Hiring your first employee in Canada is not just paying a salary. From that day on, the business withholds tax and contributions, remits them to the CRA every month, issues slips at year-end and follows the province’s employment rules. Each step has a deadline, and penalties start on day one.
This guide covers what a business has to get right, from the first pay stub to year-end, with 2026 figures and Ontario’s rules.
- An employee costs more than their salary: the business pays its own share of CPP and 1.4 times the employee’s EI.
- Remittances are due on the 15th of the following month for most small businesses, and being more than 7 days late costs 10%.
- Ontario’s minimum wage rises to CAD 17.95 on October 1, 2026.
Before the first payday
- CRA payroll account: the payroll (RP) program account is opened under the business’s Business Number.
- TD1 forms: each employee fills out the federal and provincial forms when they start. They set how much tax to withhold.
- WSIB: in Ontario, register within 10 days of hiring your first worker.
- Information for employees: a copy of Ontario’s employment standards guide within 30 days. Employers with 25 or more employees also provide pay, hours and work location in writing before the first day.
What comes off each pay stub
Deduction | Employee, in 2026 | Employer also pays |
Income tax | Per CRA tables and the TD1 | Nothing |
CPP | 5.95% between CAD 3,500 and CAD 74,600 | The same amount |
CPP2 | 4% between CAD 74,600 and CAD 85,000 | The same amount |
EI | 1.63% up to CAD 68,900 | 1.4 times the employee’s amount |
An example: a CAD 50,000 salary costs the business another CAD 2,766.75 in CPP and CAD 1,141 in EI, or about CAD 53,900 in total. That is almost 8% more, before WSIB, which depends on the industry, and any benefits.
When to remit
The deadline depends on the average amount the business withholds each month. The CRA tells each business which category it is in:
Category | Who it applies to |
Quarterly | Small employers with a perfect record: under CAD 3,000 withheld per month and 12 months without a late payment |
Regular, by the 15th of the following month | Under CAD 25,000 withheld per month on average. Most businesses |
Accelerated threshold 1 | CAD 25,000 to CAD 99,999.99 per month |
Accelerated threshold 2 | CAD 100,000 or more per month |
Late remittance penalties run from 3% to 10%, depending on how many days late. The full table is in our guide to compliance in practice.
Ontario’s rules
- Minimum wage: CAD 17.60 an hour since October 1, 2025, and CAD 17.95 from October 1, 2026. For students under 18, CAD 16.60, then CAD 16.90.
- Vacation: 2 weeks and 4% vacation pay for employees with under 5 years of service. From 5 years, 3 weeks and 6%.
- Public holidays: 9 a year. New Year’s Day, Family Day, Good Friday, Victoria Day, Canada Day, Labour Day, Thanksgiving, Christmas and Boxing Day.
- Employer Health Tax: private employers with Ontario payroll up to CAD 5 million are exempt on the first CAD 1 million of payroll. In practice, a small business pays nothing.
Year-end
By the last day of February, the business files a T4 for each employee and the T4 Summary. When someone leaves or goes seven days in a row without work or pay, the business issues a Record of Employment (ROE), generally within 5 days after the end of the pay period. Payroll records must be kept for 6 years.
MB Tax runs payroll for the businesses it serves, from remittances to T4s. If you are just starting out, see our guide to what compliance means for a business in Canada.
Frequently Asked Questions (FAQ)
The employer matches the employee’s CPP and pays 1.4 times their EI. On a CAD 50,000 salary in 2026, that is about CAD 3,900 more, before WSIB and benefits.
For most small businesses, by the 15th of the month after payday. Very small employers with a perfect record may remit quarterly.
CAD 17.60 an hour since October 1, 2025, and CAD 17.95 from October 1, 2026.
2 weeks and 4% vacation pay with under 5 years of service, and 3 weeks and 6% from 5 years.
By the last day of February, together with the T4 Summary.
