The hiring of an employee is a signal that your business has the resources and need for additional help. Although your company may need extra hands, you must make sure your company is prepared on the back end to handle the payroll requirements that accompany your new hires. It may be in your best interest to start planning for these requirements, even if you have no current plans for hiring.
Leverage Time When You Can
Chances are you are adding staff because business is getting busier. Don’t wait until you are at your busiest to set up your payroll system; you can handle much of the preparation up front. Take advantage of slower periods of business to get the most efficiency from your time. Planning in advance during a slow period will yield a higher-quality system that is less likely to have made accidental omissions.
Register in Advance to Avoid Penalties
To perform payroll functions, you must have several registered numbers. First, you must obtain a payroll program account with the Canada Revenue Agency. In addition, you must have a registered business number to have a payroll program account. You can set up these registrations at any time prior to hiring employees. However, if you hire an employee before you have these registrations, you may face penalties for failing to make deductions from an employee’s paycheck. It is simply safest to obtain the payroll account and business number in advance to avoid penalties.
Opportunity to Research and Ask Questions
Upon hiring an employee, you will be responsible for calculating the Canada Pension Plan contributions, Employment Insurance premiums, deductions for income tax, and the employer’s portion of CPP and EI to remit to the CRA. Although you can conveniently set up QuickBook to calculate these items automatically, you must ensure you have enough time to audit the calculations, ensure the system is working appropriately, and address any issues that arise. There are calculation tables available as a resource you can familiarize yourself with in preparation of an audit.
Perform Test Runs
Set up test employees in advance to make sure you know how your payroll is operating prior to your first hire. Planning ahead will give you the chance to wrinkle out any errors in advance. In addition, you will learn how to add employees and their information correctly, saving you the time and effort it will take to correct any errors. In addition, you run the risk of scaring away prospective employees if they do not trust your ability to manage the payroll system. Don’t let payroll needs sneak up on you and prepare your small business to start taking on employees. This way you can streamline the hiring process and focus on other business needs.
Be Aware of Filing Requirements
Setting up a payroll system in advance will give you more time to prepare for filing deadlines or reporting requirements. In general, a new filer is most likely to have its first remittance due to the CRA by the 15th of the following month. By planning ahead, you can develop system reminders, get access to the appropriate forms, and learn what you have to do and when. T4 slips and T4 summaries have reporting due dates, which may come quickly based on when you set up your system.