You are an employer of employees according to the Canadian Income Tax Act because you control how and when your employee will work, you determine the amount of pay and you determine what the employee will do (click here for more information).
Because you are in an employer/employee relationship, you are obligated to take source deductions off the amounts you pay to your employees. After you have made the deductions, you must send these deductions, plus your share as the employer, to the Canada Revenue Agency monthly. Once a year, you are also responsible for reporting the employee's income and deductions on a T4.
When you hire an employee, you must:
You must calculate the Canada Pension Plan contributions, Employment Insurance premiums, and income tax deductions based on the amounts you pay your employees. You also must calculate your share of CPP and EI. The Canada Revenue Agency has a great Payroll Deductions Online Calculator to help with this.
You must deduct CPP contributions from an employee's remuneration if that employee:
Use the CPP contributions rates, maximums and exemptions Chart, to determine how much CPP contributions to deduct.
As an employer, you must also contribute the same amount of CPP that you deduct from your employees' remuneration.
You have to deduct EI premiums from your employee’s insurable earnings on every dollar up to the yearly maximum. As an employer, you must also contribute 1.4 times the EI premium withheld for each employee.
Insurable earnings include most employment in Canada under a contract of service (employer-employee relationship).
There is no age limit for deducting EI premiums.
As an employer or payer, you are responsible for deducting income tax from the remuneration or other income you pay. There is no age limit for deducting income tax and there is no employer contribution required.
As an employer, you have to remit the CPP contributions, the EI premiums, and income tax deducted from your employees' income, along with your share of CPP contributions and EI premiums.
Remittances for any month are due on the 15th of the following month. For example, in June any deductions from your employee paycheques, along with your employer portion, is due to the Receiver General (or CRA) on the 15th of July. Remittances are only recorded on the day they are received so you must make sure your payment arrives on or before the 15th since you are personally responsible for any late payment penalties.
As an employer, you could be audited by CRA at any time. Similarly, the DF program may request copies of your payroll records at any time, so it is best to keep them well organized so you can access what you are looking for easily. It is equally important that you keep your records confidential. Things like SIN #s and payroll records are very confidential documents and should be stored in a secure location.
There are a lot of different payroll related documents that Self-Managers must keep. This is including but not limited to the following:
At the end of every year, you must provide a T4 to each of your employees and you must submit to CRA a T4 Summary, along with a copy of each T4. For more information on T4s click here
If you need to dismiss an employee, you must provide them with a Record of Employment (ROE) which the employee will use if they wish to seek Employment Insurance benefits. For more information on dismissing and the ROE click here
The Direct Funding Program is being expanded to allow more Ontarians with disabilities to live independently in their homes.
You can read more about this in our News Release.