What is payroll remittance

Payroll remittance refers to the process of deducting various taxes and other withholdings from employees' wages and then remitting these amounts to the Canada Revenue Agency (CRA) and other relevant entities.

Payroll remittance ensures compliance with Canadian tax laws and regulations. Employers fulfill their legal obligations and protect employees from potential tax liabilities by accurately calculating and remitting withheld funds to the CRA. Timely remittance payments are also important to maintain the financial health and reputation of a business within the Canadian regulatory framework.

Disclaimer: This content focuses on Canadian payroll deductions and remittance. See payroll deductions for US payroll information.

How is payroll remittance calculated?

Payroll remittance is calculated based on current tax rates and regulations that apply to an employee’s earnings in Canada. This involves subtracting mandatory deductions like provincial employment taxes and federal income taxes, CPP contributions, and EI, as well as other deductions such as retirement contributions, from the employee's gross pay to determine the net pay and the total remittance amount.

When an employer has no payroll deductions to remit to the CRA for a specific remittance period, they must report nil remittance. This can occur when there are no taxable earnings or deductions for income tax, CPP, and EI for that period. In such cases, the employer still needs to report to the CRA, indicating that there are no amounts to remit.

What are the common types of withholdings involved in payroll remittance?

The common types of withholdings involved in payroll remittance include:

• Income tax (provincial and federal government)
• Canada Pension Plan (CPP)
• Employment Insurance (EI)
• Voluntary deductions like health insurance premiums, retirement plan contributions, and union dues

How do voluntary deductions affect payroll remittance?

Voluntary deductions affect payroll remittance by reducing the amount of taxable income for employees in Canada, potentially altering the amount of tax to be remitted to the CRA. Employers must accurately track and remit these deductions to the appropriate entities, such as insurance providers or retirement fund managers, in accordance with regulations.

By addressing these aspects of payroll remittance, HR specialists can better manage their responsibilities, ensuring that their organizations remain compliant in Canada, employees are satisfied, and business operations run smoothly within the Canadian context.

How can businesses ensure accurate payroll remittance?

Businesses in Canada can ensure accurate payroll remittance by staying up-to-date with Canadian tax laws and rates, utilizing reliable payroll software that can be tailored to Canadian employees, and conducting regular audits of payroll processes in accordance with regulations. If Canadian payroll is new to your team, provide training for HR personnel on correct payroll management and seek advice from tax professionals when necessary.

To make sure you’re remitting payroll deductions at the right time, confirm your employer’s remitter type. Remitter types are determined by an employer’s average monthly withholding amount (AMWA) over the previous two calendar years.

The AMWA is calculated by totaling the amount of money withheld from employees’ paychecks for income tax, CPP, and EI in one calendar year, and dividing it by the number of months (maximum 12) that required a payroll deduction remittance.

Types of remitters include:

Regular remitter: Employers with a higher average monthly withholding amount are classified as regular remitters. They are required to remit deductions, such as income tax, CPP and EI, more frequently, typically on a semi-monthly or monthly basis.

Quarterly remitter: Employers with a lower average monthly withholding amount are classified as quarterly remitters. They remit deductions once per quarter of the calendar year.

Accelerated remitters: An accelerated remitter refers to an employer who is required to remit certain payroll deductions to the CRA more frequently than the standard remittance schedules. The term is often associated with larger employers who have higher payroll obligations. Accelerated remitters might be required to remit deductions weekly or even within a few business days of each payroll run or pay period.

New remitters: New remitters are new employers with a payroll account that has been open for less than 12 months. They are required to remit their payroll deductions quarterly unless the CRA instructs them otherwise.

What role does payroll remittance play in global hiring?

In global hiring, payroll remittance plays a significant role as it is influenced by Canada's unique payroll tax laws and social contribution requirements. Employers must understand and comply with local regulations to ensure proper remittance and avoid legal issues when managing payroll for employees in Canada.

How does payroll remittance affect remote workers in Canada?

For remote teams, payroll remittance can be complex, especially if the employee works from a different location than the company's base of operations. Employers must consider the tax laws of the remote worker's location within Canada and may need to register with local tax authorities, ensuring compliance with payroll remittance regulations.

What are the potential legal or compliance issues related to payroll remittance?

Whether you’re a small business in Canada or a global enterprise looking to hire and pay employees, you should be aware of the potential legal or compliance issues concerning payroll remittance. These issues may include late payments or underpayments, or failure to accurately report employee earnings to the CRA and inadequate record-keeping, which can lead to:

• Financial penalties and interest charges imposed by the CRA
• Damage to the company’s reputation and trust with employees
• Legal action by Canadian government agencies
• Potential personal liability for business owners or officers in severe cases under Canadian law

How can technology improve payroll remittance processes?

With some payroll software, you can automate calculations that are specific to Canadian tax regulations, thereby reducing errors. By working with a provider with compliance features and local in-house experts, you can keep up-to-date with changes in Canadian tax laws and provide secure storage and easy access to payroll records. You can typically integrate with accounting systems for accurate financial reporting as well.

What are the best practices for managing payroll remittance in a multinational company?

Best practices for managing payroll remittance in a multinational company include:

• Centralizing payroll management with checks for compliance with Canadian regulations
• Implementing a unified payroll system that can handle multiple currencies and tax systems
• Regular training for HR and payroll staff on payroll regulations
• Partnering with local payroll experts to navigate country-specific requirements

How can businesses measure the effectiveness of their payroll remittance process?

To evaluate how effectively a company manages payroll, there are a few key areas to focus on. First and foremost, double-check the accuracy of payroll calculations, making sure they align with Canadian tax regulations to ensure everyone receives the correct amount. Then, track your payments to the CRA to make sure they’re made on time.

Seeking feedback from employees about deductions and pay accuracy provides valuable real-world perspectives that can inform improvements, while conducting periodic audits specifically tailored to Canadian payroll rules helps identify and address any issues promptly.

Simplify payroll in Canada and beyond with Deel

Running payroll in a new country requires an in-depth understanding of their payroll regulations, tax laws, and compliance requirements. In Canada, these specifics vary depending on the province you’re hiring in. With Deel’s Global Payroll solution, our in-house experts and automated systems make payroll easy, no matter where you hire.

Learn more about Deel’s Global Payroll and how you can use our EOR model to hire employees in Canada, hassle-free.