Have employees? Payroll obligations to consider

As an employer, a trustee, a liquidator or a payer of any amount connected to employment should know his/her obligations and how payroll functions. Failure to comply with the law ESA (Employment Standards Act), you might suffer consequences and pay penalties. ESA is employment law in Ontario, which ensures each employer does their roles in relation to payroll. The law illustrates minimum employee rights and employer roles in regard to public holidays, pay rates, working hours and overtime, among others.

Employer responsibility in relation to Ontario payroll

As an employer, you must have the Employment Standards Poster. And post it where each employee will access it. Likewise, distribute copies to employees. The poster is essential because it illustrates all requirements and rights covered in the 2000 Employment Standards Act. The poster is available for download from Ontario.ca/ESAposter 

Another obligation is to open one payroll program account and get an account number to identify your business when working with the Canada Revenue Agency. The payroll program has 15 digits with 9-character BN (Business Number). The federal government will recognize your accounts and business using this BN.

When hiring employees, you must adhere to regulations on the subject. For instance, you should acquire their SIN (social insurance number). Also, the employees should give you their filled Personal Tax Credits Returns and Form TD1. Your responsibility is to calculate and withhold payroll deductions as long as the person is your employee, whether they submit their form TD1/SIN or not.

Another obligation relates to the number of hours your employees should work in a day and week. An employer can come into agreement with employees to work overtime. Working extra hours can help you as an employer to achieve business objectives. However, the overtime should not be more than the weekly limit set by ESA.  According to ESA, each employee has a right to receive a monthly/weekly minimum wage. There are certain minimum wages for fishing guides, homeworkers, students, hunting guides and liquor servers. But general minimum wages are applicable to most employees. Therefore, employers must know the minimum wages for different employees.

Employees are entitled to vacations depending on the duration they have worked in a company. For instance, an employee can go for a 2-weeks’ vacation if their employment duration is less than 5 years. They must receive the vacation yearly and their pay should be 4% of their aggregate wages. Alternatively, if an employee has worked for over 5 years, they should get 3-weeks’ vacation and a pay of 6% of aggregate wages.

Calculating and remitting employee deductions as per Canadian regulations is important for employers. Some of the deductions to withhold are income tax, employment insurance (EI) and contributions to the Canada Pension Plan (CPP). These deductions depend on the payment amount for each employee. Likewise, calculate employer share from EI and CPP. After calculating and deducting, you should remit those deductions (both from employees and your share). Hence, know how to calculate and remit these employee/employer deductions.

In Ontario, there are 9 national holidays each year. Employees have a right to take any of the holidays off work with an expectation of a pay. Therefore, employers should calculate the pay for these holidays.

ESA gives employees the right to take absence leaves. These leaves are protected under the Ontario law and an employer does not have a right to terminate employee services because they asked. Hence, employers must know about leaves of absence and their pay.

It is the responsibility of each employer to maintain written records for every employee. You can appoint legal personnel to keep these records or do so yourself. Make these records accessible to any employment standards authority from the Labour Ministry, whatsoever.

The bottom line Employers have payroll obligations they must comply with, else they will pay penalties. Therefore, any business owner or employer must learn their responsibilities in relation to payroll. Deductions should be calculated and remitted to the CRA – for both the employee and employer.

Have a question or need consultation?

Please send your inquiry to info@revenuedistrict.ca

References:

https://www.labour.gov.on.ca/english/es/pubs/fs_compliance.php

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-overview/employer-responsibilities-payroll-steps.html