroll system. As we offer trustworthy, end-to-end payroll management services to small businesses in Mississauga, Brampton, and surrounding areas. Thus, giving benefits to the employee payroll for small businesses. 

So, contact us today to learn how we can help you manage your payroll and streamline the payroll process. 

Get in touch with Yogi & Associates!