How to run payroll in Canada

The Canada payroll cycle follows a bi-weekly schedule. Most companies process payments every two weeks, typically on Fridays, though some larger organizations opt for semi-monthly payments on the 15th and last day of each month.

Payment frequency and timing

Canadian employers aren't legally required to follow a specific pay frequency, but bi-weekly payments are the standard across most industries. About 60% of Canadian employers use bi-weekly cycles, while 25% pay semi-monthly and 15% pay weekly or monthly.

Payment must be made within a reasonable timeframe after the pay period ends. Most provinces require payment within 10 days of the pay period close, though this varies by jurisdiction.

Holiday and vacation pay

Canada requires vacation pay to be calculated and paid with each paycheck or as a lump sum before vacation is taken. The minimum vacation pay rate is 4% of gross earnings for employees with less than five years of service, and 6% for those with five or more years.

Statutory holiday pay must be paid at regular rates for eligible employees. If an employee works on a statutory holiday, they receive their regular wage plus premium pay (typically 1.5x their regular rate).

Pay Type	Rate	When Paid
Vacation pay (0-5 years)	4% of gross wages	Each pay period or before vacation
Vacation pay (5+ years)	6% of gross wages	Each pay period or before vacation
Statutory holiday	Regular rate	Regular pay cycle
Holiday worked	1.5x regular rate	Next pay cycle

Payment methods and currency

Direct deposit is the standard payment method in Canada. Employers must obtain written authorization from employees before depositing wages into their bank accounts.

International companies paying Canadian employees must pay in Canadian dollars (CAD) unless the employee specifically agrees to payment in another currency. Currency conversion must be done at reasonable exchange rates, typically the Bank of Canada rate on the payment date.

Cash payments are permitted but discouraged due to administrative burden and security concerns. Cheques are acceptable but becoming less common.

Payslip requirements

Canadian payslips must include specific information by law:

Payslips can be provided electronically if employees can access and print them. French-language payslips are required in Quebec, while other provinces accept English payslips.

Employers must retain payroll records for at least three years in most provinces, with some jurisdictions requiring longer retention periods.

Income tax in Canada ranges from 15% to 33% federally, with the top rate kicking in at C$246,752. But here's what catches most employers: you'll also withhold provincial tax that varies dramatically by location.

Income tax brackets

Canada uses a combined federal and provincial system. Federal rates apply nationwide, but provincial rates vary significantly.

Federal tax brackets for 2026

Annual Income (C$)	Tax Rate
C$0 - C$55,867	15%
C$55,868 - C$111,733	20.5%
C$111,734 - C$173,205	26%
C$173,206 - C$246,752	29%
C$246,753+	33%

Provincial tax examples

Provincial rates stack on top of federal rates. Here's what your employees pay in major provinces:

• Ontario: 5.05% to 13.16% (total combined rate: 20.05% to 46.16%)
• Quebec: 14% to 25.75% (total combined rate: 29% to 58.75%)
• Alberta: 10% flat rate (total combined rate: 25% to 43%)
• British Columbia: 5.06% to 20.5% (total combined rate: 20.06% to 53.5%)

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Withholding requirements

You're responsible for withholding both federal and provincial income tax from every paycheck. No exceptions, even for part-time or temporary workers.

Registration process

Register for a payroll program account with Canada Revenue Agency (CRA) before your first pay run. You'll get a 15-character business number that looks like this: 123456789RP0001.

The process takes 5-10 business days online, longer by mail. Don't wait until the last minute.

Filing deadlines

Monthly remitters (most employers): 15th of the following month Quarterly remitters (small employers under C$3,000 monthly): 15th of month following quarter Accelerated remitters (large employers): Up to 4 times per month

Miss the deadline and you'll pay 3% penalty plus 1% per month interest.

Tax registration

Beyond your basic payroll account, Quebec employers need separate registration with Revenu Québec. This adds another 2-3 weeks to your setup timeline.

Required documentation

• Articles of incorporation or business registration
• Signing authority documentation
• Expected payroll amounts and frequency
• Business address (can't use PO boxes)

Special tax considerations

Non-resident employees

Non-residents pay the same income tax rates but lose access to most personal tax credits. This means higher effective withholding rates - often 25-30% minimum even on lower incomes.

If your employee works in Canada less than 183 days annually and is paid by a non-Canadian entity, different rules may apply under tax treaties.

Regional variations

Yukon, Northwest Territories, and Nunavut have their own tax rates and additional northern benefits. Factor these into your calculations for remote workers in these territories.

Common tax mistakes

Wrong provincial withholding: Using head office province instead of where employee works. Penalty: 10% of tax owing plus interest.

Missing remittance deadlines: Late payments cost 3% immediately plus 1% monthly. A C$10,000 remittance costs C$300 extra if one day late.

Incorrect non-resident treatment: Under-withholding for non-residents triggers reassessments and penalties averaging C$2,000-5,000 per employee.

Quebec filing errors: Forgetting separate Quebec remittances. Penalty starts at C$100 per occurrence, escalates quickly for repeat offenders.

