Payroll 101 for Small Business Owners

Transitioning from a solopreneur to an employer is a big milestone. It also comes with strict responsibilities.

The Big Three Deductions

You are responsible for withholding and remitting:

1. Income Tax (Federal & Provincial)
2. Canada Pension Plan (CPP) - You deduct the employee portion AND pay a matching employer portion.
3. Employment Insurance (EI) - You deduct the employee portion AND pay the employer portion (1.4x the employee amount).

Open a Payroll Account

You need to add a payroll program account (RP) to your Business Number before you pay your first employee.

Remittance Schedule

Most new employers are "Regular Remitters," meaning you must remit deductions by the 15th of the month following the month you paid your employees. (e.g., Pay employees in January -> Remit by Feb 15).

Penalties

The CRA does not mess around with payroll. Penalties for late remittance start at 3% and go up to 20%. The money you withhold is considered "trust funds"—it's not your money to use for cash flow.

Consider using payroll software (Wagepoint, QuickBooks Payroll, PaymentEvolution) to automate calculations and remittances.