Set up payroll in Canada: open the CRA payroll (RP) account before the first remittance due date, collect SIN and TD1 forms, calculate and remit CPP, EI, and income tax, and file T4 slips by the last day of February.
Applies in: across Canada
Payroll in Canada is five obligations that repeat every pay period: deduct, hold in trust, remit, record, and report. Open a payroll deductions account under your business number before the first remittance due date. Collect the social insurance number and TD1 forms before the first pay. Deduct income tax, Canada Pension Plan contributions, and employment insurance premiums from each pay, add the employer share, and remit the total by the due date for your remitter type. At year end, file T4 slips and the T4 Summary by the last day of February. This guide covers the process only, and it gives no wage figures and no contribution rates, because rates and ceilings change every January and the figure that matters is the one in the CRA payroll deduction tables for the pay period in front of you.
Payroll obligations follow the working relationship, not the label on a contract. The CRA generally considers you an employer if you pay salaries, wages including advances, bonuses, vacation pay, or tips to your employees, or provide certain taxable benefits such as an automobile or allowances. The CRA decides whether a worker is an employee or self-employed from all the facts of the relationship, not from the intention stated in a contract alone. An individual is an employee where the worker and the payer have an employer-employee relationship, a contract of service. A written contract that calls a worker self-employed does not settle the question if the facts of the working relationship show an employer-employee relationship.
If the status is unclear, either party can request a CPP/EI ruling to determine whether the worker is an employee or self-employed, and whether the employment is pensionable, insurable, or both. The CRA makes rulings only where the employment has started, is ongoing, or has ended, so a ruling cannot be obtained for a hire that has not started. Ask by June 29 of the year after the year the question relates to. Ask early where the answer is genuinely in doubt, because a reclassification later can leave the employer liable for deductions that were never withheld, plus penalties and interest. A contractor who works only for you, on your schedule, with your tools, and who cannot subcontract the work is the fact pattern that most often fails the self-employment test, and no contract wording fixes it on its own.
Register for a payroll deductions program account, the RP account, under your business number. Register through Business Registration Online, which you reach by signing in to your CRA account. If you already hold a business number and other program accounts, you only add the payroll account to the existing number. If you hold no business number, Business Registration Online can create the number and add the payroll account in the same session. Since November 3, 2025, new business number and program account registrations must be done online through Business Registration Online, and the number is confirmed instantly at the end of the session. The account must be open before the first remittance due date, not necessarily before the first hire, although opening it before the first pay is the safe order.
The first remittance due date is the 15th day of the month following the month in which you began withholding deductions, unless the CRA tells you to remit on a different frequency. The CRA gives two examples: hire an employee on March 11, pay them bi-weekly with the first pay on March 25, and the first remittance is due April 15; hire on March 25, pay on April 3, and the first remittance is due May 15. The due date follows the month withholding began, not the hire date and not the pay date alone. If you did not open an account before hiring, you still need to calculate deductions and remit them by the due date, and failing to do so may draw a penalty.
Quebec adds a second registration. If an employee has to report to your place of business in Quebec, or you pay the employee from your place of business in Quebec, you must register for source deductions with Revenu Québec as well as with the CRA. Quebec employees complete a federal TD1 and the Revenu Québec source deductions return. Keep the two registrations, remittances, and year-end slips separate from the start, because a payment sent to the wrong administration does not satisfy the other.
Get the employee social insurance number. Every employee must give you their social insurance number to work in Canada, and you must ask for it within three days of the employee starting work and record it. You need it for the T4 slip and for the payroll record. An employer who cannot show reasonable effort to get the number can face a $100 penalty, and an employee who does not provide it can face a $100 penalty. An employee who has no number must apply for one and give it to you within three days after receiving it, and you must tell Service Canada within six days of the start of work if no number was given. You must still deduct, remit, and file even while a number is missing. Get a completed federal Form TD1, Personal Tax Credits Return, and, if applicable, a provincial or territorial Form TD1, before you pay the employee. New employees and recipients of other amounts such as pension income must fill out these forms, and the claim amounts on them decide how much income tax to deduct. An employee gives a new TD1 within seven days of a change to their personal tax credits. A late TD1 can draw a penalty of $25 a day, with a minimum of $100 and a maximum of $2,500, and knowingly accepting a TD1 that contains false or deceptive statements is a serious offence. For employees working in Quebec, keep Form TP-1015.3-V, the Revenu Québec source deductions return, on file as well.
