Payroll is one of the few parts of running a business where being a few days late has a published price list. The Canada Revenue Agency sets out exactly what it charges, and it starts at 3% of the entire remittance.

Most guides to payroll deductions stop at the definitions: here is CPP, here is EI, here is income tax. That is the part your payroll software already handles. The part that costs employers money is the second half of the job, the remittance, which means knowing which kind of remitter the CRA thinks you are, when your money is genuinely due, and what happens when it arrives late.

This guide covers both halves, with 2026 figures throughout. It is written for the person who actually signs the cheques: the owner-manager who is their corporation’s only employee, the small business that has just taken on its first hire, and the office manager who inherited the payroll file and found a PD7A sitting on the desk. By the end you will know your remitter type, your due date, and the three situations that most often turn a routine remittance into a penalty.

What payroll deductions are

A payroll deduction is an amount you withhold from an employee’s gross pay and send somewhere else on their behalf. What is left after every deduction is the employee’s net pay.

Deductions fall into two groups. Statutory deductions are required by law: CPP or QPP contributions, EI premiums, and federal and provincial income tax. Voluntary deductions are ones the employee has agreed to, such as benefit premiums, pension top-ups, union dues or charitable giving.

Before you calculate anything, you need the right starting number. Gross pay includes more than salary or wages: taxable benefits such as an employer-provided vehicle, certain insurance premiums or board and lodging form part of the earnings that deductions are calculated on. Getting that base wrong is the most common reason an otherwise careful payroll run comes out short.

The three mandatory deductions in 2026

Every employer outside Quebec withholds these three. The figures below are the CRA’s for the 2026 tax year.

Canada Pension Plan and CPP2

CPP applies to employees aged 18 to 70 in pensionable employment who are not already receiving a CPP retirement or disability pension. You withhold 5.95% of earnings above the $3,500 basic exemption, up to the year’s maximum pensionable earnings of $74,600, and you contribute a matching amount as the employer.

The piece employers most often miss is CPP2. Since January 2024 there has been a second contribution on earnings above the first ceiling. In 2026 that means 4% on earnings between $74,600 and $85,000, to a maximum of $416 from the employee and $416 from you. It is not optional and it is not a rounding error. Any employee earning more than $74,600 triggers it.

Employment Insurance

Outside Quebec, employees pay EI at 1.63% of insurable earnings up to a maximum of $68,900, for a maximum annual premium of $1,123.07. As the employer you pay 1.4 times whatever the employee paid, which makes EI the deduction where the employer’s share is largest relative to the employee’s. You can confirm the current figures on the CRA’s EI premium rates and maximums page, which is updated each year.

If your employee works in Quebec, this is one of two places the answer forks. Quebec employees pay a reduced EI rate of 1.30%, to a maximum premium of $895.70, because the province runs its own parental insurance plan. They also pay into the Quebec Pension Plan rather than the CPP, and into the Quebec Parental Insurance Plan. Those Quebec portions are remitted to Revenu Québec, not to the CRA, and on a different form.

Federal and provincial income tax

How much income tax you withhold depends on what the employee claims on their TD1 form, which every new hire completes and any employee can update when their circumstances change. The 2026 federal rates are 14% on taxable income up to $58,523, 20.5% from $58,523 to $117,045, 26% from $117,045 to $181,440, 29% from $181,440 to $258,482, and 33% above $258,482.

Provincial and territorial tax is withheld on top, at rates and thresholds set by each province, based on where the employee reports to work rather than where your business is registered. Quebec employees complete form TP-1015.3-V instead of the provincial TD1.

How to calculate what to withhold

For a single employee the sequence is short:

• Total the employee’s gross earnings for the pay period, including any taxable benefits
• Subtract the pay-period share of the $3,500 CPP basic exemption, then apply 5.95%, and 4% on anything above the first ceiling
• Apply 1.63% to insurable earnings for EI
• Use the employee’s TD1 claim codes to determine federal and provincial income tax

In practice almost nobody does this by hand, and there is no prize for doing so. The CRA’s Payroll Deductions Online Calculator and its T4032 tables both exist for this, and you can also use the free payroll deductions calculator to check a single pay run against current rates. If you want the full mechanics, how payroll is calculated walks through a complete run.

