Building a successful business means having a good team. Hiring the right talent is critical and the same could be said for managing payroll.
You may have wondered whether it is possible to manage payroll in-house. This decision comes down to one question – are you equipped with the proper knowledge to do it?
Payroll is more than just writing a pay cheque to your employee based on their hours worked. There are many procedures and tasks involved, all of which must be performed consistently to ensure your business complies with the payroll regulations.
It is your responsibility, as an employer, to figure out what needs to be done and who is responsible for doing it.
Here are some important points to consider if payroll should be done in-house or outsourced.
Who is responsible for calculating and deducting payroll taxes?
For each pay period, you are required to calculate and deduct CPP contributions, EI premiums, and income taxes for your employee as well as the employer’s portion of the CPP and EI. The person performing this task must be well-versed in the payroll regulations.
If an error is made on the calculation or if the company fails to deduct payroll taxes, the CRA will enforce a 10% penalty plus interest. The CRA may increase the penalty to 20% if the business is being assessed the penalty more than once in the same calendar year.
Who is responsible for paying the employee?
When it comes to paying your employees, setting up a direct deposit system is the most efficient way to compensate them. As such, the lead time to process payroll should be considered to ensure your employees are paid on time.
It normally takes 3-5 business days after payroll has been approved for funds to be deposited into your employee’s bank account. The person responsible for paying the employee must clearly communicate and monitor the hard cut-off date for time submission to ensure your employees get paid on time.
Who is responsible for using pay stubs?
Payroll regulation requires pay stubs to be issued for each pay period. You can issue a physical copy, but it is more efficient for you to issue online pay stubs. It is also more convenient for the employees as they can access historical pay stubs at any time. The person responsible for issuing online pay stubs should be familiar with the payroll process and is properly trained on using the cloud payroll system.
Who is responsible for remitting payroll deductions?
Most businesses remit payroll deductions on a monthly basis but there are actually four payroll remitter types in Canada. The person remitting payroll deductions should be knowledgeable in all remitter types and aware of the penalties for the failure to remit payroll deductions by the due date.
The penalty starts at 3% and may increase to 20% if the same mistake is made more than once in the same calendar year. Interest will also be charged on outstanding balances at the CRA’s prescribed rate compounded daily.
Who is responsible for recording payroll journals?
Something that is often overlooked during the course of processing payroll is recording payroll journals. Payroll journals include, but are not limited to, employee’s CPP, EI, and income tax deductions, net amounts paid to the employee, employer’s portion of CPP and EI, and payroll deductions remitted to the CRA.
Ensuring the company’s internal payroll records and CRA records match the numbers reported on the T4 is incredibly important to minimize the possibility of a payroll audit.
The person recording payroll journals must be proficient with double-entry accounting and knows how to integrate payroll with the cloud accounting system.
Who is responsible for filing T4 return and issuing T4 slips?
At the end of the year, your business is required to file a T4 return with the CRA and issue T4 slips to each employee. The person responsible for this function must be an expert in payroll regulations to accurately report the amounts on the T4. Failure to file on time or a reporting error may result in penalties and interest.
Who is responsible for setting up new hire?
As your business continues to grow, new employees will be hired and must be properly set up on payroll. The set up process involves collecting basic information such as date of birth, Social Insurance Number (SIN), void cheque, and completed TD1 forms. The person in charge of this process should also be familiar with setting up the employee for direct deposit.
Who is responsible for monitoring employee time submission?
Tracking hours worked is critical to ensure your employee gets paid the right amount. This can be done on a spreadsheet, but manually data entry is prone to human error. A better way is to use a time tracking system that integrates with your payroll platform. The person performing this function should be properly trained on the time tracking system and is aware of the hard cut-off date for employee time submission.
Who is responsible for managing employee expense reimbursement?
Depending on your operational set up, you may require your employees to pay for business related expenses. If this doesn’t happen often, you can get away with reimbursing your employees manually. However, if the nature of your business requires your employees to pay out-of-pocket expenses on a regular basis, you will need someone who can help you manage employee reimbursement. Ideally, this process should integrate with your cloud accounting system to maximize efficiency.
Who is responsible for tracking vacation accrual?
Your business is required by law to include vacation for each pay period. You can either pay out the vacation on each pay cheque or accrue the vacation. If you decide to accrue vacation, you will need someone to track vacation accrued by each employee, so they can be redeemed during the non-busy time. Accrued vacation is a contingent liability that must be monitored closely as it will have significant financial impact if the employee is terminated from the company.
Who is responsible for calculating statutory holiday?
Statutory holiday pay is also mandated by law. The rules for calculating statutory pay is different for each province, and the person in charge of the calculation should be familiar with the regulation in their respective provinces.
For example, in Ontario, the statutory pay that an employee is entitled to is calculated by adding all regular wages and vacation earned by the employee in the four work weeks before the actual work week with the statutory holiday, divided by 20.
Who is responsible for managing employee’s request time off?
Do you have a policy for employees to request time off? If so, you will need someone to manage this process. Your employees can request time off for a variety of reasons such as personal or sick leave, and it is critical that you have an established process for this to ensure the business has sufficient resources to continue its operation.
Who is responsible for filing and issuing ROE?
When an employee leaves the company, you must file a Record of Employment (ROE) with Service Canada. The person handling this function should be familiar with the ROE requirements to ensure the form is filed correctly by the due date. Your employee may require the ROE to apply for employment insurance benefits after the termination.
Who is responsible for overseeing the entire payroll process?
The most important role when it comes to payroll is the person responsible for overseeing the entire payroll process. There are many tasks to handle so you definitely need someone who is competent and understands how to manage payroll for a company. You can either perform this in-house or you can outsource the entire payroll function. The decision comes down to these questions:
- Do you have the knowledge and expertise to manage payroll?
- How comfortable are you with the payroll regulations?
- How do you want to spend your time running the business? Do you want to focus on building the business, or do you want to allocate a portion of your time to learn and manage payroll?