Paying an Employee

Paying an Employee

Hiring your first employee is an exciting day and a milestone on your journey to success. Let GoForth take the guesswork out of the process so you and your new team can spend your valuable time on building a business rather than digging for information. Here’s how to pay your first employee.

Step 1:  Open your payroll account

• Set up a Business Number (BN) and a Payroll Account with the Canada Revenue Agency - refer to GoForth’s Getting Started Guide - Setting up a Payroll Account for step-by-step instructions.

Step 2:  Have all new employees complete a TD1 form

• TD1 forms determine the amount of tax to be deducted from an employee’s income
• There are federal and provincial/territorial forms to be completed and both should be kept with employee records – Do not send Canada Revenue Agency a copy

Step 3:  Record employee SIN cards

• Record employee name and number exactly as it appears on their SIN card
• Ensure that SIN cards beginning with a “9” have not expired
• Employees who need to apply for a SIN card can do so at Service Canada Centres

Step 4:  Review provincial and territorial legislation

• Determine wage payment guidelines
• Vacation pay rules
• Guidelines for work hours, breaks, payment of overtime

Step 5:  Determine the source deductions

• Federal tax, CPP – Canada Pension Plan, Employment insurance
• Enlist the help of specific accounting software or a payroll service, etc. to calculate deductions or visit Payroll Deductions Tables, or even better Payroll Deductions Online Calculator (PDOC)
• Visit the Workers Compensation website to determine if your province or territory requires deductions

Step 6:  File a T4 for each employee annually

• The T4 must be filed with the federal government at the end of each tax year
• They must be post-marked by the last day in February, the following year – therefore the filing date for the 2010 tax year is February 28, 2011.
• Two copies of the T4 must be received by each employee by that date as well
• Penalties for late filing can be $25/day

Step 7:  Remitting source deductions to the government

• Send a letter  along with a cheque or money order to the taxation centre
• The letter must state the following:
  • You are remitting for the first time
  • The remittance period
  • Your company name, address and telephone number
  • Your business number
• Once you’ve remitted, you’ll receive a form for the next remittance, and each one to follow
• Penalties apply if you fail to remit

Visit www.cra-arc.gc.ca for more information on payroll deductions, tax information, etc.

Once you’re finished your business planning stage, it’s time to think about training. Do you really know how to run a successful small business?  That’s why we offer Canada’s leading online small business training. Make the investment in your future today – get started now. 

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