It’s the law, mandatory to keep records about employees. Employers can’t just write cheques or pay cash and barter is viewed as dubious but may be accepted with sufficient record keeping.
Keep a permanent file for each employee, an annual file, both for each employee, with their timesheets and pay related information, and another for accrual calculations; and employer files for the monthly and annual payroll summary reporting.
What payroll records would a CRA payroll TRUST auditor be looking for and have the right to review
- Contract of employment
- Rate of pay
- Hiring date, Termination date
- Resume, reference letters
- Relationship, where employee/shareholder is related by blood or marriage, especially where the employee is a minor, and tax on split income rules might apply
- CPT1 Ruling (See RC4110 for information about employee vs self-employed)
- Garnishee orders from official sources, e.g. CRA, Family Support or Maintenance, Court Orders, etc.
- ROE’s on termination
- TD1 (federal and province/territory)
- T1213 Source deductions changes approved by Canada Revenue Agency in advance of implementation
- Vacation taken, accrued
- Sick leave
- Banked Overtime
Employers should also keep records relating to:
- Each benefit contract or account with invoices, contracts, reporting and payments for:
- Union dues
- Charitable donations
- Premiums paid by the employer, or withheld to be paid on behalf of employee for provincial medical plans; and/or private benefit programs, health, dental, disability and life insurance, etc.
- Source deductions remittances for each period, either weekly, monthly, etc.
- Annual reporting to CRA – T4’s, T4A’s, T5018’s, etc. detail and summary
- Working paper file reconciling net pay to what was reported to CRA as not everything is reported on a T4
Where can employers find the rules?
Rules about payroll record keeping and reporting is found in a variety of laws in Canada, in each of the provinces/territories, and even municipalities.
Court cases, legislation and commentary can be found on www.CanLII.org. Learn how the search box works, and you’ll have the latest, most relevant information on any of these topic areas:
- Workers Rights in Canada, including the Employment Standards Act(s) are explained on the Service Canada website. Search www.canlii.org – ‘workers rights’ found 138,963 references to cases, legislation and commentary
- Worker Safety is administered by agencies in each province/territory under the direction of the Labour Ministry, Canada or in each province/territory, depending on jurisdiction:
- Labour Canada provides an overview of the federal employee
- CRA collaborates with WorkSafeBC and has likely been working with other agencies, to share information
- All corporations and any business with employees are usually required to be registered, and wages and dividends may be assessed
- There may be optional protection for self-employed individuals
- The Labour Minister may support employers in their dealings about worker safety and employer responsibilities
- BC Employers’ Advisers Office
- Service Canada is involved in many aspects of employment
- Sign up for your employer ROE reporting account. Employment Insurance Act (federal) requires detailed Records of Employment. Service Canada manages electronic filing for employer requirement to report on ROEs.
- Canada Pension Plan Act (federal) is also administered by Service Canada. Employers collect and remit CPP at least to age 65
- Sign up and encourage employees to sign up to monitor their personal My Service Canada Account
- Canada Revenue Agency administers the Income Tax Act (federal and provincial/territorial) and has various electronic portals to make taxpayer, business and employer administration easier for employers:
- Sign up for Login services including My Account, My Business Account and/or Represent a Client
- Learn about Payroll – find what’s new, topics, forms and publications, related topics and a multimedia video learning series
- Learn about Contract Payment Reporting System
- Excise Tax Act – GST/HST may be assessable on benefits and allowances (federal)
- Temporary Foreign Worker Program is managed by Employment and Social Development Canada. Find new requirements for employer compliance here.
Employers may also contract with commercial suppliers to provide private benefits, retirement, pension, and other employee programs:
- Employee Benefits programs
- Employee Stock Option programs
- Retirement and pension programs
What role can technology play?
- Determining profitability
- Tracking business performance
- Calculating ratios for wages, salaries, and benefits as paid
- Ensuring correct amounts are calculated to remit source deductions by the due date
- Ensuring other liabilities relating to employees are tracked and paid as required
- Tracking accruals for vacation, sick leave or overtime liabilities
How can Intuit help?
QuickBooks’ monthly plans include payroll updates. There’s no excuse not to keep proper payroll records.
These are the links to purchase online, download and start today:
- QuickBooks Online for $9, $19 and $29/month depending on the version, EasyStart, Essentials or Plus (payroll is free until July 2015)
- QuickBooks Pro Desktop 2015 with Payroll – starts at $51/month
- Compare Pro + Payroll vs Premier + Payroll
Intuit Canada has online learning tools, free training and articles:
Don’t get in trouble with Canada Revenue Agency (CRA)!
Click here to learn more about how payroll works and remember:
- Employers are responsible for payroll withholdings
- If withholdings are not deducted, there are 10% of the CPP, EI and TAX not deducted, and those are penalties, and more than once in a year 20%….
- penalties aren’t deductible against other income either
- Penalties and Interest and OTHER consequences apply if late with compliance, and repeat offences, let’s not go there…
- Withholdings, are TRUST FUNDS! Funds must be held in a separate bank account
- Notice the Director’s liability – Directors may be personally liable – joint, several or individually liable along with the company
- Failure to maintain or provide adequate records
- Determine employment status and verify withholdings requirements:
- Obtain a CPT1 Ruling on CPP and EI if unsure about status of employee vs self-employed
- Verify if insurable earnings and WCB/WSIB premiums apply when hiring family by obtaining rulings
- Ensure your employees are allowed to work in Canada, they require a valid SIN # within three days of starting work
- If the Employee SIN # begins with the number “9” they MUST be authorized to work in Canada and provide a valid immigration document
- Stronger enforcement and tougher penalties, go to jail as it’s a criminal offense to hire someone who isn’t authorized to work in Canada
- Withholdings and reporting is required for nonresidents who work in Canada
- Review all purchases and use of company property and services to identify shareholder and employee benefits, as both cash and non cash benefits must be added to wages, and CPP, EI, WCB/WSIB and GST/HST remittances may apply
- Penalties for not filing information returns by the due date are legislated
- T4s for all employees (best practice)
- T4As as required
- T4A-NR slips for amounts paid to nonresidents for services, fees, commissions or other amounts rendered in Canada
- T5018 Contractors
- Record of Employment reporting is required on termination – register with Service Canada to report online
Important dates for payroll (includes link to information about records retention)
Download my Sample data file –Payroll Items list has examples of benefits including GST/HST set up per Benefits Chart in T4130 (QuickBooks v2013).