Employers have responsibilities they must fulfill for their employees. Part of these responsibilities are the correct calculation and timely remittance of payroll deductions.
Generally, Canada Revenue Agency (CRA) considers you to be an employer if one of the following applies:
- You pay salaries, wages, bonuses, vacation pay, or tips to your employees – including any related people (ex: children)
- You provide certain taxable benefits, such as an automobile or allowances to your employees
Are you paying an employee or self-employed worker?
Although a written contract and invoices to backup payments may indicate that an individual is self-employed, CRA cannot consider the worker as self-employed if there is evidence of an employer-employee relationship (ex: what level of control does the payer have over the worker’s activities, does the worker or payer provide the tools and equipment, is the worker usually free to work when and for whom they choose and may provide their services to different payers at the same time, etc.). If there is uncertainty in the employment status a Ruling can be requested from CRA, by either the worker or the payer.
Are you paying your children?
- Do you need to deduct EI for children?
Due to the non-arm’s length nature of employment, payments to children (regardless of age) are generally not subject to EI deductions. If there is uncertainty in the employment status an EI Ruling can be requested from CRA.
- Do you need to deduct CPP for children?
This depends on the age of the child. Under 18 are not CPP pensionable, however any payroll paid to children immediately after they turn 18 are subject to CPP deductions.
- Do you need to deduct Income Tax for children?
This depends on the total renumeration paid to the child during the year. If the child will receive over $13,808 in 2021 then income tax should be deducted and remitted otherwise there may be taxes owing when the child files their tax return.
Are you paying for “casual labour”?
To be considered “casual” it must meet two conditions:
- It must be casual (factors include length of time, employment must be unreliable, occasional, and unpredictable)
- It must be for a purpose other than the employer’s trade or business
If the payment does not meet these two conditions, then it is subject to CPP, EI and tax withholding, and related payroll reporting.
Differences between “pay periods” and “pay dates”
Deductions need to be calculated based on the date the payment will be made, not the pay period for which is being paid. Example: if your payroll is monthly and hours are being paid for December 1 to 31, 2021 with a pay date of January 4, 2022 then the payroll rates and tables for 2022 will need to be used, and the earnings reported on the 2022 T4 slip. Please contact GH&A to discuss if you have been using the “pay periods” instead of “pay dates” for your calculations.
Calculating the remittance
If you are not processing your payroll through an Accounting Software (such as QuickBooks, Sage or AgExpert) we recommend using the CRA Online Payroll calculator to determine the amounts to deduct from employee’s gross pay, and related remittance to be paid to CRA. Please keep in mind the above difference between “pay periods” and “pay dates”.
It is important to keep copies of all payroll calculations completed for corporate year end and T4 reporting.
Please note that the payroll calculation printout is not the equivalent of a paystub to be provided to the employee as it does not show the hours that are being paid or the year to date amounts for gross pay and deductions.
Paying the remittance
Payments to CRA for payroll remittances can be made at the bank or through the mail with pre-printed forms from CRA (these can be requested by phoning CRA), online (through online banking, “My Payment” using Visa or Mastercard Debit or Interact Online, or a Pre-authorized debit), or through a third-party service provider (using credit card, debit card, PayPal or Interac e-Transfer).
It is very important when making the payments that the correct monthly period is chosen (ex: when making a remittance for October 2021 payroll, indicate the payment is for October 2021). Payroll is one of the few programs that GH&A cannot easily move the payment to the correct period online; a phone call to CRA is required and the transfer can take from 6-12 weeks to be processed.
Some quick things to check when making your payment to ensure it is applied to the correct place:
- Does the business number have “RP0001” at the end of it? This indicates the payment is to be applied to payroll
- Is it letting you select a monthly period to be applied to? If no, you may need a different form, or choose a different payment option in online banking
There are instances when a payment needs to be applied to the “arrears” account (ex: due to penalties and interest on a late remittance) and in those instances please ensure you are choosing “Arrears” instead of a specific month.
When is the remittance due?
Unless your Average Monthly Witholding Amount (AMWA) is over $25,000.00, most companies are considered a “Regular Remitter”.
Remittances for “Regular Remitters” are due by the 15th of the following month in which you have made the deductions from an employee’s pay (ex: bi-weekly pay paid on October 11 and October 24, 2021 would have remittances to be paid by November 15, 2021)
The information in this publication is current as of December 2, 2021.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Gregory, Harriman & Associates LLP to discuss these matters in the context of your particular circumstances. Gregory, Harriman & Associates LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.