Payroll and taxes in Canada

At a glance

Key figures with the official source for each, checked November 2026.

Registrations before the first pay run

A company that pays wages in Canada needs a business number from the Canada Revenue Agency (CRA) and a payroll program account attached to it. The CRA says the account must be open before the first remittance is due. If any employee has Quebec as the province of employment, a separate registration with Revenu Québec is needed, because Quebec collects its own income tax, QPP, QPIP and health services fund contributions.

• Per employee: the employer must obtain the Social Insurance Number within three days of the start date and collect a federal TD1 form, plus the provincial TD1, before the first pay.
• Per province: workers' compensation registration with the provincial board, and an employer health tax account where the province has one.
• Province of employment: it is the province of the employer establishment where the employee reports. Since January 1, 2024 a full-time remote employee is assigned to the establishment they are reasonably attached to. If there is none, the province of the paying establishment applies.

An employer with no establishment in Canada withholds using the federal TD1 only. Under an EOR arrangement the EOR holds these accounts and is the employer of record on every filing.

Pay frequency and payslips

No federal law sets one payroll cycle for private employers. Each province sets its own rule, and the strictest province in your team usually decides the cycle. Bi-weekly and semi-monthly cycles satisfy all three large provinces.

A wage statement is required with every pay. In Ontario it must show the pay period, the wage rate, gross wages and how they were calculated, each deduction and its purpose, and net wages. Ontario allows only three kinds of deduction: statutory ones, court orders, and those the employee has authorised in writing with a stated amount or formula.

Income tax withholding

Employers withhold federal and provincial income tax from each pay using the CRA payroll deductions tables or formulas, based on the employee's TD1 claims. Quebec provincial tax is withheld separately and sent to Revenu Québec. The 2026 bands are below.

The lowest federal rate is 14% for 2026. Withholding is an estimate. The employee settles the final amount on a personal return, which is also where a difference between the province of employment and the province of residence is reconciled.

Pension and insurance contributions

Three contributory programmes apply to almost every employee. Each has an annual earnings ceiling, so contributions stop part way through the year for higher earners.

For an employee earning CAD 100,000 outside Quebec, the employer pays CAD 4,230.45 of CPP, CAD 416 of CPP2 and CAD 1,572.30 of EI, a total of CAD 6,218.75. In Quebec the same salary costs CAD 6,751.28 across QPP, EI and QPIP, before the health services fund.

Provincial payroll taxes and workers' compensation

Three provincial levies matter most. All are paid by the employer only.

• Ontario Employer Health Tax. The rate runs from 0.98% on Ontario payroll up to CAD 200,000 to 1.95% above CAD 400,000. Eligible employers with Ontario payroll under CAD 5 million deduct a CAD 1 million exemption, shared among associated employers. Monthly instalments start above CAD 1.2 million of payroll. The annual return is due by March 15.
• British Columbia Employer Health Tax. No tax on B.C. payroll of CAD 1 million or less. Between CAD 1 million and CAD 1.5 million the tax is 5.85% of the amount above CAD 1 million. Above CAD 1.5 million it is 1.95% of the whole payroll. Instalments fall on June 15, September 15 and December 15, and the return is due March 31.
• Quebec health services fund. For 2026 the rate is 1.65% for most employers with total payroll of CAD 1 million or less, 1.25% in the primary and manufacturing sectors, rising on a sliding scale to 4.26% at CAD 7.8 million.

Workers' compensation premiums are also employer-paid. Each provincial board sets the rate by industry classification, so the cost varies with the work performed.

Remittance deadlines and penalties

The CRA assigns a remitter type from the employer's average monthly withholding amount (AMWA).

Late remittance penalties are 3% for 1 to 3 days late, 5% for 4 or 5 days, 7% for 6 or 7 days and 10% beyond that. Failure to deduct carries a 10% penalty, rising to 20% for a second failure in the same year made knowingly or through gross negligence. Directors of a corporation are jointly and severally liable for unremitted amounts, with penalties and interest. Payroll records must be kept for at least six years after the year they relate to.

Year-end reporting, ROEs and bonuses

Employers give each employee a T4 slip and file the T4 information return by the last day of February after the calendar year. When that date falls on a weekend the deadline moves to the next business day, which is why the 2025 return was due March 2, 2026. Quebec employees also receive an RL-1 slip filed with Revenu Québec.

• Electronic filing: mandatory for anyone filing more than 5 information returns in a year.
• Late filing: CAD 10 a day for 1 to 50 slips, capped at CAD 1,000, with a CAD 100 minimum. The scale rises with slip count.
• PIER review: the CRA checks T4 data for CPP and EI shortfalls and bills the employer for both shares of any deficiency.
• Record of Employment: due whenever an employee has 7 consecutive days with no work and no insurable earnings. Electronic ROEs are due within 5 calendar days after the end of that pay period.

Canada has no statutory 13th month salary or mandatory bonus. Bonuses are contractual. When paid, they are subject to income tax withholding, CPP and EI like other remuneration, up to the annual ceilings.

Frequently asked questions

More on hiring in Canada

Employer of record and hiring guide for Canada · Termination and notice · Benefits and leave · Contractors vs employees · Cost calculator · EOR vs PEO vs entity

Sources

• Canada Revenue Agency, CPP contribution rates, maximums and exemptions
• Canada Revenue Agency, second additional CPP contribution rates and maximums
• Canada Revenue Agency, EI premium rates and maximums
• Canada Revenue Agency, 2026 tax rates and income brackets
• Canada Revenue Agency, T4001 Employers' Guide, Payroll Deductions and Remittances
• Canada Revenue Agency, RC4120 Employers' Guide, Filing the T4 Slip and Summary
• Revenu Québec, Employers: Principal Changes for 2026
• Government of Ontario, Employer Health Tax

This page is general information, not legal, tax or immigration advice. Rates, thresholds and procedures change, and how they apply depends on the facts. Confirm current figures with a qualified adviser or with Dryft before acting. Checked November 2026.