As your company grows, you may find that you need to expand your team. But hiring employees can feel overwhelming when you're trying to figure out how to properly compensate them. While the federal government has its own set of regulations, if you run a small to medium-sized business in Ontario, it's important that you understand the payroll rules.

In this Ontario payroll guide, you'll learn the rules and regulations for minimum wage, payroll, workers' compensation, leaves of absence, and termination notices.

Ontario's minimum wage rates 

As a business owner, you'll need to brush up on the Employment Standards Act (ESA). In Ontario, starting October 1, 2023, the general minimum wage for most employees and liquor servers is $16.55 per hour (an increase from $15.50 per hour).

If you plan to hire young talent, the student minimum wage is currently $15.60 per hour. This applies to students under the age of 18 who work 28 hours a week or less while they're in school, or who work during a school break or summer holidays.

If you have an outdoor business that employs hunting, fishing, and wilderness guides, you can expect to pay them $82.85 per hour for working less than 5 consecutive hours in a day. This increases to $165.75 per hour for working 5 or more hours in a day, whether or not the hours are consecutive, as stipulated by the Employment Standards Act.

The role of a wilderness guide is to guide, teach, or assist a person while they're engaged in activities in a wilderness environment, including:

• Back-country skiing and snowshoeing
• Canoeing, kayaking, and rafting
• Dog sledding
• Hiking
• Horseback riding
• Operating all-terrain vehicles or snowmobiles
• Rock climbing
• Survival training
• Wildlife viewing

You may run a business where you have employees who do paid work in their own home. A homeworker's minimum wage is currently $18.20 per hour. This type of work may include working for a call centre, sewing clothes for a clothing manufacturer, or writing software for a tech startup.

Hours of Work

Even though your business may operate 24/7, there are limitations on how many hours your employees can work. In Ontario, an employee can work a maximum of 8 hours per day of work or 48 hours per week. If an employee works more than 8 hours in the day or more than 48 hours in a week, there must be a written or electronic agreement (such as an e-contract) between the employee and the employer.

In addition, the employee must be compensated for overtime. The standard overtime pay is 1.5 times the employee's regular rate of pay. So, if an employee's hourly rate is $16.55, their overtime rate is $24.82 per hour ($16.55 x 1.5 hourly rate).

Furthermore, employers are required to compensate their employees for a minimum of a 3-hour shift, even if they worked less than that. For example, if you asked an employee to come into your store to work for 3 hours, but then you decided to close the store early and they only worked for 2 hours, you're still required to pay them for 3 hours of work.

It's important and required for your staff to take breaks during their shift. Employers are required to give their staff a 30-minute break to eat their meal after working for 5 consecutive hours. This can also be broken down into 2 breaks that total 30 minutes. Typically, meal breaks are unpaid unless it's stated in the employee contract that they're paid.

Payroll remittances in Ontario 

Here are the common payroll responsibilities that employers must follow:

Step 1: Open and maintain a payroll program account. Be sure to meet the conditions in Chapter 1 on the Canada Revenue Agency (CRA) website.

Step 2: Obtain your employee's social insurance number (SIN).

Step 3: Get a completed federal Form TD1 Personal Tax Credits Return, and, if applicable, a provincial or territorial Form TD1. New employees or recipients of other amounts, such as pension income, must fill out this form.

Step 4: Deduct the Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax from remuneration or other amounts, including taxable benefits and allowances, that you pay in a pay period.

• Be sure to hold these amounts in trust for the Receiver General and keep them separate from the operating funds of your business.
• Make sure these amounts are not part of an estate in liquidation, assignment, receivership, or bankruptcy.

Step 5: Remit these deductions along with your share of CPP contributions and EI premiums.

Step 6: Report the employee's income and deductions on the appropriate T4 or T4A slip. You must file an information return on or before the last day of February of the following calendar year.

Step 7: Prepare a record of employment (ROE) when an employee stops working and has an interruption of earnings (for example, if a temporary layoff occurs).

Step 8: Keep records in your payroll account because the CRA may ask to see them.

Ontario tax brackets

Here are the provincial tax brackets and tax rates in 2024:

For example, if you're self-employed and you generate $75,000 in taxable income, you can expect to pay:

• 5.05% tax on the first $51,446
• 9.15% tax on the remaining $23,554 ($75,000 - $51,446)

Keep in mind that there will also be federal taxes to consider.

