Payroll Basics for Canadian Employers

Quick answer

Before you run your first payroll in Canada, confirm the worker is an employee, register a CRA payroll program account, and collect the employee’s TD1 forms and social insurance number (SIN). Each payday you withhold CPP, EI and income tax, add your employer CPP and EI, and remit the total to the CRA on time. After year-end you issue T4 slips.

Rules in this guide were checked against CRA, Service Canada and Ontario government pages in September 2026. Rates change, so we link to official pages instead of quoting them.

Key takeaways

• Register for a payroll account before your first remittance is due. If you hire first, you still owe deductions on time.
• You deduct CPP (including CPP2 where it applies), EI and income tax from pay. You also pay employer CPP equal to the employee’s amount and employer EI at 1.4 times the employee’s premium.
• Use the CRA’s Payroll Deductions Online Calculator (PDOC) for current amounts outside Québec.
• Regular remitters pay by the 15th of the next month. Some new small employers can remit quarterly.
• T4 slips and the T4 return are due by the last day of February after the calendar year.

Step 1: Confirm you have an employee

Payroll applies to employees, not to self-employed contractors who invoice you. The CRA says all the facts, including the actual terms and conditions of the work, determine a worker’s status, not just the parties’ intention.

In broad terms, an employee works under the direction and control of the business that hired them. A self-employed worker carries on their own business and is free to choose how to carry out the contract. No single checklist settles every case. Read the CRA’s Employment status: Employee or self-employed page, which replaced the older RC4110 guide in January 2026. If you or the worker are unsure, you can ask the CRA for a CPP/EI ruling.

Step 2: Set up before the first payday

Open a payroll program account

Your payroll program account (the “RP” account) is linked to your Business Number. The CRA says you must register before the date your first remittance is due. Canadian residents can register for a Business Number and payroll account online through Business Registration Online. For the wider setup sequence, see how to start a business in Canada.

Collect TD1 forms and the SIN

Every new employee fills out the federal TD1, Personal Tax Credits Return. An Ontario employee claiming more than the basic personal amount also fills out the TD1ON. If an employee does not give you a completed form, you deduct tax allowing only the basic personal amount. Keep TD1 forms with the employee’s records. Do not send them to the CRA.

You must ask a new employee for their SIN within three days after their employment begins. Employees do not have to show you a SIN card or confirmation letter.

Step 3: Calculate deductions and employer contributions

Some amounts come out of the employee’s pay. Others you pay on top of wages.

Item	Withheld from employee	Paid by employer
Canada Pension Plan (CPP)	Yes	An amount equal to the employee’s contribution
Second additional CPP (CPP2)	Yes, on earnings above the annual maximum pensionable earnings	Same rate as the employee
Employment Insurance (EI)	Yes	1.4 times the employee’s premium
Federal and provincial income tax	Yes	No employer share

Rates, maximums and tax brackets change. Instead of building your own formulas, use the CRA’s Payroll Deductions Online Calculator (PDOC). It calculates CPP, EI and federal, provincial and territorial tax for every province and territory except Québec, and its rates were updated for payment dates on or after July 1, 2026. Ronidex’s own Payroll Calculator is not available yet, so use PDOC for now.

Step 4: Remit on time

You send the CRA the employee deductions plus your employer share. Frequency depends on your remitter type.

• Regular remitters remit monthly. The payment is due by the 15th day of the next month.
• New small employers (payroll account open less than 12 months) can remit quarterly without applying if their monthly withholding amount is under $1,000 and they have a perfect compliance record on payroll and GST/HST accounts. Quarterly due dates are April 15, July 15, October 15 and January 15.
• Larger employers may remit more often. See the CRA’s due dates page for the thresholds.

If a due date falls on a Saturday, Sunday or public holiday recognized by the CRA, the payment is on time if the CRA receives it, or it is processed at a Canadian financial institution, by the next business day.

Step 5: Year-end slips, ROEs and records

T4 slips. File the T4 return and give each employee their T4 slip by the last day of February of the following calendar year.

Record of Employment (ROE). Issue an ROE through Service Canada each time an employee has an interruption of earnings, such as 7 consecutive calendar days with no work and no insurable earnings from you. For electronic ROEs on weekly, biweekly or semi-monthly pay, you have up to 5 calendar days after the end of the pay period in which the interruption occurred. Monthly payrolls have a different rule, so check the ROE guide.

Records. The CRA requires you to keep payroll records for at least six years after the year they relate to. Ontario’s Employment Standards Act sets its own periods, such as three years for most employee records.

Ontario Employer Health Tax (EHT). Ontario charges EHT on remuneration paid to employees who work at, are attached to, or are paid through an Ontario permanent establishment. Eligible employers are exempt on the first $1 million of Ontario payroll (the exemption amount since 2020). Eligibility has conditions, including Ontario payroll under $5 million, and associated employers must share one exemption. Read the Ontario EHT guide to confirm your position.

Rules differ in other provinces. Québec employers also deal with Revenu Québec source deductions and employer contributions, including provincial income tax, the Québec Pension Plan and the Québec Parental Insurance Plan.

Example: a first-payroll timeline in Ontario

Reconciling payroll liabilities as part of your month-end close helps you catch a missed remittance before the next due date.

Common mistakes

• Treating a worker as a contractor because the contract says so, without looking at how the work is actually done.
• Remitting only the employee deductions and forgetting the employer CPP and EI.
• Using last year’s rates instead of PDOC or the current CRA rate pages.
• Spending withheld amounts as working capital. Set them aside until you remit them.
• Forgetting the ROE when an employee leaves or goes on leave.

Frequently asked questions

Do I need a payroll account before I hire?

You must register before your first remittance is due. If you hire first, the CRA says you still need to calculate deductions and remit them by the due date.

Where do I find current CPP and EI rates?

The CRA publishes them on its payroll pages, including CPP contribution rates and maximums and EI premium rates and maximums. PDOC applies the current figures for you.

Related on Ronidex

• Month-end close for small businesses
• How to start a business in Canada
• Business Budget Calculator
• The free Tax Preparation Checklist in Ronidex resources

If you’d rather have help keeping your books, see Ronidex’s bookkeeping and accounting support.