The Canada Revenue Agency requires all small businesses to comply with payroll regulations to ensure the accurate filing of income taxes and to make sure employees are paid on time. For this to happen, a small business needs to have an adequate payroll system with smart employees who know how to handle money correctly. Although payroll setup is pretty straightforward, doing it well requires you have basic knowledge of the process.
Choosing Efficient Payroll Employees
Hiring experienced payroll employees who are familiar with CRA small business deduction limits and regulations, and those proficient in payroll systems reduces the likelihood of errors in salary and expense reports. When choosing workers, there are several topics for interview questions to ask potential payroll administration employees.
Level of proficiency of payroll systems and basic software programs
- Ability to handle employees who won’t follow reporting rules
- Experience addressing inaccurate reporting
- Comprehension of employment laws that regulate pay
- Knowledge of processing payroll and special items
Considering the Types of Payroll Systems
The Canada Business Network reports that the best way to tackle payroll is to outsource to an experienced accounting firm, or you can save money by automating the payroll process with an accounting software program. These programs keep you up-to-date on tax rates, let you adjust the program to your pay schedule, create rules for payroll deductions, and can even let you make direct deposits online with a computer and an Internet connection. Some programs also offer advanced payroll functions like generating T4 income tax forms to hand out to employees at the end of the year. For very small businesses with only a few employees, you may consider a manual payroll management system. Even with a few employees, a manual system requires a large amount of paperwork and increases the likelihood of errors.
Challenges for Payroll Setup
If you decide to setup your payroll system on your own, there are a few challenges that all small businesses face. Payroll setup requires a lot of data entry and is extremely time consuming. This is where experienced employees can help.
Before you can setup your payroll system, you need to have a business number that identifies you to the CRA and register with the Payroll Program. Each employee must fill out a Personal Tax Credit Form that helps you figure out the amount of withholding from each pay period. The CRA has an online calculator that adds up the CCP contributions, E1 premiums, and income tax. It’s important that these amounts are accurate to ensure precise tax filings at the end of the year. The payments for deductions are due to the CRA on the 15th of each month. If you are late, your business can occur hefty tax penalties.
Though it can take some time and work for a small business to setup a payroll system, once in place and adequate staff is hired to handle the process, the system only requires daily maintenance. If you have any doubts about how to get started, don’t be afraid to contact an experienced accountant or the CRA for advice.