Full Guide to Canadian Payroll for Foreign Companies
Complete guide to understanding and managing Canadian payroll for U.S. and foreign companies. Learn about deductions, remittances, tax slips, and compliance requirements.
Canadian payroll involves several mandatory deductions and remittances that differ from U.S. payroll. Understanding these requirements is essential for any foreign company hiring Canadian employees.
Mandatory Payroll Deductions
What must be deducted from Canadian employee paychecks
Income Tax
Federal and provincial income tax based on employee's province of residence and income level. Rates vary by province.
Source: CRA
Canada Pension Plan (CPP)
5.95% of earnings up to $66,600 (2024). Both employer and employee contribute. Self-employed pay both portions.
Source: CRA CPP Information
Employment Insurance (EI)
2.21% of earnings up to $60,300 (2024). Employer pays 1.4x the employee rate. Maximum annual contribution applies.
Source: CRA EI Information
Quebec-Specific Deductions
Quebec Pension Plan (QPP): 6.4% up to $66,600. Quebec Parental Insurance Plan (QPIP): 0.494% up to $91,000.
Source: Revenu Québec
Remittance Requirements
When and how to remit payroll deductions to the CRA
Remittance Frequency
Remittance frequency depends on your average monthly withholding amount:
- Monthly: Less than $25,000 average monthly remittances
- Quarterly: Less than $3,000 average monthly remittances (if approved)
- Accelerated: More than $25,000 average monthly remittances
Most employers remit monthly, with deadlines typically on the 15th of the following month.
What Must Be Remitted
- Employee income tax deductions
- CPP contributions (employer + employee portions)
- EI premiums (employer + employee portions)
- Provincial variations (QPP, QPIP in Quebec)
Penalties for Late Remittances
Late remittances result in penalties and interest charges. The CRA can also require more frequent remittances for repeat offenders.
Tax Slip Requirements
Annual reporting obligations for Canadian employers
T4 Slip (Statement of Remuneration Paid)
Employers must issue T4 slips to all employees by the last day of February following the tax year. T4 slips report:
- Total earnings
- Income tax deducted
- CPP contributions
- EI premiums
- Other deductions and benefits
Employers must also file a T4 Summary with the CRA by the same deadline.
T4A Slip (Statement of Pension, Retirement, Annuity, and Other Income)
Used for contractors and consultants. Required for payments over $500 in a calendar year.
Provincial Variations
Important differences across Canadian provinces
Quebec
Quebec has additional requirements:
- Quebec Pension Plan (QPP) instead of CPP
- Quebec Parental Insurance Plan (QPIP)
- Separate remittances to Revenu Québec
- RL-1 slips (Quebec equivalent of T4)
Other Provinces
While most provinces follow federal CPP/EI rules, provincial income tax rates vary significantly. Ensure you're using the correct provincial tax tables for each employee's province of residence.
Simplify Payroll with EOR Services
Let us handle all payroll complexity for you
Managing Canadian payroll requires understanding complex rules, maintaining accurate records, and ensuring timely remittances. Our Canadian Employer of Record services handle all of this for you:
- Accurate calculation of all deductions
- Timely remittances to CRA and provincial authorities
- T4 and RL-1 slip generation and filing
- Compliance with all provincial variations
- Ongoing support and expertise