BDC Clarifies Employer Obligations for Payroll Deductions

The Business Development Bank of Canada (BDC) has issued a guide to clarify employer responsibilities concerning payroll deductions. The publication aims to outline an employer's role in withholding and remitting statutory deductions from employee paychecks each pay period.

According to the guide, employers are responsible for deducting Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and federal and provincial income taxes from employee salaries. In addition to these withholdings, employers must remit their portion of CPP and EI contributions to relevant authorities, such as the Canada Revenue Agency (CRA).

Specific deduction amounts can vary by province or territory, particularly for income tax. Quebec operates under its own systems, including the Quebec Pension Plan (QPP) and the Quebec Parental Insurance Plan (QPIP), which employers must adhere to. Provincial income tax in Quebec is remitted to Revenu Québec, and the EI premium rate is lower in the province.

BDC emphasizes that funds collected through payroll deductions are government property and must be kept separate from a business's operating capital. Timely remittance of these collected amounts is an employer's obligation, with varying remittance schedules based on business size and type.

New employers must first open a payroll program account with the CRA and obtain employee Social Insurance Numbers and completed tax forms. At year-end, a summary of all employee earnings and deductions must be filed, and T4 or T4A slips must be provided to employees and submitted to the CRA by the end of February of the following year.