My Experience Business Owner in Quebec
A Canadian/Quebec business owner’s, understanding how to run payroll is an essential part of ensuring my employees' pay is accurate and timely. An accurate and timely payment of salary is important. However, the question of how to run payroll is not completely answered without adherence to various laws and regulations guiding the process.
Failure to adhere to these laws and legislations can lead to serious legal and financial consequences for your business.
To keep my employees happy and my business afloat while making sure I am also law compliant and must understand what payroll is and the basics of how to run payroll efficiently. Also, there are various methods of running payroll as a business owner in Canada/Quebec. So, in webpage and before getting to the specific of calculating pay, I will explain some of these methods on how to effectively run payroll in in these jurisdictions—Canada/Quebec.
Failure to adhere to these laws and legislations can lead to serious legal and financial consequences for your business.
To keep my employees happy and my business afloat while making sure I am also law compliant and must understand what payroll is and the basics of how to run payroll efficiently. Also, there are various methods of running payroll as a business owner in Canada/Quebec. So, in webpage and before getting to the specific of calculating pay, I will explain some of these methods on how to effectively run payroll in in these jurisdictions—Canada/Quebec.
Recall the Definition of Payroll
In my research on payroll, I discovered that it means a business paying its employees. It is the sum of all compensations a business must pay its employees for a set period or on a given date. For a small business, this may entail distributing money in the form of paycheques or direct deposits to employees' accounts.
For larger firms, the process tends to be more cumbersome. It generally includes tracking hours worked, calculating each employee's pay, bonuses, taxes, overtime pay, sick time, vacation pay, and the final payment distribution. Payroll may also refer to the list of business employees and the amount paid to each as wages, compensation, or salary. It gives an index of the total workforce and the cost of that workforce.
I discovered, no matter the size of a business, payroll is usually a major expense, and as such, it is almost always deductible from the business gross income. Thus, lowering the company’s final taxable income when final taxes are computed for the business.
For larger firms, the process tends to be more cumbersome. It generally includes tracking hours worked, calculating each employee's pay, bonuses, taxes, overtime pay, sick time, vacation pay, and the final payment distribution. Payroll may also refer to the list of business employees and the amount paid to each as wages, compensation, or salary. It gives an index of the total workforce and the cost of that workforce.
I discovered, no matter the size of a business, payroll is usually a major expense, and as such, it is almost always deductible from the business gross income. Thus, lowering the company’s final taxable income when final taxes are computed for the business.
Ethics Insight
The recent scandals in corporate reporting have made people more and more skeptical about business ethics. Because the scandals have been frequent and have received a lot of attention, it is not surprising that the senior executives of most companies today say that they feel lot of personal pressure to show strong ethical values in their behaviour. But are they doing so? It seems so, according to a recent global study.
In this study of 365 companies in 30 countries. 90 percent of the companies specify in a formal statement of corporate values that ethical conduct is important to them. Further, these companies believe that the behaviour of management is critical for creating the appropriate "tone at the top." Chris Kelly, one of the authors of the study, explains: "Ethics-related language formal statements not only sets corporate expectations for employee behaviour, but companies are also using as a shield in an increasingly complex and global legal and regulatory environment."
In this study of 365 companies in 30 countries. 90 percent of the companies specify in a formal statement of corporate values that ethical conduct is important to them. Further, these companies believe that the behaviour of management is critical for creating the appropriate "tone at the top." Chris Kelly, one of the authors of the study, explains: "Ethics-related language formal statements not only sets corporate expectations for employee behaviour, but companies are also using as a shield in an increasingly complex and global legal and regulatory environment."
Setting up My Company's Quebec Payroll?
Setting up payroll for a new or growing business is very vital. The following are some easy steps that helped me on how to run payroll effectively under both Canadian and Quebec guidelines:
Registration with government agencies
Before I could even consider hiring employees or even consider paying them, I had to first register my company in Quebec and receive a valid business number as well as a payroll account. At the same time, I had to also register with the federal for in order to legally withhold federal mandatory deductions from the employees’ pay.
By doing this it would allow me to remit statutory deductions such as federal income taxes, employment insurance for the federal government and Quebec income taxes, QPP and QPIP to the Ministere du Revenu du Quebec.
Another important registration is that a business must also register with or pay contributions to the Commission des normes, de l'équité, de la santé et de la sécurité du travail (CNESST). Even if, the company has at least 1 worker, it must register with the CNESST within 60 days of the arrival of the first worker. In addition, it also must register with the Quebec Ministry of Finance for health tax remittance.
