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How to Run a Payroll in Your Business: A Complete Guide

Running a payroll is an essential task for any business that has employees. However, it can also be a complex and time-consuming process that involves many steps and regulations. In this blog, we will guide you through the basics of how to run a payroll in your business, from registering with government agencies to paying your employees and filing your tax reports.

Run a payroll in your business - presyz

Steps to get ready to run payroll

Step 1: Register with the Government Agencies

Before you can start paying your employees, you need to register your business with the relevant government agencies. In Canada, you need to obtain

·         a Business Number (BN) and

·         a payroll program account

from the Canada Revenue Agency (CRA). A BN is a unique identifier for your business, and a payroll program account is a 15-digit number that contains your BN and allows you to remit your payroll taxes and deductions to the CRA. You can register for both online on the CRA website.

Depending on your province or territory, you may also need to register with other agencies, such as the

·         Workplace Safety and Insurance Board (WSIB) in Ontario or

·         the Ministry of Finance in Quebec. 

These agencies may require you to pay additional premiums or taxes for your employees, such as workers’ compensation or health tax.

Step 2: Gather Employee Information

Once you have registered your business, you need to collect some information from your employees. This includes their personal details, such as:

name, address, phone number, social insurance number (SIN), date of birth, and bank account information for direct deposit.

You also need to obtain their federal and provincial TD1 forms, which are used to determine their tax credits and deductions.

Step 3: Choose a Payroll Method

There are different ways to run your payroll, depending on your budget, time, and preference. You can choose to do it yourself manually, use an online payroll service, hire an accountant, or hire someone in-house. Each method has its pros and cons, so you should weigh them carefully before making a decision.

Step 4: Decide on a Pay Frequency

Another important decision you need to make is how often you will pay your employees. This is called your pay frequency, and it can affect your cash flow, payroll costs, and employee satisfaction. The most common pay frequencies are weekly, bi-weekly, semi-monthly, and monthly. Each pay frequency has its advantages and disadvantages, so you should consider them carefully before choosing one.

Step 5: Calculate Your Employees’ Pay and Deductions

Once you have chosen your payroll method and pay frequency, you need to calculate your employees’ pay and deductions for each pay period. This involves three main components: gross wages, deductions, and net pay.

  • Gross wages: This is the amount of money your employees earn before any deductions are made. It includes their regular wages, overtime pay, bonuses, commissions, tips, and any other taxable benefits or allowances. To calculate the gross wages, you need to multiply the hourly rate by the number of hours worked, or use the annual salary divided by the number of pay periods. You also need to add any additional income or benefits that your employees receive.

  • Deductions: These are the amounts of money that you withhold from your employees’ gross wages, and remit to the government or other parties on their behalf. They include income tax, Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and any other voluntary or mandatory deductions, such as union dues, health insurance, or retirement savings. 

  • Net pay: This is the amount of money that your employees take home after all deductions are made. It is also known as the take-home pay or the net income. To calculate the net pay, you need to subtract the deductions from the gross wages. This is the amount that you pay your employees by direct deposit, cheque, or cash.

Step 6: Pay Your Employees and Remit Your Taxes

After you have calculated your employees’ pay and deductions, you need to pay your employees and remit your taxes to the government. You should pay your employees on or before the payday that you have established, and provide them with a pay stub or a statement of earnings that shows the details of their pay and deductions. You can use your payroll software or service to generate and distribute the pay stubs electronically or by mail.

You also need to remit your payroll taxes and deductions to the CRA, as well as any other provincial or territorial agencies that you have registered with. You should remit your payroll taxes and deductions by the due date that the CRA has assigned to you, based on your average monthly withholding amount (AMWA). 


Step 7: File Your Payroll Tax Reports (T4)

The last step in running your payroll is to file your payroll tax reports to the CRA and any other provincial or territorial agencies that you have registered with. These reports summarize the amounts of income, deductions, and taxes that you have paid to your employees and the government for the year. You need to file these reports by the deadlines that the CRA and the other agencies have set, or you may face penalties and interest.

The main payroll tax report that you need to file is the T4 information return, which consists of the T4 slips and the T4 summary. The T4 slips are the forms that you give to your employees to report their income and deductions for the year. The T4 summary is the form that you send to the CRA to report the total amounts of income and deductions for all your employees.

You need to file the T4 information return by the last day of February of the following year, or the next business day if it falls on a weekend or a holiday.

You can file your T4 information return electronically or by paper. To file electronically, you need to use the Internet File Transfer (IFT) service or the Web Forms service on the CRA website. To file by paper, you need to order the T4 slips and the T4 summary from the CRA, fill them out, and mail them to the address indicated on the forms. You also need to distribute the T4 slips to your employees by the same deadline, either electronically or by mail.


Running a payroll in your business can be a daunting task, but it can also be a rewarding one. By following these steps, you can ensure that you pay your employees accurately and timely, comply with the payroll laws and regulations, and avoid any penalties and interest. You can also use the payroll data to analyze your business performance, plan your budget, and optimize your tax situation.

If you need any assistance with your payroll, you can always contact Presyz Accounting. Book A Call Now

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