Hiring an employee is an exhilarating and stressful experience for a Canadian small business owner. We’ve broken down three key considerations for bringing on someone great.
Employees can be expensive, and the cost often goes beyond salary. There are a few financial considerations to understand before bringing on a new member to your team. Below are some resources to help guide you through this process smoothly.
1. Canada Pension Plan
As an employer, you must deduct CPP (Canadian Pension Plan) from your employee’s pay, and contribute an amount matching what you have deducted. If you use Wave, we can remit these premiums as well as your tax deductions and EI premiums. To determine in advance what your contributions will be, check out the CPP Contribution Rates and Maximums guide.
2. Employment Insurance
EI needs to be deducted from each employee's pay, and as an employer you need to contribute 1.4 times the amount deducted. This is a cost you should take into account when hiring on someone new.
You must register with the CRA (Canada Revenue Agency) when you are starting payroll for the first time. To do this, you'll need to open an account with the CRA.
You'll also need to collect some documentation from your employees. First you will need your employee’s social insurance number (SIN). You can be dinged with a fine if you don't collect a SIN number, so make sure you get this information first thing.
You will also need your employee to fill out a TD1 form. This is the form you'll use to deduct the right amount of tax from your employee's income. You can find TD1 forms for both the Federal and Provincial government through the Canada Revenue Agency.
As with most business activities, there is some small risk involved with hiring new employees. Consulting with a lawyer and an accountant will help ensure that you have all of your bases covered. You can find an accountant to work with you through our Wave Pro Network.
Payroll by Wave makes it easy to add new employees, and remit payments to the CRA. If you have any questions about payroll, you can always get in touch with us at questions.waveapps.com!