By the time you hire your first employee, you need to have payroll set up for your business. There are several calculations that go into the payroll process, and if you get anything wrong, you could be looking at potential tax penalties. Fortunately, when you set up your payroll the right way, it’s much easier to get everything correct and process those paychecks smoothly.
While outsourcing your payroll has it benefits, keeping it in-house is usually the better option for small businesses, especially those that are just starting out. To set up your payroll, you first need to register for an account with the Canada Revenue Agency, as that’s how you send in deductions. Those deductions include income tax, the employer’s share of each employee’s contribution to the Canada Pension Plan, and employment insurance. To figure out the correct income tax and make deductions correctly, you need to get each employee’s Social Insurance Number and have them fill out Form TD1.
It’s best to pay your employees a salary instead of an hourly wage if you want to keep your payroll as simple as possible. With salaried employees, there’s no need to track hours or calculate overtime. Even though you can calculate deductions yourself, accounting software, such as QuickBooks, can do it for you. QuickBooks also has multiple plans available to fit the size of your business and its needs. For example, you could use it to set up direct deposits, which saves you time each pay period compared to issuing checks.
Payroll doesn’t need to be intimidating or overly complicated. When you set up your account early on and choose a software to do the hard work for you, you can bring new employees onto your payroll with ease.