Running payroll isn’t just about paying your employees on time—it’s about following strict rules set by the Canada Revenue Agency (CRA). If your business slips up, even unintentionally, you could face costly penalties, interest charges, or audits.

Here’s a practical guide to staying payroll-compliant and avoiding CRA penalties.

📅 1. Know Your Payroll Deadlines

Missing remittance deadlines is one of the most common ways businesses get penalized. You must remit source deductions (income tax, CPP, EI) to the CRA on time, based on your remitter type:

• New/Small employers: Usually monthly

• Frequent remitters: May be required to remit twice monthly or even more frequently if your average monthly payroll is higher

CRA late remittance penalties can range from 3% to 10%, depending on how late the payment is.

Tip: Set up reminders or automate your payroll to avoid missing due dates.

🧾 2. Calculate Deductions Accurately

As an employer, you’re required to deduct and remit the correct amounts for:

• Canada Pension Plan (CPP)

• Employment Insurance (EI)

• Federal and provincial income tax

CRA penalties can apply if you under-deduct, and you may be required to cover the shortfall yourself—even if it was an honest mistake.

Tip: Use CRA’s Payroll Deductions Online Calculator or accounting software that updates with current rates.

📂 3. Keep Proper Records

The CRA expects you to retain detailed payroll records for at least six years, including:

• Employee information (SINs, addresses, etc.)

• Pay periods, hours worked, wages paid

• Deductions and remittances

• T4 and ROE filings

Inadequate record-keeping can result in penalties, interest, or even reassessments during an audit.

Tip: Keep digital and physical backups, and make sure your system is audit-ready.

📄 4. File T4 Slips and Summaries On Time

Every year, you must file:

• T4 slips for each employee

• A T4 Summary of all payroll deductions and payments

These must be submitted to the CRA by the end of February following the tax year.

Late filings can result in penalties of $100 to $7,500, depending on how late and how many slips are involved.

Tip: Mark your calendar and file early to avoid a last-minute scramble.

🚩 5. Watch for Employee vs. Contractor Misclassification

Misclassifying a contractor who should be an employee can trigger back payments, penalties, and CPP/EI contributions.

The CRA looks at factors like:

• Control over work and hours

• Who supplies tools or equipment

• Risk of profit/loss

Tip: When in doubt, get a second opinion or request a CRA ruling before engaging someone as an independent contractor.

✅ Final Thoughts

Payroll compliance is more than just ticking boxes—it’s about protecting your business from penalties and ensuring your employees are paid properly and legally.

Need help with payroll? At Pivot Bookkeeping, we help small businesses across Halifax and Nova Scotia stay on top of their payroll, remittances, and CRA obligations. 📞 Let’s talk—so you can stay focused on running your business, not paperwork.