Record the province of employment for each employee. The province of employment is the province of the establishment of yours where the employee reports for work, and a full-time remote worker who is attached to one of your establishments is treated as reporting there. The income tax deduction and the payroll tables follow that province, not the province where the business is registered. For non-employment income such as pension income or a retiring allowance, the TD1 for the province of residence is used instead. Keep the TD1 forms, the social insurance number record, and any CRA letters of authority that let you reduce deductions for a particular employee for a specific year with the payroll records. A missing TD1 does not excuse a missing deduction: where no valid TD1 is on file, the deduction is worked out on the basic claim amount the tables provide, and the employee corrects the difference on their own tax return.
For each pay period, deduct Canada Pension Plan contributions, employment insurance premiums, and income tax from the remuneration and other amounts you pay, including taxable benefits and allowances. Use the CRA payroll deduction tables for the pay period, the province of employment, and the pay frequency, the CRA Payroll Deductions Online Calculator, or payroll software that applies those tables. Check the tables again each January, when contribution rates, ceilings, and tax brackets are updated, and watch for mid-year editions: in 2026 the tables for British Columbia, Newfoundland and Labrador, and Prince Edward Island also have July 1 editions. The tables cover provincial income tax for every province except Quebec. This guide deliberately gives no rate, ceiling, or exemption figure, because a figure copied from an earlier year is the most common source of a systematic under-deduction that runs for twelve months before anyone notices.
Calculate the employer share as well. You remit the employee deductions together with your share of Canada Pension Plan contributions and employment insurance premiums, and the CRA Employers Guide, Guide T4001 states the point plainly: the withheld amounts are held in trust for the Receiver General, kept separate from the operating funds of the business, and are not part of an estate in liquidation, assignment, receivership, or bankruptcy. Do not treat withheld deductions as working capital. The money is not the business money, and spending it before the remittance date is the payroll error that produces the largest penalties.
Keep a payroll record for each employee that shows the hours worked and the amounts withheld for Canada Pension Plan, employment insurance, and taxes, and keep the TD1 forms, any TP-1015.3-V forms for Quebec employees, any CRA letters of authority, and all information slips issued and returns filed with those records. The salary and wage journal also records the gross and net amounts paid, including overtime, bonuses, taxable benefits, and commissions. The records must be available to the CRA when asked, and they are the documents that reconcile the remittances to the T4 slips at year end. Keep paper and electronic payroll records for at least six years after the year they relate to. A payroll run with no record is a run that cannot be proved correct later.
Your remitter type sets your remitting frequency and your due dates, and it is generally based on your average monthly withholding amount from two calendar years ago. The due dates are based on the day the employee is paid, not on the day the pay period ends: a period that ends in January but is paid in February follows the February payday. You can view your remitter type through the CRA online services. New employers are treated as regular remitters unless they qualify as new small employer quarterly remitters, and the CRA assigns accelerated remitter types to larger payrolls.
The remitter types and due dates are as follows. A new small employer with a monthly withholding amount under $1,000 and a perfect compliance record remits quarterly, with due dates April 15, July 15, October 15, and January 15. An existing employer whose payroll account has been open at least 12 months, whose average monthly withholding amount in the calendar year before the previous calendar year was under $3,000, and who holds a perfect compliance record over the previous 12 months, also remits quarterly on the same dates. A regular remitter, with an average monthly withholding amount under $25,000, remits monthly, due the 15th day of the next month. A Threshold 1 accelerated remitter, with an average monthly withholding amount from $25,000 to $99,999.99, remits up to twice a month, for periods ending the 15th and the end of the month, due the 25th of the same month and the 10th of the next month. A Threshold 2 accelerated remitter, with an average monthly withholding amount of $100,000 or more, remits up to four times a month, due the third working day after each weekly period ends.