Picture a bakery in Hamilton paying a full-time supervisor $82,000. Up to $74,600 the supervisor contributes CPP at 5.95%. On the $7,400 above that ceiling, CPP2 kicks in at 4%, which adds about $296 from the employee and the same again from the bakery. An owner who has only ever budgeted for the base CPP rate finds roughly $600 they did not plan for across the year, split between the two of them.

What a payroll remittance is

A payroll remittance is the payment you send the CRA containing the deductions you withheld from your employees plus your own company contributions. The money you withhold is never yours. You are holding it on the CRA’s behalf between the pay run and the remittance date, which is why the penalties for sending it late are steeper than most employers expect.

Which remitter are you

This is the question that determines everything else, and it is the one most guides skip. The CRA sorts employers by their average monthly withholding amount, or AMWA: the total deductions and contributions you remitted, averaged per month, from two calendar years ago. Not last year, and not this year.

Find your AMWA, then read your row:

If you are a brand new employer, you start as a regular monthly remitter and the CRA tells you if your type changes. You can confirm your current classification in CRA My Business Account, and the full rules sit on the CRA’s When to remit page.

This is the second place the answer forks, and it forks hard. Two businesses with identical payrolls this month can owe on completely different schedules, because the classification looks back two years. A business that grew quickly can find itself an accelerated remitter on the strength of a payroll it no longer runs.

When your remittance is actually due

Once you know your type, the due date follows from it:

• Quarterly: the 15th of the month after each quarter ends
• Regular: the 15th of the month after the month you paid your employees
• Accelerated, threshold 1: for pay dates in the first 15 days of a month, by the 25th of that same month. For pay dates from the 16th to month end, by the 10th of the next month
• Accelerated, threshold 2: within three working days of the end of each of the four periods the month is split into

If a due date lands on a Saturday, Sunday or statutory holiday, the CRA must receive your remittance by the next business day.

Say a landscaping company runs a crew of nine, pays every second Friday, and remitted an average of $31,000 a month two years ago. It is an accelerated threshold 1 remitter, which means the 15th is not its deadline at all. Its mid-month pay run is due on the 25th, and its month-end run is due on the 10th of the following month. An owner working from a general guide that says “remit by the 15th” would be late on one run and early on the other, every single month.

How to remit to the CRA

You can pay through CRA My Business Account, through the My Payment service with a debit card, by pre-authorized debit, through your financial institution’s online banking by adding the CRA payroll account as a payee, in person at your bank with a remittance voucher, or by cheque payable to the Receiver General. Third-party services will also process a remittance by credit card, though they charge a fee of roughly 2.5%, which is worth weighing against whatever cash-flow benefit you are buying.

Since 1 January 2024, remittances over $10,000 should be made electronically, and the CRA may assess a penalty where an employer could reasonably have paid electronically and did not.

If you would rather not track any of this by hand, automating your payroll remittances covers what can be scheduled and what still needs your sign-off.

One detail causes more trouble than the method you choose: “paid” means received by the CRA, not submitted by you. A bank transfer initiated on the due date can settle a day or two later, and the CRA dates the remittance on arrival. If you pay through your bank, work backwards from the deadline rather than toward it.

What happens when you remit late

The penalty is a percentage of the entire remittance, not of the amount by which you were short, and not prorated by day:

The penalty generally applies to amounts over $500. Below that, the CRA applies it only where the failure was made knowingly or through gross negligence. Interest accrues on top, and sustained non-payment can escalate to garnishment or seizure.

The reason this catches people is the arithmetic. A business two days late on an $18,000 remittance is not charged 3% of a shortfall. It is charged 3% of $18,000, which is $540, for a banking delay. Employers who have remitted on time for years are often the most exposed, because they have never had reason to learn how the penalty is calculated.