Registration with government agencies
Before I could even consider hiring employees or even consider paying them, I had to first register my company in Quebec and receive a valid business number as well as a payroll account. At the same time, I had to also register with the federal for in order to legally withhold federal mandatory deductions from the employees’ pay.
By doing this it would allow me to remit statutory deductions such as federal income taxes, employment insurance for the federal government and Quebec income taxes, QPP and QPIP to the Ministere du Revenu du Quebec.
Another important registration is that a business must also register with or pay contributions to the Commission des normes, de l'équité, de la santé et de la sécurité du travail (CNESST). Even if, the company has at least 1 worker, it must register with the CNESST within 60 days of the arrival of the first worker. In addition, it also must register with the Quebec Ministry of Finance for health tax remittance.
Collection of Employees' Information
To run payroll efficiently, business I would need some information from my employees. These are basic details and generally include the following:
- Name
- Address
- Phone number
- Date of birth
- Date of employment
- Social Insurance Number (SIN)
- Amounts to be paid
- Type of payment, i.e., salary or hourly
- Deductions
- Accruals (bonuses, vacation)
- Bank account details for direct deposit
Computation of Wages and Tax Deductions
An employee's gross wages are the amount paid to each employee before any deduction, such as taxes and retirement contributions. This can be expressed per hour, per period, or year. Furthermore, if there and taxable benefit, they must be included in the calculation of gross wages. A taxable benefit is anything a business provides for employees on top of their wages. It may include a car, parking cost, lodging, cell phone, etc.
As a business owner I am also responsible for remitting a portion of employee wages as taxes and contributions to the appropriate bodies. Various deductions on the CRA payroll include federal income tax, p, Canada Pension Program (CPP), Employment Insurance (EI) premiums, Registered Retirement Savings Plan (RRSP) contributions. In the case of companies operating in Quebec they have to remit to Revenue du Quebec, provincial income taxes, Quebec Pension Plan (QPP), Quebec Parental Insurance Plan (QPIP) and Quebec Health Service Plan (QHSF).
As a business owner I am also responsible for remitting a portion of employee wages as taxes and contributions to the appropriate bodies. Various deductions on the CRA payroll include federal income tax, p, Canada Pension Program (CPP), Employment Insurance (EI) premiums, Registered Retirement Savings Plan (RRSP) contributions. In the case of companies operating in Quebec they have to remit to Revenue du Quebec, provincial income taxes, Quebec Pension Plan (QPP), Quebec Parental Insurance Plan (QPIP) and Quebec Health Service Plan (QHSF).
Payroll Reconciliation & Issuing Paycheques
Payroll reconciliation helps balance the current payroll to the payroll recorded in the general ledger. It helps eliminate payroll errors before they occur. This ensures that employees' payments are as accurate as possible.
How Often Do I Run Payroll?
I discovered that one of the most asked questions apart from how to run payroll is how often it should be done. To determine how often a business will pay its employees, management must consider the nature of the business and the cash flow cycle.
However, it would be best to keep a consistent schedule as employees will not be happy with a haphazard scheme of payment. Various scheduling options management may consider when deciding how often to run payroll include:
This is extremely important for business owners to know. Before a business register business for payroll, they should have an idea of their payroll frequency that they would be using.
This is extremely important for business owners to know. Before a business register business for payroll, they should have an idea of their payroll frequency that they would be using.
The two most common frequencies for payroll are:
The very short version of how to decide on frequency is:
Now I will explain it more thoroughly by going into some pros and cons of each.
Bi-Weekly Pay Periods (Every Two Weeks)
Pros
For hourly employees, this method makes it easier to remember the dates for which they are being paid. Typically, hourly employees are paid with a one-week delay.
Cons
Because of bi-weekly can cause three pay periods in one month, specialists recommend semi-monthly when employees are paid on salary. However, if employees are paid hourly, then bi-weekly makes tracking hours easier.
Semi-Monthly (Twice Per Month)
Paying employees twice per month makes the administration more difficult when paying hourly employees, but it is the preferred method when all employees are paid by salary.
Pros
Cons
Monthly
It is a rare payment schedule. It is good for you if most of your workers work on a commission basis.