A perfect compliance record, for quarterly remitter purposes, means no late remittances or late remitting penalties, no failure to remit or failure to deduct penalties, and no overdue T4-type information returns over the previous 12 months on the payroll account, and, if the employer holds a GST/HST account, no balance owing, no overdue returns, and no credit balance with a refund hold on that account. Losing that record ends quarterly remitting, on a set timetable rather than at once. A new small employer that stops qualifying is treated as a regular remitter from the next calendar quarter. An existing small employer that stops qualifying is assigned a new remitter type for the following calendar year. A single late remittance can therefore change the schedule, but the change takes effect on the timetable for the employer type.
Report a nil remittance by the due date when a period has no deductions, for example a seasonal business with no employees in a month, and tell the CRA when you will next make source deductions. Do not report a nil remittance for a month or quarter in which deductions were made. When a due date falls on a Saturday, Sunday, or public holiday recognized by the CRA, the payment is considered on time if received on or processed at a Canadian financial institution on or before the next business day.
Late remittance carries a penalty on the amount over $500 not sent or sent late, and on amounts under $500 only where the failure was knowing or under circumstances of gross negligence. The penalty is 3 percent if the amount is 1 to 3 days late, 5 percent at 4 or 5 days, 7 percent at 6 or 7 days, 10 percent if more than 7 days late or not remitted at all, and 20 percent for a second or later failure in the same calendar year made knowingly or under circumstances of gross negligence. Interest applies from the day the payment was due, is set each calendar quarter, and compounds daily. A cheque returned for non-sufficient funds, a closed account, or a stopped payment draws a fee of up to $25 per cheque. A final remittance, when the business stops operating, a sole proprietor or partner dies, the legal status changes, or the business enters bankruptcy or receivership or is restructured, must be reported within 7 calendar days of the change, including a restructuring, reorganization, or amalgamation.
File the T4 information return, the T4 slips and the T4 Summary, and give information slips to employees, on or before the last day of February of the following calendar year. If that day falls on a Saturday, a Sunday, or a public holiday recognized by the CRA, the return is considered on time if the CRA receives it or it is postmarked on or before the next business day. If the business stops operating, the T4 return is due within 30 days of the day the business stops, or within 90 days of the death of a partner or sole proprietor. The T4 slip reports employment income and the Canada Pension Plan, employment insurance, and income tax amounts deducted, and the totals on the slips must reconcile to the remittances made during the year. A T4 that does not reconcile to the ledger is the year-end error that draws the first questions, so reconcile before filing, not after.
When an employee stops working, issue a Record of Employment. The employee may have stopped because of layoff, retirement, resignation, or dismissal, or may have an interruption of earnings because of pregnancy, illness, leave without pay, adoption, or compassionate care leave. In all of those situations, a Record of Employment is required, reporting insurable hours and insurable earnings so employment insurance entitlement, the benefit amount, and the benefit period can be decided. If you issue the Record of Employment electronically for an employee paid weekly, bi-weekly, or semi-monthly, do so within five calendar days after the end of the pay period in which the interruption of earnings occurs. For an employee paid monthly, or on 13 pay periods a year, the deadline is the earlier of five calendar days after the end of the pay period and 15 calendar days after the first day of the interruption of earnings. A paper Record of Employment is due within five calendar days of the first day of the interruption of earnings, or of the day you become aware of it. An interruption of earnings includes seven consecutive calendar days with no work and no insurable earnings, and a fall in salary below 60 percent of regular weekly earnings because of illness, injury, quarantine, pregnancy, parental or adoption leave, or compassionate care or family caregiver leave. A Record of Employment is required even if the employee does not intend to claim employment insurance, and failing to issue one can draw a fine of up to $2,000, imprisonment for up to six months, or both. Report the amounts paid on the employee T4 slip as well, and include that slip in the T4 return filed by the last day of February of the following year.