A C$60,000 salary in Canada actually costs you C$67,140. Here's the breakdown.

Your employer contributions in Canada cover employment insurance, the Canada Pension Plan, and Workers' Compensation. Provincial health taxes may apply depending on your location.

Contribution breakdown

Contribution Type	Employer Rate	Employee Rate	2026 Cap
Canada Pension Plan (CPP)	5.95%	5.95%	C$71,300
Employment Insurance (EI)	2.212%	1.58%	C$68,500
Workers' Compensation	0.5-3.0%*	0%	-
Quebec Pension Plan (QPP)**	6.40%	6.40%	C$71,300
Quebec Parental Insurance**	0.692%	0.494%	C$94,000

*Varies by province and industry risk level **Quebec employees only

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Total employer cost example

For a C$60,000 salary in Ontario:

• Base salary: C$60,000
• CPP contribution: C$3,570
• EI contribution: C$1,327
• Workers' Compensation: C$300 (estimated)
• Total employer cost: C$65,197
• Cost multiplier: 1.087

Quebec employees cost slightly more due to QPP and parental insurance premiums.

Contribution caps and ceilings

The CPP maximum pensionable earnings for 2026 is C$71,300. You'll stop paying CPP contributions once an employee hits this threshold.

EI contributions cap at C$68,500 in annual earnings. High earners save you money on EI premiums after reaching this limit.

Workers' Compensation has no cap - you'll pay the full rate on all earnings.

Registration requirements

You must register with the Canada Revenue Agency (CRA) for a payroll account before your first payroll. This covers both CPP and EI contributions.

Workers' Compensation registration happens at the provincial level. Each province has different requirements and timelines.

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Apply for your CRA payroll account online - it takes 5-10 business days to process. You'll need your business number and incorporation documents.

Payment deadlines

Remit CPP and EI contributions by the 15th of the month following the pay period. Small employers (under C$25,000 annual remittances) can pay quarterly.

Workers' Compensation deadlines vary by province. Most require monthly payments by the 15th, but some allow quarterly payments for smaller employers.

Miss a deadline and you'll face immediate penalties. The CRA doesn't offer grace periods for contribution payments.

Employees in Canada get 10 days minimum vacation after one year. That's two weeks of paid leave to calculate, plus all the provincial variations that make Canadian payroll interesting.

Annual leave

Vacation entitlement builds over time. Employees earn 4% of gross wages (equivalent to 2 weeks) after one year, jumping to 6% (3 weeks) after five years in most provinces. Some provinces like Saskatchewan give three weeks from day one.

Vacation pay calculation is straightforward - it's a percentage of all wages earned. This includes regular pay, overtime, commissions, and bonuses. You can pay it with each paycheck or in a lump sum before vacation.

Carryover rules vary by province, but most allow unused vacation to carry forward for up to 12 months. Some provinces require employee agreement for carryover.

Termination payouts are mandatory. You must pay all earned but unused vacation pay on the final paycheck. This includes both accrued time and the 4-6% vacation pay.

Sick leave

Provincial requirements range from zero to 10 days annually. British Columbia leads with five paid sick days, while federally regulated employees get 10 days. Most provinces offer unpaid sick leave only.

Employer payment applies only where provincial law requires paid sick leave. Otherwise, employees use Employment Insurance (EI) sickness benefits after a one-week waiting period.

Medical certificates can be required after three consecutive days in most provinces. Some provinces prohibit requiring certificates for short absences.

Payroll impact is immediate when you're required to pay. Track sick days used to ensure compliance with maximum entitlements.

Parental leave

Maternity leave provides 15 weeks through Employment Insurance at 55% of average weekly earnings, up to a maximum of C$668 per week in 2026. Some employers top up to full salary.

Parental leave adds 35 weeks (standard) or 61 weeks (extended) that either parent can take. Extended benefits pay 33% instead of 55%.

Employer obligations include maintaining benefit contributions during leave and guaranteeing job return. You don't pay wages unless you offer a top-up program.

Payroll processing continues for benefit deductions if you're topping up wages. Otherwise, you'll handle the return-to-work transition and any benefit adjustments.

Public holidays 2026

Date	Holiday	Notes
January 1	New Year's Day	National
April 18	Good Friday	National (except Quebec)
April 21	Easter Monday	Federal employees, some provinces
May 18	Victoria Day	National (except Atlantic provinces)
July 1	Canada Day	National
September 7	Labour Day	National
October 12	Thanksgiving	National (except Atlantic provinces)
November 11	Remembrance Day	Federal, most provinces
December 25	Christmas Day	National
December 26	Boxing Day	Some provinces

Provincial additions include Family Day (February), Civic Holiday (August), and various provincial observances. Quebec celebrates different holidays including Saint-Jean-Baptiste Day (June 24).

Holiday pay equals average daily wage for the previous 30 days. Employees working holidays earn premium pay plus the holiday pay.

Mandatory benefits affecting payroll

Employment Insurance requires 1.63% employee deduction and 2.28% employer contribution on earnings up to C$68,500 in 2026.

