Guide
How to Run Payroll in Canada: Step-by-Step Guide
Global payroll
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Running payroll in Canada comes with specific federal and provincial regulations. Whether you're hiring your first employee or expanding your team, understanding payroll requirements is key to staying compliant and avoiding penalties.
Leveraging Deel’s extensive global experience in payroll, HR, and IT management, we understand the challenges you face and have created this guide on how to run payroll in Canada, tailored to your unique needs.
This free guide simplifies payroll processing in Canada so you can confidently pay your employees and meet Canada Revenue Agency (CRA) requirements.
What You'll Learn:
- Payroll regulations in Canada: Key differences between federal and provincial rules, including minimum wage, overtime, and payroll deductions.
- Essential payroll setup: What you need to open a payroll account, set up a payroll program account, and collect required employee details, including your business number and account number.
- Pay periods & schedules: Common payroll frequencies such as weekly pay, semi-monthly, and bi-weekly pay periods.
- Salaries and tax calculations: How to calculate payroll deductions, including Canada Pension Plan (CPP), Employment Insurance (EI), and federal and provincial income tax.
- Payroll deductions & benefits: Understanding statutory deductions, taxable benefits, and tax-deductible employer contributions like RRSP and employer health tax.
- Payment methods: How to distribute salaries efficiently via direct deposit, payroll software, or other payroll services.
- Payslip essentials: What details need to be included in employee pay statements, including net pay and withholdings.
- Accurate recordkeeping: Payroll records you must maintain for CRA audits and compliance, including paycheques and remittance schedules.
- Required tax forms: Overview of TD1 Forms, T4 Slips, and other tax documents.
- Payroll management options: Choosing between in-house processing, payroll providers, or automated payroll systems.
- Workers’ compensation: Employer obligations for workplace injury coverage in provinces like Ontario.
- Integration & automation: How payroll software integrates with accounting tools to streamline payroll calculations and improve cash flow management.
Who is this guide for?
- Business owners of all sizes, including small business owners, looking to run payroll in Canada
- HR and finance professionals responsible for payroll processing
- Bookkeepers and accountants managing payroll for clients
- Anyone wanting a clear understanding of payroll requirements
FAQs
How do federal and provincial payroll regulations differ?
Federal and provincial rules differ in areas like minimum wage, overtime, vacation pay, statutory holidays, termination, parental leave, and payroll taxes.
The federal government sets baseline standards, but each province enforces its own employment laws, which can affect how you manage payroll deductions and pay periods. Employers in Ontario, for example, must consider the Ontario Employer Health Tax.
What employee information is required to run payroll in Canada?
To process payroll accurately, collect the following employee details:
- Personal information: Full name, address, date of birth, Social Insurance Number (SIN), emergency contacts
- Employment details: Hire date, job title, department, work hours, pay frequency (weekly, semi-monthly, bi-weekly, etc.)
- Canadian payroll information: Bank account details for direct deposit, TD1 Forms for tax deductions, benefits enrollment (if applicable), garnishment orders (if any)
- Earnings and deductions: Salary, bonuses, overtime pay, income tax, CPP, EI, provincial tax deductions, RRSP contributions, and other payroll deductions
How are salaries and payroll taxes calculated?
Salaries are calculated by adding base wages and any additional payments (bonuses, commissions, allowances) to determine gross pay. Then, payroll deductions are subtracted, including:
- Federal and provincial income tax (calculated using current tax rates)
- CPP contributions (or Quebec Pension Plan - QPP for Quebec employees)
- EI premiums
- Other deductions like health benefits or union dues
What are the most common pay periods in Canada?
Common pay schedules include:
- Bi-weekly (every two weeks) – most common
- Semi-monthly (twice a month)
- Weekly pay (every week)
- Monthly pay (least common) Employers must ensure timely payroll processing as per employment contracts and jurisdiction rules.
What payroll records must be kept in Canada?
Employers must maintain accurate records, including:
- T4 Slips & T4 Summary
- TD1 Personal Tax Credits Return
- Record of Employment (ROE)
- Payroll deduction calculations
- Employee timesheets and pay stubs
- Business account transactions related to payroll
Keeping accurate records ensures compliance with CRA audits and payroll regulations. Visit the CRA website for official guidelines on remittance schedules and employer responsibilities.
Can I use Deel’s payroll services to run payroll in Canada?
Yes, companies can use Deel to hire, pay, and manage a Canadian workforce, whether you’re hiring in Ontario, British Columbia, New Brunswick, or beyond. Deel Global Payroll streamlines your cross-border payroll into one seamless experience, with integrations for your favorite HR and accounting tools.
Deel is not only a payroll provider, but also offers employer of record (EOR) services that enable you to hire abroad without setting up a local entity.
With Deel EOR, you can offload payroll, tax, and compliance tasks—from ensuring correct tax rates to determining remittance schedules, and more.
