Hiring your first employee in Canada

Step 0: confirm employee status

Before you hire, satisfy yourself the role is genuinely employment. The Wiebe Door factors — control, tools, profit/loss, integration — plus the Connor Homes intention overlay are the test (see Employee vs Contractor). When in doubt, request a CRA ruling via Form CPT1. Misclassifying an employee as a contractor means retroactive CPP/EI both halves plus interest and penalties.

Step 1: open a federal payroll account

Add a payroll program account (RP) to your existing Business Number through CRA My Business Account. CRA issues an account like 12345 6789 RP0001.

Step 2: register with the provincial WCB

Step 3: onboarding paperwork

• Social Insurance Number (SIN) — record and verify within three days of hire.
• Federal TD1 (2025 version) plus the provincial TD1. Quebec uses TP-1015.3-V instead of the provincial TD1.
• Written employment contract that meets the provincial Employment Standards Act minimums (hours, notice, vacation, overtime).

Step 4: payroll deductions (2025)

• CPP: 5.95% each side on $3,500–$71,300; CPP2 4% each on $71,300–$81,200.
• QPP (Quebec only): 6.4% each side.
• EI: 1.64% employee; employer pays 1.4× (Quebec employees pay a reduced rate and add QPIP).
• QPIP (Quebec): ~0.692% employer on insurable earnings up to $98,000.

Step 5: employer-side costs

On top of the wage, you pay employer CPP match and EI at 1.4×. Then provincial payroll taxes apply above an exemption:

• Ontario EHT: 0.98–1.95% above the $1M exemption.
• BC EHT: $1M exempt, sliding scale to 1.95% above $1.5M.
• Manitoba Health and Education Levy: $2.25M exemption.
• Quebec FSS: 1.65% under $1M payroll, rising to 4.26%.

Step 6: remittance schedule and penalties

A regular remitter sends deductions by the 15th of the month followingpayment. Late-remittance penalties under s.227 of the Income Tax Act:

• 3% — 1–3 days late
• 5% — 4–5 days
• 7% — 6–7 days
• 10% — 8+ days
• 20% — repeat offender (same year)

Director liability (s.227.1): directors are personally liable for unremitted payroll source deductions. The liability survives corporate dissolution and is assessable for up to two years after you cease being a director.

Step 7: year-end

• T4 / T4A filed by the last day of February.
• ROE within 5 calendar days of the last day worked when an employee leaves.
• Quebec employers also issue RL-1 slips to Revenu Québec.

True cost of a $50,000 salary

Related calculators and guides

• Canadian Income Tax Calculator
• CPP/EI Calculator
• Should I Incorporate? Calculator
• Employee vs Contractor Guide