Managing your company's payroll

What does it mean to manage compensation in a company?

Managing payroll involves calculating what each employee actually receives, withholding government taxes from their salary (source deductions), paying the net amount to the employee, and then remitting the deductions to the CRA and Revenu Québec. You also maintain the records and produce the year-end payroll statements.

• establish the gross salary (hourly rate or fixed salary, hours, bonuses, vacation);
• calculate the source deductions on this gross amount;
• pay the net salary to the employee;
• account for the employer's expenses (the employer's share);
• remit the deductions to the governments on the due dates;
• produce year-end statements and slips (T4 at the federal level, Relevé 1 in Quebec).

Payroll touches on three areas at once: tax compliance, labor law, and your accounting. That's why a small error can spread quickly. An incorrect withholding calculation will skew your net pay, your government rebate, and your year-end statements.

Bankeo is not an accounting firm: be paired with an accountant who sets up your payroll correctly from the start and saves you from costly corrections.

How do you calculate the salary of your first employee?

Before paying your first employee, open a payroll deductions account with the CRA and register as an employer with Revenu Québec. You then collect their credit forms (Federal TD1, Provincial TP-1015.3) and calculate the deductions on each paycheck.

1. Obtain your employer numbers. Add a payroll deductions program (RP) account to your business number with the CRA, and register with Revenu Québec.
2. Have the credit forms completed. The employee completes the federal TD1 and the Quebec TP-1015.3.
3. Choose the payment frequency. Weekly, bi-weekly, bi-monthly or monthly.
4. Calculate the source deductions on each gross salary.
5. Pay net salary and keep records. Clear payslip , hours, deductions, annual total.
6. Plan your remittances and slips. Note your due dates and prepare your T4s and Relevé 1s.

Good to know: becoming an employer also adds employment law obligations (minimum wage, vacation pay, maximum pay period). These rules fall under your province's employment standards.

Hiring your first employee is often the moment an entrepreneur realizes they need structured support. Get paired with an accountant who will set up your employer accounts, configure your software, and process your first payroll.

What are source deductions (DAS)?

Source deductions are the amounts you withhold from each employee's gross salary and remit to the government. In Quebec, these include federal and provincial income tax, the Quebec Pension Plan (QPP), Employment Insurance (EI), and the Quebec Parental Insurance Plan (QPIP). The employer also contributes their own share.

• Employee deductions: federal tax (CRA), provincial tax (Revenu Québec), QPP, EI and QPIP.
• Employer's share (in addition): RRQ (employer's share), AE (generally higher than that of the employee), RQAP (employer's share).

Two important points: the cost of an employee exceeds their salary (budget for employer contributions from the outset), and the withheld funds are not yours (these are trust funds for governments). Contribution rates and maximums change annually: updated software automatically applies the correct rates.

How and when should deductions be submitted to the CRA and the Canada Revenue Agency?

You submit your DAS (Declaration of Annual Social Contributions) to the CRA (federal portion) and Revenu Québec (provincial portion) at a frequency determined by your filing status, which depends on your payroll. Most small businesses submit their DAS by the 15th of the month following payroll. Late filing penalties are immediate and substantial.

• Small employers and startups: monthly payment, usually on the 15th of the following month.
• Higher payroll: more frequent rebates, awarded by the CRA and Revenu Québec.
• Two levels, two remittances: the federal share to the CRA, the Quebec share to Revenu Québec.

Bon à savoir : le retard de remise des DAS est l'une des erreurs les plus pénalisées au Canada. Comme il s'agit de fonds en fiducie, les administrateurs peuvent être tenus personnellement responsables. La fin d'année ajoute une étape : produire les feuillets T4 et Relevés 1 pour chaque employé, généralement avant la fin février.

Employee or self-employed: why does the difference change everything?

An employee receives a salary with payroll deductions and a T4 slip. A self-employed individual invoices for their services, manages their own taxes, and has no withholding tax. Misclassifying a worker as self-employed when they are actually an employee is a common mistake, and the company bears the consequences if the classification is reclassified.

• Work control: the company manages (employee) or the person organizes their own work (autonomous).
• Tools and equipment: provided by the company (employee) or by the person (self-employed).
• Financial risk: none, guaranteed salary (employee) or can win or lose (self-employed).
• Integration and exclusivity: integrated and especially for you (employee) or multi-client (autonomous).

If you treat someone as self-employed when the relationship is actually employment, the IRS or Revenu Québec can reclassify the relationship retroactively, with unwithheld payroll deductions, employer contributions, interest, and penalties. Before hiring or signing a service contract, be matched with an accountant who can verify the correct status.

Should you outsource your payroll or do it yourself?

