Written by Maryam Ajorloo, CPA · Reviewed by Behdad Karimi Dermeni, CPA
Hiring your first employee is a big moment. Then someone asks when payday is, and you realize you are now responsible for their income tax, their pension contributions, and a handful of government deadlines you had never heard of last month.
Here is how to do payroll in Canada, in short: open a payroll account with the Canada Revenue Agency (CRA), collect each employee's tax forms, calculate and withhold CPP, EI, and income tax every pay period, send those deductions (plus your employer share) to the CRA on time, and file T4 slips once a year. The 7-step payroll process below walks through each part.
Payroll software runs the pay. Keeping the rest of your books tax-ready is where ReInvestWealth comes in. See how it works.
The payroll process in Canada at a glance
Before the detail, here is the rule of thumb that keeps most small employers out of trouble: the money you withhold from an employee's pay is never yours. It belongs to your employee and the government from the moment you deduct it, so treat it like a bill that is already due. Almost every expensive payroll mistake starts with forgetting that.
The 7 steps:
Open a CRA payroll account
Onboard your employee
Register for workers' compensation
Set pay frequency, wages, and vacation pay
Calculate each pay run
Remit source deductions to the CRA
Handle departures and year-end slips
If you are still setting up the business itself, our guide to running a small business in Canada covers the structure and registration steps that come before payroll. And if the employee is you, start with salary vs dividends in Canada to decide whether a salary is the right way to pay yourself at all.
Step 1: Open a CRA payroll account
You need a payroll program account (it ends in "RP", for example 12345 6789 RP 0001) before your first remittance is due. That first due date arrives quickly: for most new employers it is the 15th of the month after you first withhold deductions from someone's pay.
Already have a business number? You add a payroll account to it. If you do not have one yet, our guide to getting a CRA business number covers that first.
Register online. The CRA handles new program accounts through Business Registration Online, which you reach from your CRA business account.
Quebec employers register twice. You also need an account with Revenu Québec for provincial source deductions and employer contributions.
Hired someone before the account was open? You still have to calculate and remit deductions by the due date, so open the account first and save yourself the penalty.
Step 2: Onboard your employee
Before anyone gets paid, confirm they really are an employee and not an independent contractor. The difference decides whether you run payroll at all, and our independent contractor vs employee guide explains how the CRA decides.
Then collect what payroll needs:
Social Insurance Number (SIN) and legal name
TD1 forms, federal and provincial, which set how much income tax to withhold (in Quebec, the TP-1015.3 form does the same job for provincial tax)
Banking details for direct deposit
Start date, role, and pay rate
A secure online form beats an email chain full of SINs. Our employee onboarding checklist covers the rest of a new hire's first week.
Step 3: Register for workers' compensation
Each province runs its own workers' compensation board, and in most industries you must register once you have employees. You pay premiums based on your payroll, and in exchange your workers are covered if they are injured on the job.
Ontario: the Workplace Safety and Insurance Board (WSIB)
Quebec: the CNESST
Other provinces: your provincial workers' compensation board
Register in the province where the work is done, not just where your head office sits. Coverage rules and exemptions vary by industry, so check with your board when you hire.
Step 4: Set pay frequency, wages, and vacation pay
Now set up the employee in your payroll software.
Pay frequency. Weekly, every two weeks, twice a month, or monthly. Every two weeks is a common choice, and once you pick, stay consistent.
Wages. A fixed salary is easier to run because you do not need to track hours. Hourly pay needs timesheets (see Step 5).
Vacation pay. Every province requires it. In most provinces the minimum is 2 weeks of vacation, paid at 4% of earnings, rising with years of service. Saskatchewan starts at 3 weeks. Check your province's employment standards, and for Ontario specifically, our guide to Ontario employment laws covers the details.
Direct deposit. Load the banking details from Step 2 and run a small test if your software allows it.
You can pay vacation out on every pay run or let it accumulate. Accumulating is fine, but track the balance carefully: unpaid vacation does not disappear, and it all comes due when an employee leaves.
Step 5: Calculate each pay run
This is the part people picture when they think of payroll, and it is where good software earns its keep. Each pay period:
Confirm hours. Review timesheets before you run payroll. Fixing a paystub after it is issued means a correction run or reissued slips, which is twice the work for the same paycheque.
Calculate gross pay. Salary or hours worked, plus overtime, commissions, bonuses, and any taxable benefits.
Withhold deductions. Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and federal and provincial income tax. In Quebec, the Quebec Pension Plan (QPP) replaces CPP and you also withhold Quebec Parental Insurance Plan (QPIP) premiums.
Pay net pay by direct deposit, with a paystub showing every deduction.
The CRA's free Payroll Deductions Online Calculator is a good way to double-check a run, especially your first one.
Step 6: Remit source deductions to the CRA
Withholding is only half of it. As the employer, you also pay your own share on top:
CPP: you contribute an amount equal to what you deducted from the employee.
EI: you pay 1.4 times the employee's premiums.
Quebec: your share of QPP and QPIP, plus the Health Services Fund contribution, goes to Revenu Québec on its own remittance schedule.
