Managing payroll as a small business owner can seem overwhelming, but it doesn’t have to be. In this blog, we’ll break down the process so you can confidently approach it. Payroll ensures your team gets paid on time and that the right amounts go to the government. We’ll walk you through the steps and are always here to support you if you need help or have questions. Don’t forget to download our free payroll ebook at the end!
Payroll taxes and deductions
Payroll means calculating what your employees take home (net pay) and what goes to the government (payroll remittance).
When employees get paid, some of their earnings are taxable, while other benefits might not be. For example, bonuses or health benefits are taxable. This benefits chart can help you determine if the benefits you offer are taxable.
Withholdings are amounts held back from your employees’ gross pay. These include:
Canada Pension Plan (CPP) contributions
Both employers and employees contribute to CPP. If you’re self-employed, you’re both, so you contribute twice. The first $3,500 is exempt, and you’re required to contribute up to a maximum of $68,500. As of Jan. 1, 2025, earnings between $68,500 and $79,400 will see an additional CPP deduction.
Find the CRA chart for annual CPP contribution rates.
See the CPP2 rates and maximums.
The Canada Pension Plan (CPP) has been gradually enhanced since 2019, ensuring better financial stability for future retirees through slightly higher contributions today.
Employment Insurance (EI) premiums
As an employer, you contribute a larger share to EI than your employees. If you’re self-employed, you’re generally exempt from EI premiums and can opt out. Learn more about employment insurance for the self-employed.
There are exceptions for those running a corporation — opting in is possible, but rarely recommended.
Federal income tax
Employers are responsible for withholding income tax on behalf of the employee and remitting it to the CRA. The tax rates for withholding are standardized but can be customized in certain circumstances if the employee fills out a TDI form, which details the adjustments to the amount of tax to be deducted.
Provincial income tax
Each province collects tax from employees living in their province, which must also be withheld.
Find the chart for Alberta 2024 and 2023 Tax Rates & Tax Brackets.
Payroll remittance schedule
Payroll remittances — income tax, CPP and EI — are due by the 15th of the month following the payroll. For example, your June payroll remittance is due by July 15.
For business owners without employees, there’s some flexibility. If you choose to pay yourself a wage rather than dividends, you’ll still need to do monthly payroll remittances. You can opt to pay yourself once a year and submit a single remittance after your year-end. Just remember that missing the deadline comes with penalties — so be sure to remit on time, even if it's just once a year.
If you miss the 15th of the month payment deadline, you’ll be hit with a 10% penalty for the remittance amount (5% for the first offense). In Alberta, make sure to pay before 10 p.m., which is midnight out east.
You can submit payroll remittances via online banking, CRA My Payment, in person or by mail.
Calculating payroll taxes
To simplify payroll tax calculations, check out this helpful video from our partner, Curtis.
And the CRA’s Payroll Deductions Online Calculator (PDOC) can help you figure out exactly what you owe based on federal and provincial guidelines (except for Quebec).
Compliance policies
Overtime
Overtime rules differ by industry, but a common guideline is overtime for work over eight hours a day or 44 hours a week. Make sure to specify overtime expectations in your employment contracts. We encourage you to look at the labour standards for your specific province and area of work.
Vacation Pay, Flex Days and Paid Time Off (PTO)
Vacation pay is generally accrued over time. For instance, if your employee gets 12 vacation days a year, they’ll earn one day for each month worked.
Six months in, you should be able to take six vacation days and get paid your normal pay cheque even when you’re away. Some businesses opt to pay out vacation as a percentage of gross pay — usually 4% for two weeks of vacation or 6% for three weeks.
Your employment contract should specify how much vacation you can carry over calendar years or have accrued at one time.
Pay schedules
The most common payroll frequencies are bi-weekly, semi-monthly and monthly. As a business owner, you might prefer to pay yourself quarterly or annually, depending on what works best for you.
- Bi-weekly (80 hours per pay period, 26 pay runs per year),
- Semi-monthly (86.67 hours per pay period, 24 pay runs per year)
- Monthly (160 hours per pay period), 12 pay runs per year)
Download our payroll ebook
Want to dive deeper into payroll management? Our free ebook, How To Set Up Payroll Like a Pro, covers everything you need to know — key dates, rules and software recommendations. Download it today!
If you have any questions or need expert advice, our Chartered Professional Accountants are ready to help with deductions, write-offs, expenses, tax returns, GST filing and more.
Read more about Corporate Tax topics relevant to you and your small business.
