Running Your First Payroll in Ontario: A Plain-English Guide

You started a business, hired someone, and now the government expects you to collect taxes from their paycheque and send that money to the right places on time. It sounds complicated. It’s not — but there are real consequences if you skip steps or miss deadlines.

This guide walks you through the basics of running payroll in Ontario, in plain English. No accounting degree required.

What you need before your first pay run

Before you can pay anyone, you need a few things lined up:

• A Business Number (BN) — This is the 9-digit number the CRA assigns to your business. If you’ve already been collecting HST or filing a corporate tax return, you have one. If not, you’ll register for one when you open your payroll account.
• A CRA payroll account (RP account) — This is a separate account tied to your Business Number, with an “RP” suffix. It’s what the CRA uses to track your source deductions and remittances. You need it before your first pay date.
• Employee information — For each employee, you need their Social Insurance Number (SIN), a completed TD1 federal form, a completed TD1 Ontario provincial form, and their banking details if you’re paying by direct deposit (which you should — most employees expect it).

Don’t wait until the day before payday to gather this. TD1 forms in particular should be filled out on or before the employee’s first day of work.

Opening a CRA payroll account

This is easier than most people expect. You can register online through CRA Business Registration Online, or call the CRA’s business enquiries line. Either way, it takes about 5 to 10 minutes.

You’ll get an RP account number — something like 123456789RP0001. Write it down. You’ll need it for every remittance and every form you file.

The important thing is to do this before your first pay date, not after. The CRA expects you to start deducting and remitting from day one.

Source deductions in plain English

Every time you pay an employee, you withhold three things from their gross pay:

Canada Pension Plan (CPP) — Both the employee and the employer contribute. In 2026, the employee rate is 5.95% on pensionable earnings up to the first ceiling of $73,200. There’s also CPP2 — a second contribution at 4.00% on earnings between $73,200 and $85,000. You as the employer match every dollar the employee contributes.

Employment Insurance (EI) — The employee rate is 1.64% of insurable earnings. As the employer, you pay 1.4 times what the employee pays. So if you withhold $100 in EI from their cheque, you owe $140 on top of that.

Federal and provincial income tax — The amount depends on what the employee claimed on their TD1 forms and which tax bracket they fall into. The CRA publishes payroll deduction tables every year — they’re the source of truth.

Here’s the honest advice: don’t try to calculate these by hand. The CRA has a free online payroll deductions calculator, and it works fine for one or two employees. Beyond that, the math gets tedious fast and the cost of a mistake isn’t worth the savings.

Choosing a pay frequency

You get to decide how often you pay your employees. The common options:

• Weekly — Popular in trades and agriculture where workers expect a cheque every Friday. More pay runs per year means more processing work.
• Biweekly (every two weeks) — The most common frequency in Canada. 26 pay periods per year. Good balance of frequency and admin effort.
• Semi-monthly (twice a month) — Common in professional services. 24 pay periods per year, usually the 1st and 15th. Slightly simpler for salaried employees.
• Monthly — Rare for hourly workers. Some salaried professional roles use it. One pay run per month means less admin, but employees have to budget across longer gaps.

Pick what makes sense for your industry and your workers. You can always change it later, though switching mid-year creates some awkward transition pay periods.

Remittance schedules

After you withhold CPP, EI, and income tax from your employees’ pay, you need to send that money — plus your employer portions — to the CRA. This is called remitting.

How often you remit depends on how much you withhold:

• Monthly remitters — If your average monthly withholdings are under $25,000, you remit once a month by the 15th of the following month. So deductions from January paycheques are due by February 15th. Most small businesses fall here.
• Quarterly threshold remitters — If your total annual withholdings are under $3,000 and you have a clean compliance history, the CRA may let you remit quarterly instead.
• Accelerated remitters — If your monthly withholdings exceed $25,000, the CRA requires more frequent remittances — up to four times per month for very large payrolls.

The CRA assigns your remittance frequency based on your withholding history. New employers almost always start as monthly remitters.

If the 15th falls on a weekend or statutory holiday, the deadline moves to the next business day. But don’t rely on that grace — build a habit of remitting a few days early.

Record-keeping requirements

The CRA requires you to keep payroll records for 6 years after the end of the tax year they relate to. That includes:

• T4 and T4 Summary slips
• TD1 forms (federal and provincial)
• Pay records showing gross pay, deductions, and net pay
• Records of Employment (ROEs)
• Any supporting documents like timesheets, commission agreements, or bonus calculations

This isn’t optional. The CRA can audit your payroll records, and “I didn’t keep them” is not a defence that goes well.

Digital records are fine — you don’t need filing cabinets full of paper. Just make sure your records are complete, organized, and backed up.

Common first-timer mistakes

After a decade of doing this for Ontario small businesses, here are the mistakes we see most often:

• Missing remittance deadlines. Penalties start at 3% for amounts that are 1 to 3 days late, and climb from there. The CRA is not flexible on this.
• Not collecting TD1 forms on the first day. If an employee doesn’t give you a TD1, you’re required to withhold as if they only claimed the basic personal amount. That usually means over-withholding, which leads to unhappy employees at tax time.
• Classifying employees as independent contractors when they’re not. The CRA looks at the working relationship, not what you call it. If you control when, where, and how someone works, they’re probably an employee — and you owe source deductions on every dollar you’ve paid them.
• Forgetting WSIB registration. In Ontario, most employers must register with the Workplace Safety and Insurance Board within 10 calendar days of hiring their first worker. Missing this can mean retroactive premiums and penalties.

Let someone else worry about it

If all of this sounds like a lot to keep track of — it is. Not because any single step is hard, but because the deadlines are strict and the penalties are real.

That’s literally what we do. We handle the deductions, the remittances, the T4s, and the record-keeping so you can focus on running your business. Most of our clients hand us their hours and never think about payroll again.

Get in touch and we’ll walk you through it.