Your business is growing (wahoo!), and you decide that it’s time to hire an employee. Easy peas, right? The reality is, probably not. Being an employer can be super satisfying and take a huge load off a small business owner’s plate, but it can also be extremely complicated – aside from HR challenges, the complexities of payroll can be daunting.
Setting yourself up for financial success is critical when you decide to become an employer. In addition to the rate of pay, there are many other costs and tasks to be aware of. Consider :
- Vacation Pay - As an employer you will need to pay either vacation pay (usually 4% of earnings) or give time off in lieu of vacation pay. This a great link to explain your options.
- Stat Pay – long weekends are amazing, but if you are an employer, you are required to pay your employee for that extra day off, even though they are not working. And if they do work, you’ll need to pay them overtime. The details can get complicated, but this page outlines the different options and this is a handy calculator. You’ll also want to be familiar with which days are statutory holidays and require stat pay.
- Taxes – as an employer, you are required to pay CPP and EI, and remit the employee’s portion of their CPP, EI and income tax. Payroll taxes can be complicated to calculate, but this tool will give you a sense of the cost.
- Allowances and Benefits – are you paying a gas allowance or reimbursing for kilometres? Are you paying for a gym membership or other “perk”?
Pay Period – are you paying weekly, biweekly, semi-monthly, monthly? What day of the week? Are you holding back a week of pay, or paying to the end
of the current period?
*note: rules differ slightly by province, some of the above links are Ontario specific
Now that you’ve made all the calculations and found the right person to hire, what next? Some important tasks to check off include:
- Gather the employee’s information - complete a TD1 form, to capture whether you should be withholding the usual amount of taxes (ie if this is a second job for them).
- Register for a payroll business number. You can do that by logging into your business account through CRA here.
- Register for ROE web – because if your employee leaves, you have a short window of time to submit a Record of Employment. This process can take a bit of time, so it’s better to register early on. This is where you can sign up.
- Obtain a T4 Web access code – this will allow you to file year end T4’s online. You can get yours here
If you’ve just read all of that and are having a small stroke, talk to your accountant or bookkeeper. Find out how they can support you and how to make this a rewarding experience rather than a painful one.