On the QuickBooks Mind the Business podcast, one small business owner described the mindset that creates this exposure: “I didn’t even know about estimated taxes when I started as a small business owner, so I would get a nice big tax bill at the end of the year until I realized, oh, I actually have to be proactive about this and plan this out.” Remittances reward the same shift. They are a scheduled obligation, not a year-end reconciliation.

When you have nothing to remit

If you had no employees or paid no wages in a period, you still have to tell the CRA. You report a nil remittance either through CRA sign-in services or by calling TeleReply at 1-800-959-2256. No PD7A is issued once a nil reply is received.

Silence is not the same as a nil report. An account that simply goes quiet looks to the CRA like a missed remittance, and that is what generates the notice.

This lands hardest on seasonal businesses. A tour operator in Banff with six staff from May to September has four months of real remittances and eight months of nil reports, and every one of those eight still has a deadline attached.

When you remit too much or too little

Neither is fatal, and they are handled differently.

If you remit too little

Send the difference as soon as you find it. The late-remittance penalty applies to the shortfall from its original due date, so finding it yourself and correcting it quickly costs less than waiting for the CRA.

If you remit too much

The overpayment sits as a credit on your payroll account. You can usually have it applied against your next remittance, or request it back. Where the overpayment involves CPP or EI withheld from an employee in error, you also have to make the employee whole, which is why this is worth fixing in the year it happens rather than at year end. Our guide to correcting a remittance error covers the mechanics.

One thing worth saying plainly, because it comes up constantly: pre-paying a year of remittances in a lump sum is a bad idea. Remittances are matched to the periods in which you actually paid wages, so a single large payment does not cleanly satisfy twelve months of obligations. It creates reconciliation work, and it ties up cash you may need.

Remitting when you are the only employee

If you are incorporated and pay yourself a salary, you are an employer, with every obligation in this guide. You open a payroll account, withhold CPP and income tax from your own pay, remit on your own remitter schedule, and issue yourself a T4.

Two things differ from the multi-employee case. You are usually exempt from EI on your own pay where you control more than 40% of the corporation’s voting shares, which removes the EI premium and the 1.4 times employer share. And you pay both halves of CPP, as employee and employer, so the real annual cost is roughly double what the employee rate alone suggests.

Consider a consultant who incorporated last year and pays herself $6,000 a month. Her AMWA two years ago was zero, so she starts as a regular monthly remitter with a deadline on the 15th. Her payroll takes four minutes. Her remittance obligation is identical in shape to a company with thirty staff, and the penalty for missing it is calculated the same way.

Year-end forms

After the calendar year ends you report what you actually paid. You issue a T4 to every employee who earned more than $500 or from whom you withheld any deduction, and you file a T4 Summary with the CRA, by the last day of February. Pension payments and certain subcontractor payments go on a T4A instead. Our guide to T4 slips covers the detail.

Run payroll and remittances in QuickBooks

Knowing your remitter type and your due date is most of the battle. Keeping the figures right every pay period is the other half, and it is the part worth automating. QuickBooks Payroll calculates CPP, CPP2, EI and income tax on every pay run against current CRA rates, so a mid-year change like the CPP2 ceiling does not depend on you noticing it. It also fills in your PD7A worksheet from the payroll data already in your account, so the figures you report are the figures you actually paid rather than ones you recalculate by hand. You can file and pay your source deductions to the CRA from inside QuickBooks, which takes the banking lag out of the equation on a due date.

Here is where to start:

• Find your AMWA from two calendar years ago and confirm your remitter type in CRA My Business Account
• Put your actual due dates in a calendar, working backwards from each one if you pay through your bank
• Check your next pay run against the 2026 CPP, CPP2 and EI figures above, especially for anyone earning over $74,600
• Set a recurring reminder for nil reporting in any period you expect to pay no wages

Get those four right and payroll remittances stop being a thing that can surprise you.

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