Running payroll for employees in Canada is manageable once you understand the structure, but the structure has a few layers worth knowing before you start. Every employee needs a Social Insurance Number (SIN) before payroll can run. You’ll deduct and remit three federal obligations on every paycheck: Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax. If any of your employees are in Quebec, add a separate provincial filing stack on top of that. This guide covers the numbers, the deadlines, and the mistakes that catch foreign employers off guard.
Payroll frequency and pay periods
Canada doesn’t mandate a single pay frequency, but bi-weekly (every 14 days) is by far the most common approach. It produces 26 pay periods per year and gives employees a predictable schedule that aligns well with standard payroll software cycles. Semi-monthly (24 periods/year) and monthly (12 periods/year) are also permitted under provincial employment standards, though monthly is less common for salaried employees and uncommon for hourly workers.
Your choice of frequency affects how you prorate deductions each period, so it’s worth setting this up correctly before you onboard your first Canadian hire. Changing pay frequency mid-year creates administrative complexity across your remittance calculations and year-end reporting.
What gets deducted from every paycheck
Three mandatory deductions apply to virtually every Canadian employee outside Quebec. Each one has a split between what the employee pays and what you, the employer, contribute on top.
Canada pension plan (cpp)
CPP is Canada’s national retirement contribution program. In 2026, both the employee and employer each contribute 5.95% on pensionable earnings between the basic exemption of $3,500 and the Year’s Maximum Pensionable Earnings (YMPE) of $74,600. The maximum contribution for each side is $4,230.45 per year.
A second tier called CPP2 applies to earnings between $74,600 and $85,000. The rate for CPP2 is 4% each (employee and employer), with a maximum contribution of $416 each per year. CPP2 is relatively new and catches some employers by surprise when they’re setting up payroll for higher earners.
Employment insurance (ei)
EI premiums fund Canada’s federal employment insurance program. Outside Quebec, the 2026 rates are 1.63% for employees and 2.282% for employers, applied on insurable earnings up to the Maximum Insurable Earnings (MIE) threshold of $68,500. The annual maximums are $1,123.07 for employees and $1,572.30 for employers.
Note that the employer rate is always higher than the employee rate. That’s by design: the employer share is set at 1.4 times the employee premium rate.
Federal income tax
Federal income tax is withheld from each paycheck based on a five-bracket progressive structure. The 2026 brackets are:
- 14% on the first tier of taxable income
- 20.5% on the next tier
- 26% on the next tier
- 29% on the next tier
- 33% on income above the top threshold
Employees complete a TD1 form (Personal Tax Credits Return) when they’re hired. That form tells you which credits to apply when calculating how much to withhold each period. The withholding is an estimate: employees true up to their actual liability when they file their personal tax returns each spring.
Provincial income tax
Every province and territory has its own income tax rates and brackets, which you deduct alongside federal tax. Provincial rates vary significantly. You deduct the correct provincial amount based on the province where the employee reports to work (not where your company is based). For Quebec specifically, the provincial income tax is handled through an entirely separate remittance process covered below.
Employer remittance obligations
Collecting deductions isn’t enough: you’re responsible for remitting them to the Canada Revenue Agency (CRA) on time. Remittances cover CPP (both employee and employer shares), EI (both shares), and all income tax withheld.
You use Form PD7A to remit to the CRA. The frequency of your remittances depends on your average monthly withholding amount from two calendar years prior:
- Regular remitters: remit by the 15th of the month following the payroll month. This applies to most new employers and smaller payrolls.
- Accelerated remitters (Threshold 1): remit within 3 banking days after the 15th and the last day of each month (twice monthly).
- Accelerated remitters (Threshold 2): remit within 3 banking days of each Wednesday and Friday payroll run (up to 4 times per month).
If you’re a new employer with no prior remittance history, you start as a regular remitter and your threshold is reassessed annually.
Late or missed remittances carry penalties. The CRA charges a percentage-based penalty starting at 3% for remittances 1 to 3 days late, scaling up to 10% for remittances more than 7 days late. Repeat violations can attract a 20% penalty. Interest accrues on top of penalties, so even small late payments add up quickly.
