When it comes to running a company, one of the key aspects will be to take care of the people that work for you. There are many ways employers do this, benefits, appreciation events, but the single common connection for all businesses will be paying your employees, which means running a payroll. If this is your first time hiring someone though, you may be wondering, what is payroll, and how do I manage it?
What is payroll?
Payroll is the function of a business (that’s you) paying its employees. This involves paying your staff through the distribution of money, the keeping of financial records of how you paid them, what you paid them, and when they were paid, as well as the deductions you do to ensure you and them are both in line with Provincial and Federal tax regulations. This can be in relation to regular employees, who you will have to issue a T4 for at the end of the year, or contractors/subcontractors you have hired, who you will need to issue T5018 or T4A for.
Payroll may refer to the cost of your staff, or the staff themselves. When a company says it is “doing payroll” they usually mean that they are generating paychecks, or calculating the taxes and other deductions owed for those employees.
When it comes to paying people in Canada there are a lot of things to consider. What province do you operate in? How often will you pay your staff? How many hours are they working? What tax bracket are they in? What deductions will you take? How many vacation hours have they accrued? Sick time? Employment insurance? How do you plan to keep records?
A lot of this is fairly standard and set in stone. Canada’s tax laws dictate the deductions, including how much vacation time they earn, what their Employment Insurance (EI) deductions will be, and what the minimum amount you can pay them will be. Other matters are dictated by law, for example you must have your staff fill out a TD1 form when they start with you so you have all applicable tax information as well as their social insurance. Also, in Canada, full time is considered 8 hours a day, 40 hours a week.
You also have to keep in mind when remitting the deductions to the government you may be required to do so weekly, semi-monthly, monthly, quarterly, or annually, depending on the payroll amount being withheld. Regardless of how you choose to take care of your payroll, ensure you talk to your accountant first to make sure you have the best understanding of how your business will be required to remit.
When it comes to processing and keeping records however, you have a great deal of options. A lot of larger businesses keep their payroll departments in house, having it as part of their accounting team. Some smaller businesses may choose to do the work themselves, using software like QuickBooks or the newer WaveApp to manage their payroll functions. Other companies still may decide to outsource their payroll functions to an accounting firm, so that they may be looked after by accountants who are specialized in payroll support.
Letting Us Help
Should you decide you want to outsource your payroll services to a company such as our, there are a few factors you have to consider when we start to help.
One of the biggest factors with choosing someone to help with payroll is the frequency of which you choose to pay your staff. Most people are familiar with semi-monthly and biweekly, but other options include weekly, monthly, and yearly. When you come to an accountant make sure you have your schedule set up and ready to go, so we can ensure there are no disruptions to payment. Once you have this figured out, we’ll set up a deadline to have hours to us by.
Hours and Pay Rate
One of the biggest issues with payroll is accurately tracking hours. Some people use a clock-in/clock-out system. This might be as part of their Point-of-sale (POS) system, a separate system, or a manually sign in sheet. We will need access to these records, however they are kept, so that we can ensure accuracy of processing. Likewise, we’ll need a record of what the hourly rate of pay for staff is, unless they are salaries in which case we will need their salary.
If there are any special conditions for their pay, such as requested Vacation Time, special tax rules around the employee such as garnishments. We also need to be aware of employee benefits, health plans that are in place, and vehicle allowances that have been made, as these will likely be taxable benefits as well. Ensuring all of this is documented will help you and your employees avoid penalties.
Whether you are considering doing your payroll on your own, having someone in house, or looking to have an accounting office take care of it for you, we are happy to explain your options in more detail. We offer new business clients a 30 minute consultation to get to know you and the needs of your business better, as well as make meaningful recommendations as to what is the best fit for you. If you have questions feel free to call, email or text us, and we’ll be happy to explain.