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Introduction of Canada Payroll

2024-12-10
Canadian payroll usually includes employer information, employee information, pay period, gross income before tax, various deductions, income tax, and net pay. The following will introduce the composition of Canada payroll, payment frequency, deductions, income tax, and Statement of Remuneration Paid (T-4).

  1. Composition of payroll

    Canadian payroll usually consists of gross wages before tax, wage deductions, wage income tax and net pay. Gross wages before taxes are gross earnings earned by an employee before any deductions or taxes are deducted, and include base salary, overtime pay, bonuses, allowances, and other wages or benefits the employee may receive.

    Payroll deductions and payroll taxes including Canada Pension Plan (CPP) or Quebec Pension Plan (QPP), Employment Insurance (EI), and federal income tax, provincial or territorial income tax, Registered Retirement Savings Plan (RRSP) (optional) etc.

    Net pay is the final amount that employee receives after deducting all required and voluntary taxes and deductions.

  2. Frequency of payroll

    The Canada Labour Code requires employers to pay employees salary on a regular basis. The most common salary payment frequencies generally include weekly, bi-weekly, semi-monthly, and monthly.

  3. Salary deductions and income tax

    British Columbia income tax ratesOntario income tax rates

    (i) The maximum pensionable earnings from which you deduct CPP of 2023 is $66,600;
    (ii) The year’s basic exemption for 2023 is $3,500;
    (iii) The 2023 rate you use to calculate the amount of CPP contributions to deduct from your employees’ remuneration is 5.95%;
    (iii) Different rates apply for employees working in Quebec. The 2023 QPP contribution rate for employers and employees is 6.40%.

    (1)
    		 Canada Pension Plan contributions (CPP)

    (a)    You have to deduct CPP contributions from an employee’s pensionable earnings if that employee meets all of the following conditions:
    (i) The employee is in pensionable employment during the year;
    (ii) The employee is not considered to be disabled under the CPP or the Quebec;
    (iii) The employee is 18 to 69 years old. Work outside Quebec, Canada and earn more than $3,500 per year;
    (iii) Quebec employers deduct the Quebec Pension Plan (QPP) contributions instead of CPP contributions.

    Exception: do not deduct CPP if the employee is at least 65 years of age, but under 70, and gives you Form CPT30, Election to Stop Contributing to the Canada Pension Plan, or Revocation of a prior Election, with parts A, B, and C completed

    (b)    CPP contribution rate and maximum

    You have to deduct CPP contributions from your employees’ pensionable earnings. As an employer, you must contribute an amount equal to the CPP contributions that you deduct from your employes’ remuneration.
    (2)
    		 Employment insurance (EI) premiums

    You have to deduct EI premiums from an employee’s insurable earnings if that employee is in insurable employment during the year.

    (a) The maximum annual insurable earnings in 2023 is $61,500;
    (b) In 2023, the employee EI premium rate is 1.63%;
    (c) The employer’s contribution rate is 1.4 times that of the employee’s, and the employer’s contribution rate will be 2.28% in 2023;
    (d) The premium rate for Quebec workers is 1.27%.
    (3)
    		 Federal, provincial and territorial income taxes

    As an employer, it is the responsibility to deduct personal income tax from the remuneration paid or other income. There is no age limit for the deduction of personal income tax, and the employer does not need to bear the contribution fee. Employers are required to remit the personal income tax deductions to the Canada Revenue Agency (CRA).


    (a)     Personal Tax Credit Return

    Most employees need to fill out the TD1 form (federal form and provincial or territorial form) when starts work, so that the employer can obtain enough information for the declaration of federal and provincial or territorial personal income tax withholding and payment. Special groups may also choose form TD1X, Or TD3F. The employee should fill out a new Form TD1 within seven days of any change that may result in a change to their personal tax credits for the year.

    (b)     Federal income tax rates

    2023 federal income tax rates

    Taxable income（CAD）

    Tax rate

    ≧$53,359

    15%

    $53,359~$106,717

    20.5%

    $106,717~$165,430

    26%

    $165,430~$235,265

    29%

    >$235,675

    33%


    (c)     Provincial and territorial income taxes

    Tax rates vary across Canada's territories and provinces, but are calculated in the same way as federal. In provinces and territories other than Quebec, individuals only need to prepare one return including federal and local taxes. In Quebec, individuals must file separate federal and local tax returns. Listed below are the individual income tax rates for British Columbia, Ontario and Quebec for 2023.

    British Columbia income tax rates

    Taxable income（CAD）

    Tax rate

    ≧$45,654

    5.06%

    $45,654~$91,310

    7.7%

    $91,310~$104,835

    10.5%

    $104,835~$127,299

    12.29%

    $127,299~$172,602

    14.7%

    $172,602~$240,716

    16.8%

    >$240,716

    20.5%


    Ontario income tax rates

    Taxable income（CAD）

    Tax rate

    ≧$49,231

    5.05%

    $49,231~$98,463

    9.15%

    $98,463~$150,000

    11.16%

    $150,000~$220,000

    12.16%

    >$220,000

    13.16%


    Quebec income tax rates

    Taxable income（CAD）

    Tax rate

    ≧$49,275

    14%

    $49,275~$98,540

    19%

    $98,540~$119,910

    24%

    >$119,910

    25.75%





    		Your taxable income is your income after various deductions, credits, and exemptions have been applied.


  4. T4 Statement of Remuneration Paid

    The T4 slip, also known as the Statement of Remuneration Paid, is an annual tax return issued by the employer that reports the employee's employment income and deductions for the current fiscal year. If you worked for more than one employer in a fiscal year, you should receive separate T4 for each employer.

    (1)
    		 On the standard T4 slip, it usually includes the following contents:

    (a) Tax year
    (b) Name of employer
    (c) Employee social security number, name, and address
    (d) Annual Employment Income
    (e) Deductions and taxes paid
    (2)
    		 When to issue the T-4

    Employers need to issue and send T-4 to employees by the last day of February of the calendar year.

Reference:
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4001/employers-guide-payroll-deductions-remittances.html#emp_que
 https://www.canada.ca/en/revenue-agency/news/2023/05/the-canada-pension-plan-enhancement--businesses-individuals-and-self-employed-what-it-means-for-you.html
 https://www.canada.ca/en/employment-social-development/programs/ei/ei-list/ei-employers/2023-maximum-insurable-earnings.html
 https://www.bdc.ca/en/articles-tools/employees/manage/basics-employer-payroll-deductions
 https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html

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