The Basics of Setting Up Payroll For Your Small Business

As a small business owner, setting up payroll is one of those essential tasks you must take care of. If you’ve never had to handle payroll before, the prospect can be initially intimidating. However, setting up payroll is not that difficult once you know what to do. Here are the seven basic steps to follow.

Register

Running payroll in Canada requires registering with the federal government. You must get a Business Number from the Canada Revenue Agency (add a payroll account to that business number). To register, you will have to provide your pay schedule, number of employees, and what payroll software or service you are planning to use.

Collect Employee Information

You will need to get certain information from your employees, including name, address, phone number, date of birth, Social Insurance Number, and bank account information.

Determine Gross Wages

Gross wages refers to an employee’s wages before taxes, retirement contributions, and other deductions are figured. Fringe benefits are included in gross wage calculations.

Determine Taxes and Contributions

Now you need to figure the taxes and retirement contributions that need to be deducted from an employee’s gross wages. Among the deductions you must account for are federal income tax, provincial income tax, employment insurance premiums, and pension program contributions. While CRA has an online calculator, introducing software is your best bet for this piece. You can use your main accounting software with a payroll module or a stand alone company like Wagepoint.

Issue Paychecks

After double-checking for errors, it’s time to send your employee’s their paychecks. You should also provide employees a pay stub, which can be used to prove income. It is best practice to keep documentation on hours worked each day.

Remit Deductions and Taxes

Now you must send the payroll taxes and deductions figured earlier to the government. Remittances must be submitted by the 15th of the month. Alternatively, you can switch to a quarterly, twice-a-month, or four-times-a-month remittance schedule.

Generate and Share T4 Forms

Form T4 is a form summarizing what an employee made and had deducted during the previous year. You must send T4 Forms (summary) to both employees and the Canada Revenue Agency by the end of February.

Whether you are a new or experienced small business owner, we here at Indigo Bookkeeping Services can help you with payroll. If you would like to have more time to focus on your business, we can streamline the payroll process and administer your payroll for you. Contact us today.