As a business owner, you understand the potential complexities of paying employees and it’s your responsibility to see that everyone on your payroll is compensated fairly. Plus, you may have various types of income to disperse and tax obligations to fulfill.
Since these factors are often worrisome no matter what sort of enterprise you run, hiring or buying a payroll service could be the way to go. Read this to find out what a payroll service is and how to choose the best one for the health of your Canadian business.
What Is A Payroll Service?
A payroll service provider is a company that offers different kinds of assistance to employers who need easier, more cost-effective ways to pay their employees and taxes on time. The software or professional help these services provide can greatly improve and reduce the administrative workload for anyone who normally has to deal with it.
Depending on which provider you hire or download software from, there are a number of payroll services these companies can offer you for a fee, including but not limited to:
- Payroll Reporting – Helps employers create detailed reports about their payroll operations and employees to manage business better and comply with tax laws.
- Automatic Payroll Processing – Allows an employer to automate their payroll process and access payment options like paychecks, paycards or direct deposit.
- Tax Filing Assistance – While hiring a full-scale payroll service provider may be necessary here, this also helps employers comply with Canada’s tax regulations.
- Wage Garnishment & Tax Withholding – Ensures deductions, like income taxes or legal debt payments, are withheld from employee wages and paid on schedule.
Other Ways To Process Your Business Payroll
There are two types of payroll services you can access in North America. Although some employers outsource their payroll needs to a third-party service provider, many will simply buy software so they can manage their payroll internally.
In-House Payroll Services
If you don’t want to hire a third-party professional, many payroll service providers sell processing software, so your human resources or financial department can build their own payment system and handle things “in-house”. This can help your company pay its employees on schedule and save some money in third-party service fees over time.
Here’s how an in-house payroll system usually works, whether your processing team is using its own software or one you’ve purchased from a third-party provider:
- Create a Payroll Bank Account – Before you can implement a payroll service system, you must set up a business bank account specifically for it. This account is where your employees’ paychecks will be withdrawn from.
- Establish Your Payroll System – Next, find a way for your financial team to log your workers’ hours and calculate their payouts. Some employees work on salary and receive a fixed amount per paycheck, while others may earn an hourly rate.
- Set Up Your Payroll Schedule – In Canada, bi-weekly paychecks are the most common method of dispersing employee wages but some businesses will hire contract workers or freelancers, in which case monthly payments might occur.
- Collect Timekeeping Data – Once you have your payroll system up and running, you can input timekeeping statistics for all your employees and their regular pay cycles, then use the data you get to figure out their total salary or wage.
- Enter Employee Deductions – Most payroll software will also allow you to deduct whatever is necessary from an employee’s gross pay, such as income withholdings, payroll taxes and contributions for healthcare or retirement funds.
- Schedule Employee Payments – The final step is to calculate your employees’ gross pay after deductions and arrange the date on which their wage or salaried amount should be paid. You can then log and report any necessary information.
Advantages Of In-House Payroll vs. Third-Party Payroll Services
Think carefully prior to implementing a payroll system, as there are benefits and drawbacks associated with both in-house payroll and third-party payroll service providers. Here are some of the main advantages of these options:
In-House Payroll
- Control – Since your payroll system is managed internally, you’ll have more control over how your employees are paid and how business is handled.
- Affordability – Depending on how large your company is, dividing its payroll processing costs among multiple internal workers can be cheaper than hiring a third-party payroll service, as it lowers the price per check and per employee.
- Security – The fewer outside parties have access to your company records and finances, the safer your business will be overall. Establishing a well-managed internal payroll system can reduce the risk of data breaches.
Third-Party Payroll Services
- Speed and Efficiency – Despite the fees you may encounter, buying a legitimate software or hiring a solid company to help manage your payroll can be more convenient than building and overseeing an internal payroll system.
