BC Small Business Payroll – Everything You Need to Know

Small companies account for more than 98% of all businesses in Canada. Company size is often determined by the number of people they employ, not necessarily by revenues or sales. Large companies have 500 employees or more. But if you employ fewer than 100 people, you’re a small business owner. You are responsible 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 but cannot 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. Having someone unfamiliar with the payroll legislation do your payroll increases 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 - we will help you understand what you need to do for payroll and how to get started.

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. Any employee contracts you enter into must reflect those standards.

Government legislation is in place to ensure employers pay their employees 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 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 between the employer and employee 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 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.

Choosing 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 transfer their pay to their personal bank accounts electronically.

Must-Have Features of a Payroll System for Small Businesses and NPOs

When selecting a payroll system for a small business in Canada, it's crucial to choose one that simplifies payroll processing and ensures compliance with Canadian payroll regulations. Here are essential features to look for in a payroll system:

1. Automated Calculations

• Taxes and Deductions: The system should automatically calculate federal and provincial taxes, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums.
• Net Pay: Automatically determine the net pay after all deductions, which reduces errors and saves time.

2. Regulatory Compliance

• Ensure the system is updated with the latest tax tables and regulatory requirements to maintain compliance with Canadian payroll laws.
• Features to handle specific provincial requirements, such as British Columbia's Employer Health Tax or Quebec's unique QPP (Quebec Pension Plan) and QPIP (Quebec Parental Insurance Plan).

3. Direct Deposit and Cheque Printing

• Ability to handle direct deposits, which is a common preference for employees.
• Cheque printing capabilities for businesses that require or prefer this payment method.

4. Year-End Reporting

• Automated generation of T4 slips and T4 summaries.
• Capable of preparing and electronically filing ROE (Record of Employment) forms.

5. Record Keeping and Data Management

• Secure storage and easy retrieval of employee records, including pay stubs, payroll records, and year-end tax forms.
• Compliance with Canadian Federal and Provincial data privacy laws.

6. Integration Capabilities

• Ability to integrate with existing accounting software and human resources management systems to streamline business processes.
• Integration with time tracking and attendance systems to accurately calculate hours worked.

7. Employee Self-Service Portal

• Provides employees with access to their pay stubs, tax forms, and personal payroll information online, reducing administrative overhead for employers.
• Features allow employees to update their personal information and banking details, which helps maintain data accuracy.

8. Customer Support and Training

• Reliable customer support that understands Canadian payroll specifics.
• Training resources to help small business owners or their staff understand how to use the payroll system effectively.

9. Scalability

• The system should be scalable to grow with your business, handling an increasing number of employees without a significant jump in cost or complexity.

10. Mobile Accessibility

• Mobile app or mobile-friendly access allows employers and employees to view payroll information, submit time off, or manage details on the go.

Final Thoughts

Selecting a payroll system with these features will help ensure that your small business can manage payroll efficiently while staying compliant with Canadian payroll regulations.

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.