Payroll Taxes in Canada: What Employers Must Deduct, Remit, and File

If you run a small business in Hamilton (or anywhere in Ontario) and you’re hiring—congrats. Payroll is a big step.

It’s also one of the fastest ways to rack up CRA penalties if it’s handled casually.

Here’s a CRA-based overview of what you need to know.

1) What are “payroll deductions”?

CRA’s Employer’s Guide covers payroll deductions and remittances, including the requirement to deduct amounts and remit them to CRA.

In plain language, employers generally withhold:

• CPP contributions
• EI premiums
• Income tax

2) Remittance due dates: don’t guess

CRA provides remittance due date rules in the Employer’s Guide (and separate CRA payroll pages). For example, CRA describes quarterly due dates for certain remitter categories and explains accelerated remitter thresholds.

Because remitter type can vary, the safest move is to set up payroll properly from day 1 and confirm your remittance schedule.

3) Penalties: payroll is not the place to “catch up later”

CRA can assess penalties when amounts are deducted but not remitted, or remitted late.

CRA also outlines penalties when required CPP/EI/tax amounts were not deducted, including a 10% penalty (and potentially 20% in certain repeated/gross negligence circumstances).

4) Contractor vs employee: a common (and expensive) mistake

A very common question we get from IT consultants and hospitality operators is:

“They invoice me… so they’re a contractor, right?”

Not always.

CRA explains factors it considers when determining employment status, including:

• level of control,
• tools/equipment,
• ability to subcontract/hire assistants,
• financial risk,
• opportunity for profit, and more.

When this is wrong, payroll withholdings can become a retroactive problem.

5) Keep payroll records properly

CRA’s recordkeeping rules also apply to payroll records, and CRA provides guidance on keeping and retaining records.

FAQ: Payroll taxes

1) What happens if I remit payroll deductions late?

CRA states it can assess penalties for failure to remit or remitting late.

2) What if I forget to deduct CPP/EI/tax?

CRA outlines penalties when required amounts were not deducted.

3) How does CRA decide if someone is an employee or self-employed?

CRA describes multiple factors used to assess the relationship, including control, tools, financial risk, and opportunity for profit.

Call to action

Fern Taxes CPA Professional Corporation supports Hamilton and Ontario employers with:

• payroll setup and ongoing support
• CRA remittance planning
• year-end slips (T4/T4A) workflow
• contractor vs employee reviews (CRA-aligned)

Book a free consultation and we’ll help you avoid costly payroll mistakes.