Doing your own payroll is possible with good software, but it exposes you to calculation errors and late submissions. Outsourcing to an accountant or payroll service transfers the risk, saves you time, and ensures compliance. The right choice depends on the number of employees, your risk tolerance, and your available time.

• In-house payroll (software): low direct cost, control, but errors and delays are your responsibility. For 1 to a few employees, a simple situation.
• Accountant or bookkeeper: calculations validated, discounts managed, payslips produced, for a recurring service fee. For an SME that wants compliance and peace of mind.
• Specialized payroll services: automation, multi-province compliance, with volume-based fees. For growing payrolls.

For many entrepreneurs, the calculation is simple: a single late payment penalty often costs more than months of payroll services. Outsourcing isn't a luxury expense; it's a risk management strategy.

What are the most common payroll errors?

The most frequent payroll errors are late remittances to the CRA or Revenu Québec, use of outdated contribution rates, incorrect employee/self-employed classification, omission of employer contributions in the budget and inconsistent year-end slips.

• Late submissions. The most penalized mistake. Mark your deadlines and never touch withheld funds.
• Keep the old rates. The maximums for RRQ, AE and RQAP change every year.
• Confusing net income with actual cost. Forgetting employer contributions distorts your budget.
• Misclassifying a worker. Reclassification is retroactive and expensive.
• Incomplete reports and records. You are vulnerable in the event of an audit or dispute.
• The slips do not match. The T4s and Statement 1s must correspond to the remittances for the year.

Good to know: almost all of these errors can be prevented with proper implementation from the very first employee. The cost of prevention is minimal compared to the cost of correction and penalties.

When should you entrust your salary to an accountant?

Entrust your payroll to an accountant from the moment you hire your first employee, or as soon as you have any doubts about deductions, discounts, or an employee's status. It's also a good time when your team is growing, when you're managing tips or multiple states, or simply when payroll is taking up time you'd rather spend on your business.

• You hire your first employee and need to open your withholding accounts;
• You have received a notice from the CRA or the Canada Revenue Agency regarding your remittances;
• your payroll increases and the frequency of discounts changes;
• you work in more than one province or manage special situations;
• The end of the year is approaching and you need to produce T4s and Statement 1s.

Avec Bankeo, vous remplissez une demande gratuite et vous êtes jumelé, généralement en 48 heures, à des comptables vérifiés qui connaissent la paie au Canada. Le service est gratuit pour l'entrepreneur, sans engagement, et nous restons à vos côtés : si le comptable ne vous convient plus, nous vous en retrouvons un, sans frais.

How much does payroll management cost for a small business?

The cost varies depending on the number of employees, the complexity of the payroll, and the chosen solution (software, accountant, or specialized service). Beyond the price, consider the cost of an error: a single late filing with the IRS results in a penalty that often exceeds several months of service. Get paired with an accountant for free to calculate the right solution for you.

Do I need an accountant to do my payroll?

Not necessarily, but it's highly recommended from the very first employee. Payroll encompasses taxation, labor law, and your accounting all at once. An accountant opens your employer accounts, applies the correct rates, manages your discounts, and generates your payslips, thus preventing penalties. Linking with Bankeo is free.

When do I have to remit the deductions at source?

Most small businesses are monthly remitters and pay no later than the 15th of the month following payroll. Your exact remittance frequency depends on your payroll and is assigned to you by the CRA and Revenu Québec. The federal and provincial portions are remitted separately.

What is the difference between an employee and a self-employed person in terms of payroll?

An employee receives a salary with payroll deductions and a T4 slip at the end of the year. A self-employed individual invoices for their services and manages their own taxes, without withholding tax. The classification depends on the actual nature of the relationship. Incorrectly classifying an employee as self-employed exposes your company to retroactive reclassification with penalties.

How does Bankeo help me with payroll?

Bankeo n'est pas un cabinet et ne fait pas votre paie. Nous vous jumelons gratuitement, généralement en 48 heures, au bon comptable pour votre situation, parmi un réseau qui gère la paie au Canada. Vous remplissez une demande, on vous présente autant de comptables vérifiés qu'il le faut pour trouver le bon match, sans frais ni engagement, et on vous accompagne, toujours : si le comptable ne vous convient plus, on vous en retrouve un, sans frais.

What happens if I submit my deductions late?

Le retard de remise des déductions à la source est l'une des erreurs les plus pénalisées au Canada. La pénalité s'applique sur le montant en retard et augmente avec le nombre de jours. Comme il s'agit de fonds en fiducie, les administrateurs peuvent être tenus personnellement responsables. Un comptable surveille vos échéances pour que cela n'arrive jamais.