Ontario Pay Statements 

Your team looks forward to getting paid for their hard work and seeing their bank balance go up! When you issue payments to your staff, you must provide each employee with a statement of earnings on or before payday. Be sure that the pay stub includes the following information:

• Pay period
• Wage rate and overtime rate
• Regular and overtime hours of work
• The gross amount of pay, listing items separately (for example, wages, overtime, general holiday pay, and vacation pay)
• Deductions from earnings and the reason for each deduction
• Any amount for room and board
• Hours taken off in lieu of overtime
• The net amount of wages

Electronic statements are acceptable if employees have confidential access and can view and print them. Furthermore, privacy legislation may require an employer to maintain the confidentiality of the employee's payroll information. Don't forget to keep employment records on hand for 3 years.

Employers can choose if the regular payday will be weekly, bi-weekly, semi-monthly, monthly, or any other specified period. Generally, the most common practice for employers is to pay bi-weekly on a Friday. Be sure that you pay all wages earned in each pay period by the payday.

Prohibitive wage deductions 

There may be times when your business loses money, such as when you realize the cash register is short of money and doesn't equal the amount in sales you generated at the end of a shift. As an employer, you may believe that you can simply take the difference from an employee's paycheque — but think again.

Employers aren't allowed to make deductions from an employee's wages (even if it's a collective agreement or in a written agreement) due to the following scenarios:

• Faulty work by an employee
• Cash shortages or property loss if someone other than the employee had access to the cash or property
• Cash shortages from an employee not collecting all or part of the purchase price from a customer
• Any amount to purchase, use, repair, or clean any uniforms or special clothing that an employee is required to wear at work

Leave of absence 

For regular sick leave, there is no provincial law that requires employers to provide sick days or pay for sick days — though the federal government has its own rules for paid sick days. Employers may offer sick days at their discretion by employment contract.

• Here are the common types of leaves of absence, along with their duration, how much notice employees need to give, and whether they are paid leaves based on Ontario guidelines.

Workers' compensation

Sometimes accidents happen in the workplace. As a small business or startup, if you've been informed that one of your employees has been injured, you're required by law to report the injury to the Workplace Safety and Insurance Board (WSIB) within 72 hours.

While WSIB coverage isn't mandatory across Ontario, those who work in the construction industry are required to have this coverage. There are certain exceptions to this rule, including individuals, partnerships, or corporations performing home renovation work only and who are hired and paid directly by the homeowner or resident.

It's also the employer's responsibility to provide first aid, report the accident, and keep a record of the incident. To report an injury, illness, or accident, log in to your WSIB account. If you fail to report it, you may face penalties.

Wages and health benefits

As the employer, you're required to pay the injured worker's full wages for the day the injury occurred. If they're unable to work beyond the day of the accident, compensation payments start the first regular working day afterward. Cheques are issued every 2 weeks.

The good news is that the WSIB will cover 85% of your employee's take-home pay if they cannot work because of a work-related injury or illness, up to a maximum insured wage of $110,000.

Termination notice

When businesses go through a recession or need to downsize, employers need to follow the provincial policy for when an employee's employment is terminated.

An employer must give notice if an employee has been continuously employed for a minimum of 3 months. In the chart below, you can find out how much notice an employer is required to give based on how long an employee has been working for the company:

If you operate a medium to large-sized company, there may be times (such as during a recession) when you need to let go of part of your workforce. For mass employee layoffs, the following notice is required:

Remember that during the statutory notice period, employers are required to:

• Not decrease the employee's wage rate or change any term or condition of employment.
• Continue to make any contributions needed to maintain the employee's benefit plans.
• Pay the employee the wages they're entitled to.

Alternatively, employers can provide termination pay in lieu of a termination notice. This is usually a lump sum payment equal to regular wages for a regular workweek that an employee would've been entitled to during the notice period.

Creating an all-star team

Once you understand the provincial rules about your employees' payroll policies, you can focus on growing your company. Entrepreneurs have many responsibilities to juggle, but hopefully this guide has helped simplify how you run your business.

QuickBooks Payroll streamlines your payroll process by giving you access to features that help you set up multiple pay schedules and frequencies, including vacation and sick leave policies, time tracking, tax filing, and more. Try it today!

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