- Simplicity and Accuracy – Some outsourced payroll solutions require minimal information to get your system set up. Just give them a rundown of your payment schedules, HR functions and benefit structures, then watch the checks roll out.
- Compliance With Payroll Regulations – If you hire an experienced and highly rated payroll service, they should be fully compliant with Canada’s related laws, whereas a poorly designed payroll system can get your business in legal trouble.
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READ ARTICLEBest Payroll Services In Canada
If you’ve decided to save time and ensure greater accuracy in rolling out your payroll, take a look at some of these great Canadian payroll software providers.
Wave Accounting/Wave Apps
Launched in 2010, Wave Financial is a business service provider based in Toronto. Their company offers several top-quality solutions, like Wave Payroll, which easily integrates with Wave Accounting; a free software and app for computers or mobile devices. Features of the Wave Payroll and Wave Accounting combination include:
- Automatic tax remittances. Automating remittances in a timely fashion ensures you don’t forget to report and you don’t incur any late penalties.
- Automatic payroll journal entries. Helps reduce the amount of time you need to spend on manual bookkeeping.
- Employee access. Wave is applauded for its easy-to-use software for employees to report their time and attendance and to access their pay stubs, banking information, and tax documents.
- Payroll employee and contractor. Wave allows you to issue payroll to both employees and contractors with their flexible service.
- Direct deposit. You can pay employees directly by depositing funds in their bank account.
- T4/T4A tax forms. Users can easily generate T4 and T4A slips and summaries.
Wave Financial Price
- Accounting and Invoicing Software = $0 (no setup, hidden or monthly fees)
- Payroll = $20 base fee + $6 per active employee + $6 per independent contractor
- Payment Processing =
- 2.9% + $0.30 per Visa/Mastercard transaction
- 3.4% + $0.30 per American Express transaction
- 1% per bank/EFT payment ($1 minimum transaction fee)
Wave Financial Offer
- 30-day free trial
QuickBooks Online (QBO)
QuickBooks Online is a payroll software sold by a financial management platform called Intuit; a long-standing company that was founded in 1983 and now owns many other websites, like Turbotax, Credit Karma, Mint and Mailchimp. Currently, QBO is available for Mac, PC, smartphone or tablet and comes with these kinds of features:
- Track time: Quickbooks offers an add-on timesheet feature that allows employees to fill out their attendance. Then, the payroll software auto-populates the data to save you time in data entry.
- File taxes: The software calculates taxes for you and allows you to track your CRA deductions; however, you’re still responsible for remitting the deductions.
- Payroll forms: Quickbooks prepares T4 and RL-1 forms and assists you with calculations needed to complete a Record of Employment.
- Employee portal: Employees can easily access and track their pay stubs, vacation, and year-end tax forms.
- Multiple customer invoicing options. Apple Pay, Visa/Mastercard, Discover, etc.
- Mileage tracking. Employers, employees, and clients can track and deduct driving costs.
QuickBooks Price
- EasyStart = $6.60/month for the first 3 months ($22/month after)
- Essentials = $13.20/month for the first 3 months ($44/month after)
- Plus = $19.80/month for the first 3 months ($66/month after)
- Self-Employed = $4.50/month for the first 3 months ($15/month after)
QuickBooks Offer
- 50% off the first three months of membership
Simple Pay Canada
If you want easy, Canadian-made accounting software that’s compatible with other business services (including QuickBooks), Simple Pay is a new workforce management platform based in Mississauga. They specialize in payroll and contractor payments for small to medium businesses and offer a range of options and add-ons, including:
- Tax remittance: Complies with tax and remittance rules by automatically remitting source deductions every month, to save yourself the hassle.
- Timesheet: Ensures accuracy in pay by keeping meticulous records of attendance.
- API ready: This allows for seamless integration with other HR and employment systems.
- Customizable: Increased flexibility and customization lets you generate mapping options to adjust payroll as needed.
- Business Payments: Allows for direct deposit payments to employees, contractors, and the Canada Revenue Agency.
