We get it – even the most seasoned payroll pros make mistakes sometimes. In this post, we examine some of the most common Canadian payroll mistakes and how you can fix them. We’re here to ensure you’re compliant – and our platform makes it easy.
Common Canadian Payroll Mistakes
Issue 1: Misclassifying Workers
One of the first steps in payroll is determining whether your workers are employees or independent contractors. This distinction affects how you pay them, what taxes you withhold and remit, and what benefits you provide. For example, employees are subject to income tax, Canada Pension Plan (CPP), Employment Insurance (EI), and other deductions, while contractors are responsible for their own taxes and benefits. Employees and independent contractors also require different tax documents. For instance, an employee must receive a T4, while independent contractors require a T4A. Misclassifying workers can result in penalties, audits, and lawsuits from the Canada Revenue Agency (CRA) or your workers themselves.
When onboarding an employee with PaymentEvolution, we clarify this distinction. You’ll be asked to designate your new team member as an employee, a contractor or a construction contractor. We also break down what these distinctions mean.
For a more detailed breakdown, check out our guide on determining your workers’ statuses.
Issue 2: Not Remitting On Time
You know that payroll isn’t just about what you pay – it’s also about what you deduct. As an employer, you must deposit your federal and provincial payroll deductions on specific dates, depending on your remitter type and frequency. These remittances include income tax, CPP, EI, and other provincial taxes such as Quebec Pension Plan (QPP), Quebec Parental Insurance Plan (QPIP) and Ontario Employer Health Tax (EHT). If you miss these deadlines, you could face late filing penalties and interest charges from the CRA or the provincial tax agencies.
If you use our direct deposit services (ePay), we will remit based on your electronic payment date. For peace of mind, you can also check the status of all remittance payments handled through your payroll from our platform.
If you’re running payroll manually or by cheque, you should know your remitter type and frequency based on your average monthly withholding amount (AMWA) and total taxes remitted in the previous year. You should also keep track of the deposit due dates for each remittance period and set up reminders or automatic payments to ensure timely deposits.
Issue 3: Taxable and Non-Taxable Benefits Mixups
We’ve said it before, and we’ll say it again: benefits are a fantastic tool for growing your business. But when it comes to reporting benefits, things can get tricky – especially the difference between taxable and non-taxable benefits. Once you’ve deducted a benefit, you’ve got to report it – this includes cash and non-cash benefits such as bonuses, commissions, tips, stock options, employee discounts and free meals. These benefits are then subject to income tax and sometimes CPP and EI as well. Failing to report these benefits can result in underpaying taxes and penalties from the CRA.
We can fully integrate your benefits and payroll processing to streamline any solutions. If you’re ever confused, you can also contact one of our benefits architects or check out our guide to taxable and non-taxable benefits.
Simple payroll starts with us.
Payroll isn’t always straightforward – but don’t let that worry you. We’ve seen all the common Canadian payroll mistakes. Find the answers you need with our world-class support team. It’s a guarantee – from our business to yours.