(NC) A great business begins with a great idea. But that spark does not mean entrepreneurs magically understand all aspects of running a business. One of the most important parts, and one that can be tricky to grasp, is payroll.
To properly establish a payroll system there are several important steps, including:
1. Registering with the government
You’ll need a 15-digit business number that allows the Canada Revenue Agency (CRA) to identify your business for tax matters. You may also have an obligation to establish additional provincial accounts for workers’ compensation or employer health taxes, depending on where your business and your employees are located.
2. Managing your money
While not a requirement, establishing a dedicated payroll bank account is recommended to keep funds for payroll costs separate from business expenses. This is important because the CRA specifically states that once an employer has withheld payroll source deductions from employees, these amounts are to be held in trust until remittance is due.
3. Creating a compensation model
While there is legislation detailing minimum wage based on hours worked, the method in which employees are paid is completely up to you as an employer. You’ll have to decide whether you want to pay workers a salary, hourly wage or commission.
“Understanding the basics of payroll in the early stages of your business will save you tremendous time and resources in the long run,” says Peter Tzanetakis, president of the National Payroll Institute. “Mastering these basics will enable you to protect your business in the event of audits and ultimately support the health of your business long-term.”
To learn more about how payroll best practices can support your business’s health, you can download a full e-book at payroll.ca/payrollcheckup.
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