Before you can start paying your employees and enjoy that “responsible employer” feeling, there are a few things you need to take care of from a government standpoint.
And that’s the stuff you don’t want to get wrong because the CRA can come down on you with some pretty hefty fines.
That’s why we created a handy, and did I mention 100% free-to-download Guide to Hiring your First Employee, which covers information around hiring employees vs. contractors, workers compensation, and of course the steps you need to take for registering your business and setting up payroll services for small businesses.
Verify your Compliance with the Provincial Labour Department
Each province has its own set of rules and compliance requirements, which is why a great first step is to contact the Labour Department in your province.
The Labour Department can inform you about the specific employment standards legislations that apply in your province, and there are differences you need to be aware of when you are running a business.
Here’s a comparison chart, courtesy the nice folks at workplace.ca that outlines all the employment standards by province. It covers the minimum wage, vacation, employment termination requirements among other things. And, we’ve included a list of all the labour departments in Canada, and their contact details Canada in our free guide for easy reference.
Register for your CRA program accounts
You should never operate a business without completing and registering the right paperwork with the government.
- Business number (BN): The BN is a unique nine-digit number assigned to your company, which makes it easier for you to work with other businesses and organizations across Canada, including the CRA.
- This BN forms the basis for all other program accounts like payroll, corporation income tax, etc.
- In order to correctly register for a BN and the relevant program accounts, you should have the following information on hand: the name of your business, the physical location and mailing address, your legal business structure, your national and international (if applicable) gross sales and the fiscal year-end.
- Program Accounts: After you get a Business Number, the next step is picking the correct program accounts, which apply to your business.
- There are four major program accounts, and each account follows a similar format: GST/HST account (RT), Payroll account (RP), Import-Export (RM), or Corporation Income tax (RC).
- Some of these program accounts may or may not be applicable to your business, but the CRA provides really helpful information to help you decide if you need to register for any, all or other program accounts.
You have a couple of ways to register for a business number as well as the program accounts that apply to your business.
The Business Registration Online (BRO) program is a one-stop online self-serve application you can use to register for a Business Number as well as for program accounts in Ontario, Nova Scotia and British Columbia.
You can also register for a business number over the phone by calling 1-800-959-5525; however, you’ll need to provide them with all the information requested on Form RC1.
Setting up your Employees
The title for this section is a bit misleading because it is not that you have to actually register / set up your employees with the government, but if you need to pay your employees, there are a few bits of information you will need them to provide.
- Social Insurance Number (SIN): As the employer, you are legally responsible to collect your employee’s SIN and record that number on file within three (3) days of their hire date. If you don’t receive this information from your employee, you have to notify Service Canada within six (6) days of their hire date.
- Federal and Provincial TD1 forms: You should also maintain a record of your employees’ Federal and Provincial TD1 forms, which will help you determine the amounts that need to be withheld for source deductions.
Even with a SIN and TD1 forms, the employer is legally expected to collect and remit taxes on behalf of the employee. You would just use the basic claim amounts when calculating the source deductions.
- Each province has its own employment standards legislation, which is why you should always contact the Labour Department in your province to understand the guidelines in which you should operate your business.
- Register for a Business Number either via the BRO program or by completing the Form RC1 and sending it in via mail or fax. You can also phone in the details by calling 1-800-959-5525, but make sure you have the information requested on the Form RC1 handy.
- There are four major program accounts, and if you have employees to pay, you should register to get a Payroll account.
- You are legally required to maintain a record of your employees’ SIN and TD1 forms, both federal and provincial; however, you are expected to collect and remit the tax amounts owed even if you have not received that information from your employee as yet.
For more information, helpful forms and resources to help you navigate the confusing waters of hiring your first employee, registering your business and so much more, you can download our free Comprehensive Guide to Hiring your First Employee. If you want to learn more about distinguishing between employees vs contractors and choosing what's right for your business, we have a guide for that too! Download our Free Employees vs Contractors Guide here.
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