Small companies account for more than 98% of all businesses in Canada. They are distinguished from large companies by the number of people they employ and not necessarily by revenues or sales. Large businesses boast 500 employees or more. But if you employ fewer than 100 people, you’re a small business owner with an enormous responsibility for paying employees correctly, on time, and in compliance with employment standards and legislation.
As most businesses grow, they might seek to increase their employee count. However, most growing businesses are unable to afford a human resources team. To meet their payroll responsibility, some business owners will elect to either pay their staff and manage payroll deductions themselves or assign these payroll tasks to a relative.
Even though payroll might seem straightforward, you should still have someone familiar with the payroll legislation to handle your payroll. If you have someone unfamiliar with the payroll legislation to do your payroll, you are increasing the risk of fines and penalties.
If you’re a BC-based small business owner with new employees - and you’ve decided to handle payroll yourself - this article will help you understand what you need to do for payroll and how to get started doing it.
When and How to Pay Your Employees
Paying your employees accurately and on time is the foundation of a compliant payroll practice. Consulting both the federal and provincial employment standards should determine payment amounts and timeframes. Those standards must also be reflected in any employee contracts you enter into.
Government legislation is in place to ensure employees are paid fairly. So, you must stay up to date and conform to all employment standards, including those for:
- Minimum wage,
- Vacation and termination pay,
- Statutory holiday pay and
- Pay structures for standard, overtime, and emergency work hours
You may need to consider some employment agreements when establishing your payroll system. Some of these documents will be driven by the nature of your business - others are set out by unions.
Employee Agreements
While the Canada Revenue Agency (CRA) doesn’t require signed employee agreements, your business may find them valuable for formalizing the exact terms of an employee’s:
- Salary, hourly wage, or commission,
- Work hours and job duties,
- Probationary period, and
- Employee benefits
Employee agreements can help you avoid payment misunderstandings down the road. But they must adhere to federal and provincial employment laws.
Averaging Agreements
In some businesses, an averaging agreement is signed by the employer and employee that permits the number of hours worked over one, two, three, or four weeks to be averaged out. This does away with the need to calculate and pay overtime for hours covered by the agreement when you’re processing payroll.
Employee Benefits Agreements
According to the CRA, employee benefits include anything personal in nature that you pay for or provide to an employee or their family member. Benefits can include allowances, reimbursements, or the use of your business's goods, services, or property. Examples of employee benefits include:
- Meals,
- Cell phones,
- Company vehicles, transit passes, or parking permits
- Group insurance premiums,
- Childcare expenses, and
- Recreational memberships
You must understand which employee benefits will result in a tax filing and which are non-taxable.
Union Agreements
If your employees are unionized, they may have a collective agreement that includes additional employment standards. In many cases, unionized employees will request that you deduct and remit part of their wages to a third party as union dues.
Employment Standards Overview
Every employee you hire must be offered at least the minimum work standards legislated by the federal and provincial governments.
In addition to the standards set out for things like minimum wage, overtime, and vacation pay, employment laws also dictate employee termination requirements and the timing of payments.
For example, as an employer, you must run payroll at least twice a month by choosing a frequency of bi-weekly or semi-monthly pay period. In either case, employee pay periods cannot be longer than 16 days.
At the same time, all the money your employees earn – whether it includes standard pay, overtime, or statutory holiday pay – must be paid within eight days following the end of the pay period. If your business banks annual vacation pay or wages on behalf of employees, those amounts do not need to be paid within the pay period.
You should also be aware that if you employ hourly staff that work more than 8 hours a day, BC employment standards for overtime state that you must pay each extra hour at 1.5 times an employee’s regular rate.
Employees are paid double time for hours worked over 12 hours a day. A weekly overtime rate of 1.5 times the regular rate also applies to employees who work more than 40 hours a week. Only the first 8 hours worked in a day count toward weekly overtime.
Need a professional to manage your payroll?
Let's talkChoosing the Right Payroll System or Service
The most efficient way to pay employees is with the help of an online payroll system or service. The complexity of your payroll process will determine the payroll system you need. Here's what you should consider when it comes to choosing the right payroll system:
- The number of employees you have,
- Your mix of hourly wages and salaries,
- Whether you work with contractors or commission-based employees, and
- How frequently you have to manage employee expense claims, allowances, or overtime
Accounting software designed for small business payroll can calculate employee pay and payroll deductions. Many systems will even complete the appropriate payroll tax forms.
But you'll typically need to make payments yourself if you choose a payroll application like QuickBooks Online, Ceridian, Wagepoint, Payworks, or Rise. You should also note that all of these platforms are cloud-based. Cloud payroll solutions reduce manual data entry and are the best way to streamline your payroll process.
You might consider outsourcing your payroll if you’re uncomfortable using accounting software or are too busy running your business to learn how. Third-party payroll providers like Enkel offer end-to-end payroll service, taking payroll tasks off your hands.
What to Expect from Your Payroll System
Taking advantage of an automated payroll system will ensure your employee payments are made accurately and on time. The right payroll software can help you:
- Calculate and remit most payroll deductions, including Canada Pension Plan (CPP) contributions, Employment Insurance (EI) payments, and income tax deductions,
- Generate T4s at the end of the year and ensure employees receive them on time,
- Fulfil employee termination requirements by generating and filing Records of Employment (ROEs) with Service Canada
Many small business owners also opt for the convenience of direct deposit payroll instead of processing paper cheques themselves. With direct deposit, your employees simply provide their banking information, and you use a system like QuickBooks payroll to electronically transfer their pay to their personal bank accounts.
Setting up employee payroll and staying abreast of what small business owners must do throughout the year can be an ongoing challenge. If you’re not planning to hire an in-house accountant or bookkeeper, outsourcing to a full-service payroll management expert may be well worth considering.
At Enkel, we provide business owners and non-profit organizations with reliable Payroll management services, giving you peace of mind as you focus on doing what you do best. Contact us today to learn more about how we can help you streamline and manage your payroll process. Whether you're based in Vancouver, Victoria or Kelowna, we can help you manage your payroll so you can focus on growing your business.