Most new employers are regular remitters, which means the deductions and your share must reach the CRA by the 15th of the month after you paid the employee. Larger employers remit more often. Late remittances attract penalties, so put the date in your calendar or let your payroll software remit for you.
Step 7: Handle departures and year-end slips
When someone leaves. Pay out any accrued vacation in the final pay, then issue a Record of Employment (ROE), which Service Canada uses to decide Employment Insurance benefits. If you file ROEs electronically, the deadline is generally 5 calendar days after the end of the pay period in which the employee stopped working. Many payroll providers can file them through ROE Web for you.
At year-end. Every employee gets a T4 slip (and an RL-1 in Quebec), and you file the matching summary with the CRA (and Revenu Québec). Both are due by the last day of February following the calendar year, or the next business day if that falls on a weekend. For Quebec employers, the CNESST also expects your annual payroll declaration (the Déclaration des salaires) by March 15.
If you have handled Steps 1 to 6 properly, year-end is mostly a matter of checking that your totals match what you remitted. For the full calendar of business deadlines, see our guide to small business tax deadlines in Canada.
Payroll checklist for small business owners
Print it, pin it, or paste it into your calendar:
Before the first hire: payroll account open with the CRA (and Revenu Québec), workers' compensation registered, payroll software chosen
Each new hire: SIN, TD1 forms (TP-1015.3 in Quebec), banking details, employee vs contractor confirmed
Every pay run: hours reviewed, deductions calculated, net pay deposited, paystubs issued
Every month: remittance sent by the 15th (for regular remitters)
When someone leaves: final pay with vacation, ROE issued
Every year: T4 and RL-1 slips by the last day of February, CNESST declaration by March 15 (Quebec)
Always: keep payroll records for at least 6 years
Common payroll mistakes (and how to avoid them)
Spending the withholdings. That money is held in trust for the government. Some owners move it to a separate account on payday so it is never mistaken for operating cash.
Missing a remittance date. Penalties start on day one. Automate it.
Treating an employee like a contractor. It feels simpler until the CRA reassesses you for the CPP and EI you never withheld.
Forgetting vacation pay. It is owed whether or not anyone takes a holiday.
Fixing paystubs after the fact. A two-minute timesheet review before payroll beats a correction run every time.
One more thing we hear often from customers: payroll and bookkeeping are two different jobs. Your payroll software calculates and pays. Your books still need to record those wage payments and remittances correctly, or your year-end numbers will not match your T4s. This is exactly the kind of work an AI Bookkeeper handles automatically.
Can you do payroll yourself?
Yes. With one or two employees, plenty of owners run payroll themselves with payroll software, and the 7 steps above are the whole job. What makes it manageable is good software, a calendar you trust, and books that are up to date.
Where it is worth bringing in help: your first year-end, a termination, Quebec employees if you are not based in Quebec, or anything involving taxable benefits. Your accountant can review your setup once so every pay run after that is routine.
ReInvestWealth is not payroll software. It is the AI Bookkeeper that keeps the rest of your books clean: it connects to your bank, categorizes the wage payments and CRA remittances that come out of your account, and keeps your records ready for year-end, so you and your accountant are looking at the same numbers. Start free for 30 days.
Frequently asked questions
How do I do payroll for one employee in Canada?
The steps are the same as for a larger team. Open a CRA payroll account, collect the employee's SIN and TD1 forms, withhold CPP, EI, and income tax each pay period, remit those amounts plus your employer share by the 15th of the following month, and issue a T4 slip by the last day of February.
Do I need a payroll account before I hire?
You need it before your first remittance is due, which for most new employers is the 15th of the month after the first pay. Opening it before your first hire is the safest approach, because you still owe the deductions on time even if the account is not set up yet.
What does an employer pay on top of an employee's wages?
You pay an amount equal to the employee's CPP contributions, 1.4 times their EI premiums, and workers' compensation premiums. Quebec employers also pay their share of QPP and QPIP and contribute to the Health Services Fund. These amounts are a business expense on top of gross wages.
How long should I keep payroll records in Canada?
Keep payroll records, including timesheets, paystubs, TD1 forms, and remittance records, for at least 6 years from the end of the tax year they relate to. That matches the general CRA record-keeping rule for businesses.
A note from our CPAs: This guide is educational and covers the general payroll rules for Canadian small businesses. Provincial employment standards and your industry can change the details, so for advice on your specific situation, talk to your accountant. (If they use ReInvestWealth, they'll already have clean books to work from.)
Written by Maryam Ajorloo, CPA
> Maryam Ajorloo is the co-founder of ReInvestWealth and a CPA who specializes in small business tax, sales tax, and everyday bookkeeping. She helps entrepreneurs keep clean, audit-ready books and make sense of write-offs, filing deadlines, and the numbers behind their business. Read more · Connect on LinkedIn
Reviewed by Behdad Karimi Dermeni, CPA
> Co-founder of ReInvestWealth and a founding community builder at Stripe. Behdad built ReInvestWealth to give smart, busy entrepreneurs CPA-level accounting without the CPA-level price tag. Read more · Connect on LinkedIn
