Start by confirming the person is an employee
Before you set up payroll, check whether the worker is really an employee or a self-employed contractor. The CRA looks at the total relationship, not the label in the contract. Factors include the intent of the parties, who controls how and when the work is done, who supplies the tools, whether the worker can make a profit or suffer a loss, and whether they can hire helpers. The CRA's page on employee or self-employed status explains these factors.
Getting this wrong can mean unpaid source deductions, penalties and interest. If a worker is truly an employee, you must deduct and remit tax, CPP and EI, even if both sides agreed to something else.
Before the first pay day
1. Open the right CRA accounts
You need a business number and a payroll program account (RP) before your first remittance is due. For example, if your first pay day is March 25, your first remittance would be due April 15. Register early rather than at the last minute. If you have not yet registered the business itself, see our business registration service.
2. Collect employee information
Before the first payment, get the employee's Social Insurance Number (SIN) and their completed federal and provincial TD1 forms. The TD1 tells you which personal tax credits to apply when calculating deductions. Keep copies on file.
3. Register with WSIB if required
In Ontario, many employers must register with the Workplace Safety and Insurance Board within 10 calendar days of hiring their first worker. Coverage is mandatory for many industries, including construction, restaurants and bars, trucking, manufacturing, agriculture, and sales and service. Some sectors are optional, such as banks and insurers, travel agencies, photographers, many hair salons and private day cares. Failing to register when required can bring penalties and retroactive premiums. Use WSIB's registration page to check your category.
4. Set up pay, benefits and a pay schedule
Decide how often you will pay, the hourly rate or salary, and any benefits. Put it in a written employment agreement that matches Ontario's Employment Standards Act (ESA). Ontario's general minimum wage is $17.95 per hour effective October 1, 2026 through September 30, 2027. Check the government's minimum wage page for special rates that may apply to your situation.
What you deduct, and what you also owe
On every pay you deduct income tax, the employee's CPP contribution and the employee's EI premium. You then pay your own share:
- Employer CPP matches the employee's contribution.
- Employer EI is 1.4 times the employee's premium.
The CRA updates rates and maximums each year, so use its payroll resources or its Payroll Deductions Online Calculator rather than relying on a number from a guide. We explain how this fits together in Canada payroll: CPP, EI and CRA remittances.
Vacation and other ESA basics
Ontario employees are entitled to vacation time and vacation pay. Vacation pay is at least 4% of gross wages for employees with under five years of employment, and at least 6% after five years. Vacation time is two weeks, rising to three weeks after five years. Other ESA topics, such as public holidays, hours of work, termination and notice, are outside this guide, so review the ESA before setting policies.
Remitting what you withheld
New employers are usually regular remitters. That means you send deductions and your employer share to the CRA by the 15th of the month after the month the pay was made. The CRA moves you to another schedule based on your average monthly withholding amount. Under $25,000 is regular remitter territory, and quarterly remitting is available only at very small amounts (under $1,000), on dates the CRA assigns.
Remitting on time matters more than most new employers expect. The deductions are not your money, and the CRA treats them as held in trust for the government. Set up a recurring reminder and pay from a separate account if cash flow is tight. Late remittances attract penalties:
| How late | Penalty on the late amount |
|---|---|
| 1 to 3 days | 3% |
| 4 to 5 days | 5% |
| 6 to 7 days | 7% |
| More than 7 days, or not remitted | 10% |
The penalty is applied only to the portion above $500, unless the failure was knowing or grossly negligent. Interest also runs on what is owing.
Year-end and when employment ends
- T4 slips and summary: due by the last day of February for the previous calendar year. The late-filing penalty is $25 per day per slip, with a $100 minimum and a $2,500 maximum.
- Record of Employment (ROE): issued when an employee has an interruption of earnings. For electronic ROEs with weekly, biweekly or semi-monthly pay, issue it within five calendar days after the end of the pay period in which the interruption occurs. Monthly payers have a different rule, so check the Service Canada ROE guide. Issuing ROEs promptly helps former employees apply for benefits without delay.
- Records: keep payroll records for six years from the end of the last tax year they relate to.
A first-hire checklist
- Confirm employee status under the CRA's factors.
- Register a payroll account with the CRA.
- Check whether WSIB registration is required and do it within 10 days of hiring.
- Get the SIN and TD1 forms.
- Put a written employment agreement in place.
- Calculate deductions with the CRA calculator or payroll software.
- Calendar your remittance dates.
- Record everything in your books so year-end is simple.
If you would rather not run payroll yourself, our payroll service covers deductions, remittances, T4s and ROEs, and our accounting team can keep payroll entries tied to your books. Questions about your situation? Get in touch.