If you employ people in Canada — including yourself through your corporation — you must operate payroll and remit source deductions to the CRA. That means withholding income tax, CPP and EI, remitting on schedule, and reporting on T4 slips each year. Here's how the system works.
Setting up a payroll account
Before your first payday you need a payroll (RP) program account under your Business Number with the CRA. This is what you use to remit deductions and file year-end reports.
What you deduct from pay
| Deduction | Who contributes |
|---|---|
| Income tax | Employee (withheld from pay) |
| Canada Pension Plan (CPP) | Employee and employer |
| Employment Insurance (EI) | Employee and employer (employer pays more) |
Remittance schedules
The CRA assigns a remittance frequency — typically monthly for new or smaller employers, with more frequent schedules for larger payrolls. Remitting late triggers penalties, so the deadline matters as much as the amount.
Year-end reporting
After each calendar year you must prepare T4 slips for employees and file a T4 Summary with the CRA, reporting total earnings and deductions.
- Register a payroll (RP) account before the first payday.
- Calculate income tax, CPP and EI correctly for each pay run.
- Remit deductions to the CRA by your assigned deadline.
- Track the employer share of CPP and EI as a cost.
- Issue T4 slips and file the T4 Summary by the annual deadline.
Common mistakes to avoid
The pitfalls we see businesses run into most often on this topic.
- Paying wages before registering a payroll account with the CRA.
- Missing remittance deadlines and incurring penalties.
- Miscalculating CPP or EI, especially the employer portion.
- Forgetting to file T4s and the T4 Summary on time.
- Treating a director's pay as exempt from source deductions when it isn't.
Frequently asked questions
How Stratancy can help
Stratancy sets up your CRA payroll account, runs each pay cycle with accurate CPP, EI and income tax deductions, and remits to the CRA on schedule. We handle year-end T4 slips and the T4 Summary, and for owner-managers we advise on the optimal salary-and-dividend mix. Payroll is part of our fixed monthly service, giving you controller-level oversight without the administrative burden.