1. Register with the CRA to Obtain a Business Number

A business number (BN) is a unique number that allows the CRA to identify a business for tax matters related to business in Canada. Each business requires one BN for its legal entity. The BN has 15 digits: nine unique numbers to identify the company, plus two letters and four numbers to identify the program and each account:

• GST/HST program account (RT)


• payroll deductions program account (RP)


• import-export program account (RM)


• corporation income tax program account (RC)


• registered charity program account (RR)


• information returns (RZ)


• luxury tax program account (LT)
  


• underused housing tax program account (RU)

2. Open a Payroll Program Account

A payroll program account is an account number assigned to an employer, a trustee or a payer of other amounts related to employment to identify them when dealing with the CRA. Employers must register for a payroll program account before the first remittance due date. Click here for more information about registering with Revenu Quebec.

3. Open a Payroll Bank Account

It is recommended to establish a separate bank account for payroll processing. This ensures that monies for payroll costs are kept apart from other business expenses. The CRA and RQ state that once an employer has withheld payroll source deductions from employees, these amounts will be held in trust until the government remittance is due.

4. Register for Provincial/Territorial Health Taxes and Levies

Each province and territory has a hospital plan covering its residents. Plans are funded in various ways, monthly such as premiums, employer levies or through general tax revenue. Employers are responsible for registering an account with the provincial or territorial government agency that oversees these programs.

5. Register With Workers Compensations

Workers’ compensation (WC) is a provincial/territorial government insurance plan designed to provide income to and pay expenses incurred by employees absent from work due to work-related injuries or certain industrial diseases. The Workers’ Compensation Board within each province/territory administers the plan and is funded by employers who pay annual assessments into a general accident fund.

6. Apply for a Reduced Employment Insurance Premium Rate

To qualify for a premium reduction, an employer must maintain a plan that provides short-term disability or wage-loss replacement benefits that meet specific standards. The employer’s disability plan must provide the employee with a benefit equal to or greater than the sick benefits paid by EI.

7. Comply With Employment Standards

Each province and territory in Canada has legislation outlining the basic minimum employment standards that employers and employees must follow. New employers must familiarize themselves with the various acts and regulations that apply to their employees. Examples of provisions under employment standards include:

• Minimum wage


• Minimum and maximum hours of work


• Job-protected leaves (e.g., maternity, parental, compassionate care)


• Annual vacation entitlement

8. Establish a Payroll Schedule and Provide Pay Statements

An employer must establish a regular pay frequency and pay date. They must also provide employees with a statement of earnings and deductions each pay period on or before the payment date. The information reported on an employee’s pay statement must comply with the employment/labour standards legislation of the jurisdiction where the work is performed

Overall, setting up a new payroll in Canada requires careful planning and attention to detail. Seeking the advice of a payroll professional will be helpful to ensure that your new payroll is set up correctly and complies with all Canadian regulations.

For more details about these steps and further information, visit the National Payroll Institute’s Setting Up a New Payroll in Canada Best Practices Guidelines.

Do you have experience with setting up a payroll in Canada from scratch? Share your best tips with fellow members in the comments below. 

Sources:

• National Payroll Institute