Register with the provincial or territorial workers compensation board where the business operates, and check the provincial employment standards rules for the province of employment, including pay frequency, overtime, statutory holiday pay, and termination pay. Those rules sit outside the CRA, they differ by province, and they decide whether a pay calculation is lawful even when the deductions on it are correct. Payroll software does not settle them, and neither does a correct remittance.
| Amount 1 to 3 days late | 3% penalty |
|---|---|
| Amount 4 to 5 days late | 5% penalty |
| Amount 6 to 7 days late | 7% penalty |
| Amount more than 7 days late, or not remitted | 10% penalty |
| Second or later failure in a calendar year, knowingly or with gross negligence | 20% penalty |
| Returned cheque fee | Up to $25 per cheque |
The penalty applies to amounts over $500 not sent or sent late, and to amounts under $500 only where the failure was knowing or under circumstances of gross negligence. Interest also applies from the day the payment was due.
You are required to register for a payroll account if you are an employer, a trustee, or a payer of other amounts related to employment. You must register before the first remittance due date, which is the 15th day of the month following the month in which you began withholding deductions from an employee pay, unless the CRA tells you to remit on a different frequency. If you did not open an account before hiring, you still need to calculate deductions and remit them by the due date.
The employee social insurance number and a completed federal TD1 form, plus a provincial or territorial TD1 form if the employee claims more than the basic personal amount. Every employee must give you their social insurance number to work in Canada, and you must ask for it within three days of the employee starting work. The TD1 forms set the personal tax credits used to work out the income tax to deduct. In Quebec, employees also complete a federal TD1 and the Revenu Québec source deductions return, Form TP-1015.3-V, which they give you on the day they take up employment. Keep the TD1 forms and the social insurance number record with the payroll records.
Deduct Canada Pension Plan contributions, employment insurance premiums, and income tax from remuneration and other amounts you pay in the pay period, including taxable benefits and allowances. Hold the withheld amounts in trust for the Receiver General and keep them separate from the operating funds of the business. You also remit your share of Canada Pension Plan contributions and employment insurance premiums with the employee deductions. The amounts are calculated with the CRA payroll deduction tables for the pay period, province of employment, and pay frequency.
By the due date for your assigned remitter type. Regular remitters remit monthly, due the 15th day of the next month. New small employers with a monthly withholding amount under $1,000 and a perfect compliance record may remit quarterly, due April 15, July 15, October 15, and January 15. Existing small employers with an average monthly withholding amount under $3,000, an account open at least 12 months, and a perfect compliance record may also remit quarterly. Larger payrolls are accelerated remitters and remit twice a month or up to four times a month.
File the T4 information return, the T4 slips and the T4 Summary, and give information slips to your employees, on or before the last day of February of the following calendar year. If that day falls on a Saturday, a Sunday, or a public holiday recognized by the CRA, the return is considered on time if the CRA receives it or it is postmarked on or before the next business day. The T4 slip reports the employee income and the Canada Pension Plan, employment insurance, and income tax amounts deducted during the calendar year.
Yes. If an employee has to report to your place of business in Quebec, or you pay the employee from your place of business in Quebec, you must register for source deductions with Revenu Québec as well as with the CRA. For pensionable employment in Quebec you deduct Quebec Pension Plan contributions instead of Canada Pension Plan contributions, and you deduct for both the Quebec Parental Insurance Plan and employment insurance. Send the Quebec Pension Plan, Quebec Parental Insurance Plan, and Quebec income tax deductions to Revenu Québec, and the Canada Pension Plan, employment insurance, and federal tax deductions to the CRA. At year end, Quebec employees get an RL-1 slip for Revenu Québec as well as a T4 slip for the CRA.