8.3 Payments and Remittances

8.3.1 Payments and Remittances

Payments are the compensation provided to employees for their services, encompassing wages, salary, bonuses, and other forms of monetary compensation. Remittances involve the transfer of withheld amounts and deductions from the employee’s paycheque to the relevant tax authorities or designated recipients. Remittances include income tax, employment insurance (EI) premiums, Canada Pension Plan (CPP) contributions, and other mandatory deductions. Employers must fulfill their remittance obligations to meet their legal responsibilities and ensure compliance with payroll regulations.

A payment is considered on time if the CRA receives it on or before the next business day. If you do not remit on time, the CRA will charge a penalty and apply interest, depending on the amount deducted. The CRA also charges penalties for failure to file an information return by the due date. The employer must provide the recipient with their slip and file their information return with the CRA on or before the due date. It is not considered late if the due date falls on a Saturday, Sunday, or a federal public holiday (Government of Canada, 2024b). The table below highlights the penalties for late remittance and late filing.

^{Note: Adapted from Government of Canada. (2024d). Remit (pay) payroll deductions and contributions: When to remit. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/remitting-source-deductions/how-when-remit-due-dates.html}

8.3.2 Paying Employees

Paying employees correctly and on time is an important part of effective payroll management. In this process, employers need to ensure compliance with legal requirements and maintain a positive employer-employee relationship.

If an employer does not deduct the necessary CPP contributions or EI premiums from an employee’s payments, the employer bears the responsibility for these amounts, even if they are unable to recover them from the employee. Both the employer’s and the employee’s share of any outstanding contributions and premiums will be evaluated, and penalties and interest may be assessed.

If the employer neglects to deduct the correct amount of income tax from the employee’s payments, a penalty may be imposed. It is important to inform the employee as soon as this error is realized. The employee then has the option to either pay the amount when filing their income tax and benefits return or request that the employer deduct additional income tax at the source.

Employees who choose to have more tax deducted from their remuneration should fill out a federal TD1 form for their employer to show how much more tax they want deducted.

The CRA can assess a penalty of 10% of the amount of the CPP, EI, and/or income tax that the employer did not deduct.

Employees who are not paid correctly or on time may take legal action against their employer. This can result in lawsuits for unpaid wages, damages, and claims for interest on any overdue amounts. Late or incorrect payments can also damage the employer-employee relationship, leading to a loss of trust, decreased employee morale, and potential employee turnover. These negative consequences can impact productivity and culture.

8.3.2.1 Third-Party Deductions: Health Insurance, Wage Garnishments, and Pension Fund Contributions

When it comes to health insurance, employers must ensure that they accurately calculate and deduct the appropriate premiums from employees’ wages and remit them to the designated health insurance provider.

Employers may encounter wage garnishments, which involve deducting a portion of an employee’s wages to satisfy a legal obligation such as debt repayment or child support. Employers must comply with the garnishment orders and accurately calculate and remit the garnished amounts to the appropriate authorities. According to the Government of Canada (2012), garnishments cannot occur at the end of the first pay period. Employers are obligated to pay garnished amounts within 15 days after the second pay period and at the end of each subsequent pay period when debt remains owing.

Employers must also calculate and deduct the correct pension contributions from the employees’ wages and remit them to the pension fund or retirement plan provider.

8.3.3 Remittances to the CRA and Revenu Québec

8.3.3.1 What Is Remitted

What is remitted to the CRA? Employers are responsible for deducting federal and provincial or territorial income tax from an employee’s wages. These deductions are based on the employee’s income and tax rates.

Both employers and employees are required to contribute to the CPP and EI programs. Employers deduct the employees’ portion of CPP contributions and EI premiums from their pay, then the employer’s and employees’ contributions are remitted to CRA.

The deducted amounts are remitted to the CRA according to the employer’s remitting frequency.

For businesses in Québec, the province administers its own provincial pension plan called the Québec Provincial Plan (QPP), as well as its own provincial income tax and the Québec Parental Insurance Plan (QPIP). Employers in Québec deduct QPP contributions rather than CPP contributions. The QPP, QPIP, and provincial tax deductions are remitted to Revenu Québec, whereas CPP, EI and federal tax deductions are remitted to the CRA (Revenu Québec, n.d.).

8.3.3.2 Methods of Payment

Employers are eligible to make remittances by a variety of methods, including by online payment, by cheque, or in person at the employer’s bank or financial institution (Government of Canada, 2024b). Cheques and payments made at the employer’s bank must be accompanied by a personalized remittance voucher. This remittance voucher is called a PD7A Statement of Account for Current Source Deductions, which must in turn be ordered from the CRA (Government of Canada, 2024e).