Simply Pay Price
While Simple Pay has fair and transparent pricing, the cost of your payment plan depends on which options you choose, the size of your company payroll and the number of pay runs you want (fees are charged per payroll). Here’s an example:
- Your business has 20 employees and needs 24 semi-monthly pay runs
- Cost Per-Payroll = $30.00
- Annual Cost = $720.00
- +$5.00 for automated remittances
- +$3.00 for automated ROE
- +$1.50 for contractor payments
Check out Simple Pay’s business payroll calculator for an accurate estimate of pricing.
ADP Workforce Now
ADP has been providing business solutions globally for over 70 years. Their most popular program, ADP Workforce Now is a payroll processing software geared toward small and medium businesses, with an emphasis on HR services (but ADP also offers plans for larger companies). They offer a number of features including:
- Built-in tax management and compliance expertise: This saves you the trouble of ensuring compliance with federal laws around payroll.
- Process payroll online: Simple online database with the ability to see real-time calculations before submission.
- Insightful Dashboard: Displays analytics to help business owners make evidence-based decisions, as well as T4s, attendance and other information for employees.
- Benefit and insurance plan – Benefits and insurance plans are available for employees, groups and businesses.
- Help Finding Talent – Talent recruiting, management and activation tools are also available to help you find new employees.
ADP Workforce Now Price
ADP offers many options and caters to companies with larger payrolls, so your service plan may vary in cost. However, you just have to visit their website, book an appointment and request a quote to find out about pricing for your business’s payroll.
ADP Workforce Now Offer
- First two months free
Rise People
Rise People offers a user-friendly HR software that covers payroll, benefits, company culture, and performance management. This software offers unique reporting to help you understand your business’s finance and HR patterns. Rise People offers a variety of features including:
- Automate Payroll: Automation saves you time by taking care of T4s, remittances, discrepancies, benefits, and ROEs.
- Taxes: Assured compliance with tax laws and the Employment Standards Act.
- Time and Attendance: Timekeeping software ensures accuracy in attendance recording, and allows for real-time staff scheduling.
- Payroll Reports: Clear, extensive and exportable reporting helps you understand your business’ finances.
- Customization: Update and change information at your convenience and adjust payroll as needed.
Rise People Price
- Send Rise a message for pricing inquiries.
Disadvantages Of In-House Payroll vs Third-Party Payroll Services
When choosing a payroll service, consider these drawbacks too:
In-House Payroll
- Time – Depending on how established your business is, it can take a lot of hours, money and effort to create a payroll system. You must account for costs like staff salaries, onboarding and the price of whatever accounting software you’re using.
- Mistakes – It can also be tough to find a qualified professional or team to handle your payroll responsibly. Letting payment or tax errors slip by may be considered non-compliance, which could lead to financial and legal problems later on.
- Complications – Some payroll systems are complex, particularly when HR, employee scheduling, time tracking and benefit functions must be integrated. So, you may have to devote more expertise, work, and funds to get going.
Third-Party Payroll Services
- Costly – Outsourcing your payroll can be more expensive than doing things in-house. Most payroll services charge per payroll or per employee, which can make sense for some companies depending on their size.
- Security Concerns – Unfortunately, since your payroll information has to pass through another set of hands, there’s a greater chance of that information getting misused or hacked.
How To Choose A Payroll Service That’s Right For Your Business?
Before you select a payroll service, take these factors into account:
- Cost – Some providers offer multiple payroll plans with flat rates, others charge per-option or client, so get a quote and weigh it against your business budget.
- Accuracy – Whether you’re outsourcing your payroll or handling it in-house, ensure that the service you’re using has high accuracy.
- Compliance – Ensure the payroll service you use complies with federal or provincial payroll laws as failure to comply could result in severe consequences.
- Company Size – The larger your business is, the more, time, work and money you’ll have to put in to design a flawless payroll system. Sometimes it may be better to hire an outside source.
