Payroll Compliance in Ontario: What Every Employer Needs to Know

Registering as an Employer

Before you can pay employees, you need a payroll program account with the CRA. You can register online through My Business Account or by calling the CRA. You'll receive a Business Number (BN) with a RP suffix (e.g., 123456789 RP 0001).

You'll also need to register with the Workplace Safety and Insurance Board (WSIB) if your industry requires it, and with the Ontario Ministry of Labour if you have employees in regulated industries.

Mandatory Payroll Deductions

Every pay period, you must calculate and deduct three amounts from employee pay:

• Canada Pension Plan (CPP) contributions — both employee and employer portions
• Employment Insurance (EI) premiums — employee deduction plus 1.4x employer contribution
• Federal and provincial income tax — based on TD1 forms completed by the employee

CPP Contributions in 2026

In 2026, the CPP contribution rate is 5.95% on earnings between the basic exemption ($3,500) and the Year's Maximum Pensionable Earnings (YMPE). Both the employee and employer contribute this rate, meaning your total CPP cost per employee is 11.9% of pensionable earnings.

CPP2 (the second additional CPP contribution) also applies to earnings between the YMPE and the Year's Additional Maximum Pensionable Earnings (YAMPE). Ensure your payroll software is updated to handle both CPP tiers.

Remittance Deadlines

Most new employers are regular remitters, meaning payroll deductions must be remitted to the CRA by the 15th of the month following the pay period. As your payroll grows, you may become an accelerated remitter with more frequent deadlines.

Late remittances attract penalties of 3% to 10% of the amount owing, plus daily compound interest. The CRA takes payroll remittances very seriously — these are considered trust funds held on behalf of employees.

Year-End Reporting: T4 Slips

By the last day of February each year, you must issue T4 slips to all employees and file the T4 Summary with the CRA. T4 slips report employment income, CPP contributions, EI premiums, and income tax deducted.

Common T4 errors include missing or incorrect box amounts, failing to report taxable benefits (company car, group insurance, etc.), and late filing. Penalties for late T4 filing start at $100 and increase based on the number of slips.

Ontario Employment Standards Act Requirements

Beyond CRA obligations, Ontario employers must comply with the Employment Standards Act (ESA), which governs minimum wage, overtime, vacation pay, public holidays, and termination notice.

Key ESA requirements include: vacation pay of at least 4% (or 6% after five years), public holiday pay for nine Ontario statutory holidays, and written notice or pay in lieu of notice upon termination based on length of service.

Record-Keeping Requirements

You must keep payroll records for at least six years. This includes time sheets, pay stubs, TD1 forms, records of employment (ROEs), and all remittance documentation.

When an employee leaves, you must issue a Record of Employment (ROE) within five calendar days of the last day of work. ROEs are filed electronically through Service Canada.