However, it would be best to keep a consistent schedule as employees will not be happy with a haphazard scheme of payment. Various scheduling options management may consider when deciding how often to run payroll include:
This is extremely important for business owners to know. Before a business register business for payroll, they should have an idea of their payroll frequency that they would be using.
This is extremely important for business owners to know. Before a business register business for payroll, they should have an idea of their payroll frequency that they would be using.
The two most common frequencies for payroll are:
- Bi-weekly (every two weeks) Semi-monthly (twice per month)
The very short version of how to decide on frequency is:
- If a company has any employees paid hourly use bi-weekly.
- If a company only has employees paid by salary, use semi-monthly
Now I will explain it more thoroughly by going into some pros and cons of each.
Bi-Weekly Pay Periods (Every Two Weeks)
- This is the most used payment schedule. It is easier to use and manage irrespective of the business's size or the payment type management has adopted (hourly or salary). Workers receive their pay every two weeks and on the same day of the week every time. This is usually every second Friday. A downside is that some months can have three paydays, and this may affect cash flow.
Pros
- Employees are paid on the same day of the week every time (often every second Friday). Easy for them to remember “Yes! Friday is payday!”
- Employees are paid slightly more frequently (every 14 days instead of every 15-16 days). This can help employees’ cash flow by reducing the time period between paycheques.
For hourly employees, this method makes it easier to remember the dates for which they are being paid. Typically, hourly employees are paid with a one-week delay.
Cons
- Twice per year there will be a month that includes three pay periods. If your business has a monthly cycle for revenue, this can create cash flow problems on those months. It also makes consistent financial reporting more difficult comparing one month’s results to another.
Because of bi-weekly can cause three pay periods in one month, specialists recommend semi-monthly when employees are paid on salary. However, if employees are paid hourly, then bi-weekly makes tracking hours easier.
Semi-Monthly (Twice Per Month)
Paying employees twice per month makes the administration more difficult when paying hourly employees, but it is the preferred method when all employees are paid by salary.
Pros
- There are only two pay periods each month. This helps keep the cash flow predictable and will make it much easier to compare monthly financials.
- Pay days are always on the same day of the month (usually 15th. and last). This can help employees plan for monthly expenses such as rent or mortgage payments.
Cons
- Paydays occur on different days of the week because they are attached to numbered dates (15th. and last day of the month for example). There is no set day of the week that employees can remember as payday.
- For hourly employees, it is more difficult to keep track of what hours are included in which pay period.
Monthly
It is a rare payment schedule. It is good for you if most of your workers work on a commission basis.
Choose the Method of Processing-Payroll
Should I run payroll myself, use payroll software, or something else?
No one answer fits all situation on how to run payroll. A business can decide to run its payroll manually, use payroll software or outsource to professional payroll service providers. Again, one must consider the nature, size of your business, and the technical knowledge required.
The manual method makes use of ledgers and cheques or e-transfer. This is usually prone to mistakes and errors in processing payroll as someone must calculate all the deductions and it’ would be management’s responsibility to take of all federal and provincial remittances.
This can be annoying for both the business owners and their employees when mistakes occur, and employees are not paid accurately.
Furthermore, the business owner, may face stiff penalties from the federal and provincial agencies when such mistakes happen. Therefore, unless there are skilled employees in the company, and it is just small, it is better to use payroll software.
Payroll software offers automatic calculations and remittance of all necessary payroll deductions. Employees can also be paid via direct deposits. All that is required, to input wages and hours worked, and the software uses this information to perform calculations and deduct withholdings automatically.
Another advantage is that most payroll software systems are updated when there are tax laws changes and will alert you to file for certain tax reforms. An example of such a software system is Sage 50 Pro Accounting with Payroll. This software like many others, can pay staff accurately and on time with great speed and efficiency with just one click of the mouse.
Another option available to you is to have someone who already works for you and with the requisite skills to run your payroll or engage professionals' service. These professionals also help produce various reports that simplify accounting procedures and ensure your business complies with all necessary laws and taxes.
The manual method makes use of ledgers and cheques or e-transfer. This is usually prone to mistakes and errors in processing payroll as someone must calculate all the deductions and it’ would be management’s responsibility to take of all federal and provincial remittances.
This can be annoying for both the business owners and their employees when mistakes occur, and employees are not paid accurately.
Furthermore, the business owner, may face stiff penalties from the federal and provincial agencies when such mistakes happen. Therefore, unless there are skilled employees in the company, and it is just small, it is better to use payroll software.