- Security – Your business data is another place to take precautions. Don’t choose a payroll service or software until you’re 100% certain it’s legitimate.
- Customer Support – A payroll service is only as good as the team running it. Fast or, ideally, real-time assistance is very important for your payroll.
Canadian Payroll Laws
As an employer, you have responsibilities toward your employees and business. Additionally, you (and in some cases, the trustee/payer) are required to:
Create And Maintain A Payroll Account
You can register for a payroll account by meeting certain government conditions, like being an employer who needs to:
- Pay wages, salaries, tips, gratuities, bonuses or vacation pay
- Provide employee benefits or allowances
- Report, remit and deduct other forms of remuneration (pension, etc.)
Obtain Your Employee’s Social Insurance Number
Anyone who wants to legally work for a Canadian business must give their employer a valid SIN. Every employee you employ must give you their SIN number.
Fill Out The Appropriate Forms
You must complete a federal Form TD1, Personal Tax Credits Return and a provincial or territorial Form TD1 (if applicable). New employees or recipients of other amounts of income, like pensions, must fill out these forms.
Make Deductions
Be sure to deduct CPP contributions, EI premiums and income tax from remuneration or other amounts (allowances, etc.) that you pay within a pay period.
Remit Deductions
Don’t forget to remit the employee payroll deductions above, as well as your share of any CPP contributions or EI premiums.
Report Your Employee’s Income and Deductions
Using the appropriate T4 or T4A slips, you must file an information return for each employee, on or before the last day of February of the following calendar year. If one of your employees ceases working and has their earnings interrupted, draw up a Record of Employment (ROE).
Payroll Service FAQs
Do I need to set up a payroll with the CRA?
As an employer, you have to register for a payroll program account before your first remittance date. This account identifies your business to the CRA and is assigned to employers, trustees or other entities that pay employees.
To register, visit the CRA website and fill out the required details under “Payroll”. You’ll then receive a 15-digit payroll account number that’s unique to your business.
When are the remittance dates for payroll tax deductions?
Payroll remittance dates for tax deductions usually fall on the 15th day of the month after employees are paid. The frequency at which you must report will vary based on your average monthly withholding amount (AMWA), as well as the remittance threshold for your source deductions. For example, a Regular Remitter (less than $25,000) must report on or before the 15th day of each month. While a Quarterly Remitter (less than $1,000 and less than $3,000) must report quarterly by April 15, July 15, October 15, January 15.
Do I need to make payroll deductions?
Yes, if you qualify as a trustee, employer or payer of other employment amounts, you must register for a payroll program account and follow any federal or provincial/territorial requirements you’re assigned, including tax or income deductions. Once again, you can visit the CRA website for more information.
How do I set up payroll with the CRA?
To set up payroll with the CRA, you are required to set up a CRA payroll deductions program account. If you’re already signed up for another CRA program account and have a business number (BN), you can simply add a payroll deductions account to your existing account. However, if you haven’t signed up for a business number (BN), you’ll need to register for one to open a payroll account. You can register online for a business number, over the phone (1-800-959-5525), or via the mail by mailing Form RC1, Request for a Business Number to a tax service office (TSO) or tax centre (TC).
What happens If I report my remittance late?
If you report your remittance late, you’ll face penalties. If you’re late by one to three days, you’ll face a 3% penalty on the amounts due. If you’re late by four or five days, you’ll face a 5% penalty. If you’re late by six or seven days, you’ll face a 7% penalty. Finally, if you’re late by more than one week, or if you don’t remit any amount at all, you’ll face a 10% penalty.
Bottom Line
Luckily, there are many good payroll softwares and providers to choose from in Canada. Just be sure to do research beforehand and go with a trustworthy company. Remember, your payroll is one of your business’s most important aspects, so it’s essential to report all of its information accurately to avoid future problems with the Canada Revenue Agency.