Canada Pension Plan takes 5.95% from both employee and employer on earnings between C$3,500 and C$71,300 annually.

Workers' compensation varies by province and industry, ranging from 0.5% to 8% of payroll. Employers pay the full cost.

Provincial health premiums apply in some provinces. Ontario eliminated its premium, but other provinces may have payroll health taxes.

Group benefits aren't mandatory but are common. Employer contributions to health and dental plans create taxable benefits for employees in most cases.

Canada tax authorities audit 12% of employers annually. Here's what they check.

The Canada Revenue Agency (CRA) focuses on payroll compliance more than ever in 2026. They're particularly strict about remittance deadlines and proper withholdings. Miss these requirements and you'll face penalties that add up fast.

What monthly filings do you need to submit?

Your monthly remittance covers income tax, CPP, and EI deductions from employee paychecks, plus your employer portions. The deadline is the 15th of the month following the pay period.

For example, January payroll deductions must reach CRA by February 15th. You'll file and pay through the CRA's My Business Account portal.

Quarterly remitters get extended deadlines if their average monthly withholding is under C$3,000. You'll pay by the 15th of the month following each quarter end.

Accelerated remitters with higher withholdings pay twice monthly or even more frequently. CRA assigns your remittance frequency based on your withholding amounts.

What annual reports are required?

T4 slips must reach employees by February 28, 2027 for 2026 earnings. File the T4 Summary with CRA by the same date. Late filing costs C$25 per day, minimum C$100.

Record of Employment (ROE) forms are due within 5 calendar days when employees leave or take unpaid leave over 7 days. Submit these electronically through ROE Web.

Payroll deductions reconciliation happens automatically when you file T4s. CRA compares your annual totals against monthly remittances. Discrepancies trigger immediate follow-up.

What employee documentation must you maintain?

Employment contracts aren't legally required in all provinces, but provincial employment standards demand written terms for key conditions. Include pay rates, work schedules, and benefit details.

Pay statements must show gross pay, all deductions, net pay, and pay period dates. Employees need access to these records for at least 3 years.

Payroll registers document every payment and deduction. Store these securely for 6 years along with supporting documents like timesheets and expense claims.

Language requirements vary by province. Quebec employers must provide pay statements in French unless employees specifically request English.

What are the penalties for non-compliance?

Violation	Penalty	Additional Costs
Late monthly remittance	C$25 per day minimum	10% annual interest
Missing T4 deadline	C$25 per day, minimum C$100	Up to C$2,500 maximum
Incorrect withholding	10% of underpayment	Plus interest from due date
Missing ROE	C$54 to C$378 per form	Service Canada penalties
Inadequate records	Up to C$25,000	Plus reconstruction costs

Repeated violations escalate penalties significantly. CRA can impose gross negligence penalties of 50% of the tax owing for serious cases.

Director liability applies to corporate officers. You're personally responsible for unremitted source deductions, even if the company declares bankruptcy.

Which regulatory bodies oversee payroll?

Canada Revenue Agency (CRA) handles all federal tax compliance. Access their services through My Business Account at canada.ca/cra-business.

Employment and Social Development Canada manages ROE requirements and EI claims. Use ROE Web for electronic submissions at canada.ca/roe.

Provincial employment standards offices enforce minimum wage, overtime, and leave requirements. Each province maintains separate online portals and contact systems.

Workers' compensation boards in each province require separate registration and reporting. These operate independently from federal payroll obligations.

Contact CRA's business enquiries line at 1-800-959-5525 for payroll questions. Their automated system routes calls to specialized agents during business hours.

Minimum wage in Canada increased 3.2% in 2026, from C$17.30 to C$17.85 per hour federally. Provincial rates vary significantly, with Ontario reaching C$18.20 and Alberta maintaining C$17.85.

Federal tax brackets adjustment - Effective January 1, 2026

The federal tax brackets increased by 2.8% for inflation. The basic personal amount rose to C$16,040, up from C$15,610 in 2025.

Key bracket changes include the 20.5% rate now applying to income between C$55,867 and C$111,733 (previously C$54,395 to C$108,790). This affects withholding calculations for most employees.

CPP contribution rate increase - Effective January 1, 2026

The Canada Pension Plan contribution rate increased to 5.95% for employees and employers, up from 5.85% in 2025. The maximum pensionable earnings rose to C$71,300, increasing the annual maximum contribution to C$4,242.

The enhanced CPP second additional contribution rate remains at 4% on earnings between C$71,300 and C$79,400.

EI premium reduction - Effective January 1, 2026

Employment Insurance premiums decreased to 2.13% for employees (from 2.25% in 2025) and 2.98% for employers. The maximum insurable earnings increased to C$67,500, creating a maximum annual premium of C$1,438 for employees.

Digital payroll reporting mandate - Effective July 1, 2026

The Canada Revenue Agency now requires all employers with 50+ employees to submit payroll information electronically within 15 days of each pay period. Paper submissions are no longer accepted for these employers.

Penalties start at C$1,000 for late submissions, increasing to C$2,500 for repeat violations.