Payroll software offers automatic calculations and remittance of all necessary payroll deductions. Employees can also be paid via direct deposits. All that is required, to input wages and hours worked, and the software uses this information to perform calculations and deduct withholdings automatically.
Another advantage is that most payroll software systems are updated when there are tax laws changes and will alert you to file for certain tax reforms. An example of such a software system is Sage 50 Pro Accounting with Payroll. This software like many others, can pay staff accurately and on time with great speed and efficiency with just one click of the mouse.
Another option available to you is to have someone who already works for you and with the requisite skills to run your payroll or engage professionals' service. These professionals also help produce various reports that simplify accounting procedures and ensure your business complies with all necessary laws and taxes.
What is Payroll Processing?
What Should I Do?
Another great discovery is payroll processing entails everything I have discussed so far. In other words, it is the entire process from inputting employee details into your payroll manually or using software to the actual issuance of paycheques.
Since the workforce's payment is a critical part of business, its importance cannot be understated. Here are seven things that should do to ensure a hitch-free payroll process.
Since the workforce's payment is a critical part of business, its importance cannot be understated. Here are seven things that should do to ensure a hitch-free payroll process.
- Plan and create a payroll policy: This is the first thing must be done. Businesses must determine and establish a standard payment policy, leave, and benefits policy, attendance policy, etc. While doing this, there must consideration provincial laws, and federal labor laws. Things to include in their pay policy include pay dates, frequency of payment, and how employees would be paid- by direct deposit or via paycheques.
- Choose a convenient payroll system: There are three main payroll systems you can choose from; manual payroll, outsourced payroll, and payroll software. The pros and cons of each are already discussed. But before choosing any of these systems, you must consider factors such as business size, growth, employee benefits, expertise, and the complexity of calculations required.
- Gather necessary information: Before management begins processing payroll, they need to gather some documents which government agencies may require. These include federal and provincial TD1 and TP1 forms. These documents will give each employee's personal information, social insurance number, and tax filing status. If the company intend to include things like health insurance and retirement savings for its workers, it need documents showing approved additional deductions. Finally, if the business wants to pay via direct deposit, the workers’ would have to consent and supply their banking information.
- Set up direct deposit: The direct deposit is usually used because of its convenience for business owners and workers. This can easily set this up through the business’ bank or payroll service provider. The bank or payroll software will require your employees' banking details to facilitate direct pay.
- Set up a time tracking system: if a company decides to pay hourly, it will need to maintain an accurate record of work hours for its employees. It can do this manually by asking employees to sign in and out every workday. It might also use time tracking software for this purpose. At the end of each pay period, all that has to done is to transfer the accumulated work hours to your pay record. If the company uses tracking software, it just has to import this information to it payroll software.
- Validate and submit payroll: This is especially important to payroll for hourly employees. Management must ensure that all hours worked are correctly computed so that each employee's pay is accurate. Once this is done and has have given approval, the final piece on how to run payroll jigsaw is in place. After which, wages can be issued to each employee.
- Report and update records: After completing payroll for each month, a payroll report should be properly documented. The report should include the details of all deductions and tax contributions from each employee's wage. Management should also update payroll records at intervals taking into consideration changing laws and regulations.
What are payroll deductions, payroll remittance, and payroll taxes?
Payroll deductions are withholdings removed from employees' wages for taxes and other contributions. In Canada, it is required of you as an employer to withhold source deductions such as Canada Pension Plan (CPP), Employment Insurance (EI), and income tax from employees' pay and remit them to the CRA at regular intervals. Likewise in Quebec, employers are required to withhold source deductions such as Quebec Pension Plan (QPP), Employment Insurance (EI), both federal and provincial income taxes, and Quebec Parental Insurance Plan (QPIP) from employees' pay and remit them to the CRA and Minster du Revenue du Quebec respectively--at regular intervals.
This must be done properly because penalties are attached if remittance is not made on time or if errors are made.
The CPP/QPP the Employment Insurance EI and QPIP all three have two parts. A part is deducted from the employee's pay, and the employer contributes the other part. For the income tax, it is only deducted from the employees' pay.
There is an annual maximum amount for each of these deductions, and contribution stops when the amount is reached Besides income tax, federal and provincial taxes also have to be calculated and paid to the CRA and Ministere du Revenu du Quebec.
