Payroll Basics for Small Employers in Ontario: Source Deductions, T4s, and Records

Hiring the first employee changes what a small business in Ontario has to do each pay period. Payroll is not only a matter of transferring wages. It includes calculating pay, deducting amounts at source, remitting those amounts to the Canada Revenue Agency (CRA) on time, keeping records, and issuing slips at year-end. Mistakes compound because they repeat every cycle until someone notices them. A clear grasp of the basics helps Mississauga and Ontario owners keep payroll accurate without turning it into a second job.

What has to be deducted at source

When you pay an employee, you generally have to deduct Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax from the wage or salary. The employer also pays a share of CPP and EI. These source deductions are not optional once a person is an employee, and they are not the same as a contractor invoice. Treating someone as a contractor when the working relationship looks like employment is a common source of CRA reviews, so the classification should be settled before the first pay run.

The amounts come from CRA payroll tables or certified payroll software, based on the employee’s TD1 information and the pay frequency. Getting the setup right at the start matters more than correcting a string of incorrect runs later. New hires need to be added with the right province of employment, and departures need a clean final pay.

Remitting on CRA’s schedule, not when it is convenient

Deducting the amounts is only half of the obligation. The employer’s share, together with the amounts withheld from the employee, has to be remitted to CRA on the schedule that applies to the business. That frequency depends on the size of the average monthly remittance, and it can be quarterly, regular, or more frequent for larger payrolls. The due dates are strict. A missed remittance can lead to penalties and interest, and the problem grows if it is repeated across several pay periods.

The practical habit is to treat remittance dates with the same seriousness as payday itself. Someone has to be responsible for running payroll, checking the totals, and sending the remittance. Those dates are easy to miss during a busy week, which is why many small employers keep payroll on a fixed calendar and review each run before the money leaves the account.

T4s and the records you need to keep

At the end of the calendar year, employers have to prepare T4 slips for employees and file the T4 information return with CRA. That filing is generally due by the last day of February following the year in which the amounts were paid. The slips have to reflect the wages, deductions, and other amounts already recorded through the year. If the weekly or monthly runs were incomplete, year-end becomes a reconstruction project instead of a review.

CRA also expects employers to keep payroll records, including hours, gross pay, deductions, remittances, and the supporting forms. Business records are generally kept for six years. A clean set of records also helps if an employee asks for a pay stub, if a Record of Employment is required when someone leaves, or if CRA asks questions later. Each pay run should be posted to the books rather than left in a separate spreadsheet, so payroll and the general ledger agree.

A process that can keep pace with the business

Full-cycle payroll usually covers timesheets, pay calculation, source deductions, direct deposit or other payment, remittances, and year-end T4s as one sequence, not a set of disconnected tasks. Onboarding and offboarding should sit in the same process, so a new hire or a departure does not get missed. If you already use payroll software, the setup still needs to be checked, especially tax codes, remittance accounts, and year-to-date figures if you are switching providers mid-year.

Payroll also has to sit alongside the rest of the accounts. Monthly bookkeeping, HST/GST returns, and corporate or personal tax filings all rely on payroll figures that are complete. When those numbers are reviewed by an experienced accountant before anything is submitted to CRA, errors are more likely to be caught in the file rather than after a notice arrives.

A practical way to get support

If you are running payroll for a small team in Ontario and want the calculations, remittances, and T4s handled as one process, Accounting Firm Mississauga provides payroll processing for local employers, along with monthly bookkeeping, backlog accounting, corporate tax returns, personal tax filing, HST/GST returns, financial reporting, and audit support. Every file is reviewed by an experienced accountant before it is submitted to the CRA, and a flat-fee quote is provided after a free consultation, before work begins. You can also speak with their team about payroll services in Mississauga if your business is in Port Credit, Streetsville, Meadowvale, Erin Mills, Cooksville, Clarkson, Malton, or Mississauga City Centre. Their office is at 1470 Hurontario St #100, Mississauga, ON L5G 3H4, and you can reach them on +1 416 991 0900 or info@accountingfirmmississauga.ca.