Hiring your first employee is an exciting, and sometimes daunting, step. It means your business is growing and you’re ready to share the workload. But it also comes with new financial and legal responsibilities that go far beyond just paying a salary. At Nunniyer Business, we’re here to help you confidently navigate the financial side of hiring. Think of this as your essential checklist to ensure you're compliant and ready for your new team member.
1. Get Your Business Ready for Payroll
Before you can even issue a paycheck, you need to set up the proper accounts.
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Open a Payroll Program Account (RP): You must have this account with the Canada Revenue Agency (CRA) to remit the deductions you collect from your employees. If you don’t already have one, you can easily open it online through the Business Registration Online (BRO) service.
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Review Workers’ Compensation: Depending on your province and industry, you may be required to register with a workers’ compensation board (like WSIB in Ontario). This program protects both you and your employees in case of workplace injuries.
2. Understand Your New Financial Obligations
An employee’s pay isn’t just their salary. As an employer, you have a financial responsibility to contribute to several programs on their behalf.
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Employer’s Portion of CPP & EI: You must match your employee’s Canada Pension Plan (CPP) contributions and pay the employer’s portion of Employment Insurance (EI) premiums. These are significant costs that need to be factored into your budget.
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Provincial Health Tax: Some provinces, like Ontario and Quebec, have an Employer Health Tax (EHT) that you may be required to pay on your payroll.
3. Collect the Right Paperwork
Before you run your first payroll, make sure you have the following from your new employee:
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Social Insurance Number (SIN): You are legally required to ask for your employee’s SIN within three days of their start date. For non-citizens, SINs starting with a “9” require you to verify their work permit.
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TD1 Forms: Both federal and provincial Form TD1 are essential. These forms tell you how much income tax to withhold from their paycheck based on their personal tax credits. You do not send these to the CRA; you keep them for your records.
4. Set Up a Payroll System
A reliable payroll system is crucial for accuracy and compliance. This is where a lot of small businesses choose to work with a professional.
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Manual vs. Software vs. Service: You can calculate payroll manually, use a software program, or work with a full-service provider. A full-service payroll provider handles the calculations, remittances, and year-end reporting (T4s) for you, saving you a huge amount of time and stress.
5. Prepare for Year-End
The final step is to prepare and file your year-end reports. By the last day of February, you must provide each employee with their T4 slip, which summarizes their annual income and deductions. You must also file the T4 Summary with the CRA.
Hiring your first employee is a milestone to be celebrated. By being prepared for the financial and administrative responsibilities, you can ensure a smooth process and avoid costly mistakes.
If you’re ready to take the next step and hire your first team member, but feel overwhelmed by the payroll process, the team at Nunniyer Business can help. We can manage your payroll from start to finish so you can focus on building your team and growing your business.