8.3.3.2.1 Payment Options

Payments to the CRA may be made in the following ways:

• In person at any Canadian bank, financial institution, credit union, or Canada Post outlet. The PD7A form must accompany the remittance
• By online banking app or website using the Payroll Business Number and business bank account
• Using “My Payment” with a credit or debit card, PayPal, or Interac e-transfer. My Payment is an electronic service to make payments directly to CRA using a bank access card (Government of Canada, 2024b)
• By pre-authorized debit

8.3.3.2.2 External Payroll Provider (Outsourced)

Alternatively, employers have the option to use a third-party payroll provider. In this case, the outsourced payroll provider is responsible for paying employees and making the required remittances. External payroll providers include the following:

• ADP
• Ceridian
• PaySimply
• Payworks
• Wave Payroll

A full list of external payroll providers can be found on the CRA website here (Government of Canada, 2024a).

8.3.3.3 Remittance Schedules

The employer’s remittance due date depends on their remitter type. The remitter type sets your remitting frequency, which affects the due dates based on your average monthly withholding amount (AMWA). Employers can view their remitter type on their “My Business Account” with CRA. Refer to the table below to determine the AMWA according to remitter type.

^{Note: Adapted from Government of Canada. (2024d). Remit (pay) payroll deductions and contributions: When to remit.  https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/remitting-source-deductions/how-when-remit-due-dates.html}

Employers are required to remit on time according to the remitter type schedule. The table below identifies due dates based on the remitter type.

^{Note: Adapted from Government of Canada. (2024d). Remit (pay) payroll deductions and contributions: Types of remitters. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/remitting-source-deductions/how-when-remit-more-information.html}

8.3.4 Provincial Health Taxes

Employers in five Canadian provinces are required to pay a tax based on the total annual wages of their employees. The revenue from these taxes is used to finance the health plans of the respective provinces. The provinces that enforce this payroll tax include British Columbia, Manitoba, Newfoundland and Labrador, Ontario, and Québec. Northwest Territories and Nunavut enforce provincial health care premiums on incomes, but the premiums are not classified as income tax. Refer to the table below for an overview of the health tax levies for each of the provinces.

Provincial Health Tax Levies

^{Note: Adapted from CanPay Software. (n.d.). Provincial payroll tax. https://www.canpay.com/payroll-information/provincial-payroll-tax.html}

8.3.5 Workers’ Compensation Boards

The remittance schedule for Workers’ Compensation Board (WCB) contributions vary by province and territory. Each province and territory has its own specific regulations and guidelines regarding remittance deadlines, which are typically monthly, quarterly, or annually. Detailed information can be found on the WCB website for each jurisdiction regarding deadlines, reporting requirements, and applicable payment methods. Refer to section 6.3 Employer Workers’ Compensation Premiums for additional information on the WCB.

References

CanPay Software. (n.d.). Provincial payroll tax. https://www.canpay.com/payroll-information/provincial-payroll-tax.html

Government of British Columbia. (2024). Employer health tax overview. https://www2.gov.bc.ca/gov/content/taxes/employer-health-tax/employer-health-tax-overview

Government of Canada. (2024a). Pay through a third-party service provider. https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/pay-a-service-provider.html

Government of Canada. (2024b). Payments to the CRA: Pay at the counter (teller) at a bank or credit union. https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/pay-your-canadian-financial-institution.html

Government of Canada. (2024c). Remit (pay) payroll deductions and contributions: Types of remitters. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/remitting-source-deductions/how-when-remit-more-information.html

Government of Canada. (2024d). Remit (pay) payroll deductions and contributions: When to remit. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/remitting-source-deductions/how-when-remit-due-dates.html

Government of Canada. (2024e). Statement of account for current source deductions – Regular and quarterly remitters – PD7A. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/remitting-source-deductions/how-when-remit-overview/statement-account-current-source-deductions-regular-quarterly-remitters.html

Government of Canada. (2023b). TD1 personal tax credits returns. https://www.canada.ca/en/revenue-agency/services/forms-publications/td1-personal-tax-credits-returns.html

Government of Canada. (2012). Guidelines for the processing of garnishments. https://www.tbs-sct.canada.ca/pol/doc-eng.aspx?id=25600

Manitoba.ca. (n.d.). The health and post-secondary education tax levy. https://www.gov.mb.ca/finance/taxation/taxes/payroll.html

Revenu Québec. (n.d.). Remitting source deductions and employer contributions. https://www.revenuquebec.ca/en/businesses/source-deductions-and-employer-contributions/remitting-source-deductions-and-employer-contributions/

Image Credits (images are listed in order of appearance)

April Calendar (modified to remove word “Tax”) by Nataliya Vaitkevich, Pexels licence

Close-up Photo of Red Pins on a Calendar by Towfiqu barbhuiya, Pexels licence