If your small business has reached a point where you need to hire workers to keep up with the workload, you will need to know how the payroll process works. The first step to paying employees is setting up and using a payroll system.
To find out the process needed to pay your employees through a payroll system, you can read this step-by-step guide below.
Step 1: Choose Your Payroll System
The most straightforward way to track and use a payroll is with online software. Learn how to set up payroll with QuickBooks. You will have to pay taxes on your payroll, so it is best to keep accurate and detailed records of workers’ salary payments to ensure you are prepared come tax time. The best way to guarantee correct and current records is through software. It provides automatic updates and quicker processing times for you and your employees, without miscalculations from human error.
Some small businesses choose to run payroll manually, meaning everything is tracked and calculated by hand. Other companies opt to outsource their payroll to a third party to ensure proper bookkeeping protocol.
Step 2: Set Up a Payroll Schedule
As the manager of newly hired employees, you will have to decide when you will be paying them for their work. Typically, businesses will pay their workers on a weekly, bi-weekly, semi-monthly, or monthly basis. Each pay frequency comes with its own advantages and disadvantages. So you will want to weigh your options and choose the payment schedule that will work best for your business as well as your staff.
You will also need to consider provincial legislation before deciding, as some provinces will require businesses to have at least two pay periods per month.
Step 3: Gather Employee Information
Once you’ve hired someone to work for your business, you will need to gather pertinent information from the new employee. It is best to collect this information before they start working to ensure that all required paperwork is complete.
Typically, you can provide your new hire with an Employee Information Form, which will allow them to write down all applicable information in one place and hand it back to you. This form should include spaces for:
- Social Insurance Number
- Their full name as it appears on their bank account that will be used for pay
- Bank account details including their account number and financial institution branch number – a void cheque or direct deposit form will provide the information you need to set up a direct deposit to their account
- Date of birth
- Employee’s current address
- Their contact information with the phone number they can be reached at
- Emergency contact information
On top of the personal and banking information, Canadian employers must also obtain a completed TD1 Personal Tax Credit Return form from their new employees. This form helps businesses determine how much tax they should deduct from the employee’s income.
All provinces except Quebec will be required to use the TD1 form. For businesses located in Quebec, these employers will need to obtain a complete TP-1015.3-V form, the Source Deductions Return form, from new hires. Canada Revenue Agency will require these forms during tax season to ensure that businesses pay the appropriate payroll taxes for their company’s staff members.
Other business-related information needed includes:
- Hire date of the worker
- Assigned employee number
- New role title, internal department names and codes
- Hourly or salaried wages, part- or full-time employment
- Any bonuses
- Deductions: Canadian Pension Plan and Employee Insurance
- Benefits package if applicable
- Vacation or holiday information
Step 4: Track and Submit Timesheets
Small business employers will need to track the hours worked per week, per pay period, of each employee on their payroll. To accurately pay each worker what is due to them, you must keep up-to-date timesheet information.
With the TSheets feature of QuickBooks Online, your business can take advantage of the cloud-based time tracking ability that will save your company time and money. Track your employees time by project and tasks, as well as their overtime, all while allowing your employees to clock-in on any mobile device, with the GPS tracking feature.
With the QuickBooks Payroll feature, the software provides an employee portal for individuals to input their work hours to make this step as easy as possible. For those businesses using manual payroll, the worker will need to keep track of their hours and submit their weekly timesheets to you.
Step 5: Calculate Gross Pay and Make Deductions
The gross pay, or gross income, is the total amount of income an employee will receive for their time worked before payroll deductions are made. There are various mandatory and voluntary forms of deductions from the gross pay, with the most important mandatory ones being Canada Pension Plan (CPP), Employee Insurance (EI) premiums, and payroll taxes. If you have opted to provide benefits to your employees, then deductions must also be made for the benefits package.
Payroll software can make these calculations for you and automatically saves them in your business records. For manual calculations, a payroll calculator can help you figure out gross pay, employment insurance and deductions, and the final amount paid to workers, known as net pay. Your employees will need to pay their income tax from this net pay come tax season.
Step 6: Pay Employees with Direct Deposits
Paying employees’ wages through direct deposit is the most practical method of payment. Direct deposits offer a safe, secure, and easy way for the employer to send salaries and for the employee to receive what they earned on time, directly into their specified bank account.
Payroll software allows business owners and managers to schedule these deposits on the appropriate pay date, as set up with the payroll schedule, without direct deposit fees. Ensure that your payments reach your employees on time, every time, as it could reflect poorly on your business if you do not.
Step 7: Keep Detailed Payroll Records
With every pay date that passes, you will want to update your records accordingly to reflect every worker’s salary payment. Keeping current and accurate records is an essential aspect of running payroll. You and your employees will need to ensure all records are correct for filing income taxes with the Canadian government.
Once tax season hits, it will make the filing process easier for you and your business when calculating and paying payroll taxes to the Canadian government. QuickBooks can even assist or automatically prepare and file T4 forms for you.
How do I do Payroll Manually?
To run your payroll manually, you will need to keep an Excel document or Google Sheets document to track employee pay information, alongside the QuickBooks paystub online calculator.
Manually calculating the appropriate figures and deductions and tracking them in your Excel document will be a good fit for businesses that have a small payroll with few workers, who are also comfortable making those calculations themselves.
How do I make an Employee Paycheque?
Businesses can quickly and easily make paycheques for their employees with QuickBooks Online using scheduled and unscheduled payroll. To manually make employee paycheques, or payslips, there are various paid and free pay stub generators and templates available online.
Payroll Software that Streamlines the Process
Stay on top of the payroll process, keep your business running smoothly and your employees happy, with the QuickBooks payroll feature. Let your staff check their past pay stubs, timesheets, and vacation days with the available employee portal.
Learn more about the perks of using payroll software, and you and your new employees won’t be disappointed with how easy it is to use.