Hiring Your First Employee

Business tip

What changes the day someone else goes on your payroll.

First question

Employee or contractor?

Calling someone a contractor doesn't make them one. CRA looks at the real relationship, including control over the work, who supplies the tools, and who carries the financial risk. Getting it wrong can mean you owe unpaid CPP, EI, and tax.

Step one

Open a payroll account.

Register for a CRA payroll program account before your first remittance due date. You'll need a CRA business number to do it.

Step two

Collect the paperwork.

Get the employee's social insurance number and completed TD1 tax forms before the first pay, so you can calculate deductions correctly.

Every pay

Deduct, add your share, then remit.

Withhold income tax, CPP, and EI from each pay, add your own share of CPP and EI, and send it to CRA. The first remittance is due by the 15th of the month after you started withholding, unless CRA assigns you a different frequency.

Year-end

Issue T4 slips by the end of February.

File your T4 information return and give each employee their slip by the end of February of the following year.

Beyond CRA

Workers' comp and employment standards.

In Alberta, open a WCB account within 15 days of hiring your first worker if you're in a covered industry. Provincial employment standards also set rules on pay, vacation, and ending employment.

Tickle & Compass

Talk to an accountant before the first pay.

Payroll mistakes cost penalties and interest, so a short setup session is cheap insurance.

Switching to a corporation →

General information, not tax, legal, or financial advice. Rules vary by province and change — confirm with an accountant.