Payroll remittance is usually paid monthly. The due date is usually the 15th. of the following month. For example, the deductions from August will be due on or before the 15th. of September. It will help if you keep an eye out for due dates not to have late payroll remittances.
This must be done properly because penalties are attached if remittance is not made on time or if errors are made.
The CPP/QPP the Employment Insurance EI and QPIP all three have two parts. A part is deducted from the employee's pay, and the employer contributes the other part. For the income tax, it is only deducted from the employees' pay.
There is an annual maximum amount for each of these deductions, and contribution stops when the amount is reached Besides income tax, federal and provincial taxes also have to be calculated and paid to the CRA and Ministere du Revenu du Quebec.
Payroll remittance is usually paid monthly. The due date is usually the 15th. of the following month. For example, the deductions from August will be due on or before the 15th. of September. It will help if you keep an eye out for due dates not to have late payroll remittances.
How do I calculate payroll deductions, payroll remittance, and payroll taxes in Canada?
Calculating payroll remittance depends on the type of payroll system you are using, a manual payroll system or payroll software.
If you are using a software system, the payroll deductions and remittance will be computed automatically. The software withdraws the necessary deductions from your business account and remits them to the CRA for you. This is not only efficient; it is also timesaving and requires little to no effort.
Consequently, if you handle the company is handling its payroll, it will have to make the deductions manually and send the payment to the CRA and MRG by mail or setting up by account on the websites.
If you are using a software system, the payroll deductions and remittance will be computed automatically. The software withdraws the necessary deductions from your business account and remits them to the CRA for you. This is not only efficient; it is also timesaving and requires little to no effort.
Consequently, if you handle the company is handling its payroll, it will have to make the deductions manually and send the payment to the CRA and MRG by mail or setting up by account on the websites.
How Do I Pay My Employees?
There are three ways you can use in making payments to your employees. These are:
- Use of paycheques: This is the traditional method commonly used in the past. Although it is giving way for more tech-enabled means, it is still in use by some employers.
- Direct deposit: Electronically transfers payment from the business account to the employees' bank account. It is fast and easy to use.
What Are T4 and RL1 Slips?
How Do They Relate To Payroll?
T4 and RL1 are a group of income tax forms that summarizes employees' earnings and deductions for each year. It is usually due in February, and it contains information for the previous year. It can be done electronically or by using paper slips.
These forms are to be filled by the company and subsequently submitted to the CRA and MRQ before the due date. The employer, also have to fill a summary form that accounts for all employees' earnings and deductions.
Penalties are attached to late submissions and errors in filling the report. Hence, you must ensure diligence while filing it or, better still, use software or professionals to do this.
These forms are to be filled by the company and subsequently submitted to the CRA and MRQ before the due date. The employer, also have to fill a summary form that accounts for all employees' earnings and deductions.
Penalties are attached to late submissions and errors in filling the report. Hence, you must ensure diligence while filing it or, better still, use software or professionals to do this.
How Can I Run My Payroll The Easiest Way?
The long hours business owners/management will spend doing all the required calculations and the steep price to pay for errors is why they should follow the following steps to make preparing their payroll easier.
- Use a unified pay period: If they decide to use the biweekly or semi-monthly schedule, stick with it across the board. Paying some workers weekly, others biweekly, and others semi-monthly will complicate your payroll.
- Use payroll software: The automated nature of payroll software saves a lot of time and effort. It also reduces redundancy and improves compliance with all necessary regulations.
- Synchronize the payroll platform with other processes: Using the right payroll software, a company can integrate its payroll with other processes such as work time tracking, report writing, and the creation of accounting ledgers.
- Monitor current regulatory requirements: this will help a company avoid costly penalties and aid compliance. Tax laws and regulations regarding payroll are ever-changing.
- Work with a professional: payroll service providers can handle all aspects of a business’ payroll while focusing management’s time and energy on other important aspects of the business. The extra charge is worth every penny, considering the price it will have to pay for errors and non-compliance.
Conclusion
As I indicated, there is no one-size-fits-all approach when figuring out how to run payroll. First, start by looking at the business size, the budget, and the number of staff the business is paying.
Is the company running a small business with a small team? Figuring out how to run payroll does not have to be hard. Payroll software to keep things organized, save time, and take away the headaches of running a payroll of a large team.
Is the company running a small business with a small team? Figuring out how to run payroll does not have to be hard. Payroll software to keep things organized, save time, and take away the headaches of running a payroll of a large team.