Year-end reporting
At year-end, your payroll obligations shift from remitting deductions to reporting them.
T4 slips
You must issue a T4 slip (Statement of Remuneration Paid) to every employee by the last day of February following the tax year. For the 2025 tax year, that deadline is February 28, 2026. T4 slips report employment income, tax deducted, CPP contributions, and EI premiums for the year. Employees use these to file their personal returns.
T4 summary
Along with individual T4 slips, you file a T4 Summary with the CRA. The summary aggregates all employee totals for the year. Both the T4 slips and the T4 Summary must be filed with the CRA by the same last-day-of-February deadline.
If you file late, the CRA charges a penalty of $10 per day per slip (minimum $100, maximum $7,500 for employers with 50 or fewer employees, scaling higher for larger payrolls).
Record of employment (roe)
A Record of Employment is a mandatory document you must issue whenever an employee has an interruption of earnings. This includes layoffs, resignations, terminations, leaves of absence, and end of contract. The deadline is within 5 calendar days of the interruption.
The ROE is used by Service Canada to determine whether a former employee qualifies for EI benefits and, if so, how much they’ll receive. Failing to issue an ROE on time can directly harm your former employee’s access to benefits and exposes you to penalties.
If you file ROEs electronically through the CRA’s ROE Web service, which is required for employers with 100+ employees and strongly recommended for everyone else, the 5-day clock starts from the last day of the pay period in which the interruption occurs.
Quebec payroll: what’s different
Quebec operates a partially separate payroll system, and if you have even one employee in the province you need to be set up for it.
The key differences from the rest of Canada:
QPP instead of CPP. Quebec employees contribute to the Quebec Pension Plan (QPP) rather than CPP. The rates and thresholds are similar but not identical and are set by Retraite Québec rather than the federal government.
QPIP instead of federal EI (partially). Quebec has its own parental insurance program called the Quebec Parental Insurance Plan (QPIP). Employees and employers in Quebec pay QPIP premiums in addition to (reduced) EI premiums. The federal EI rate in Quebec is lower than elsewhere because QPIP covers the parental leave portion that EI covers in other provinces. In 2026, the Quebec employee EI rate is 1.31% and the employer rate is 1.834%, with a maximum employee contribution of $895.70.
Provincial income tax filed separately. Quebec provincial income tax is remitted to Revenu Québec, not the CRA. You’ll maintain a separate payroll account with Revenu Québec and follow their remittance schedule, which mirrors the federal structure but operates independently. You’re effectively running two parallel remittance streams for Quebec employees.
If you have employees in both Quebec and other provinces, your payroll setup needs to handle both streams without conflating them.
Common payroll mistakes foreign employers make
Setting up Canadian payroll from outside the country creates some specific failure points worth flagging.
Not registering with the CRA before the first payroll. You must open a payroll program account with the CRA (a Business Number with an RP designation) before you can legally run payroll. Foreign companies sometimes assume they can register retroactively. They can’t do that without incurring penalties on every prior remittance.
Misclassifying employees as contractors. Canada’s CRA applies a multi-factor test to determine whether a worker is an employee or an independent contractor. Getting this wrong means you’ve missed CPP, EI, and tax withholding obligations for every paycheck you’ve issued. The CRA can reassess retroactively and hold you liable for both the employer and employee portions of anything underpaid.
Missing remittance deadlines. Foreign companies sometimes treat Canadian remittances like they treat tax filings in other jurisdictions, assuming a few days late is fine. It isn’t. Penalties apply from day one and they compound quickly. Build your remittance schedule into your payroll calendar before you hire anyone.
Ignoring the Quebec dual-filing requirement. Employers who have one or two Quebec hires sometimes fold them into their general payroll process and remit everything to the CRA. Revenu Québec will flag this. You need separate accounts and separate filings for Quebec employees regardless of how few there are.
Not collecting SINs before running payroll. Every employee must provide their SIN before you process their first paycheck. Running payroll without a SIN on file isn’t just a paperwork problem: it means you can’t correctly calculate deductions or file year-end T4s.
How an EOR handles canadian payroll
For many foreign companies, the fastest and lowest-risk path to employing someone in Canada is through an Employer of Record (EOR). An EOR becomes the legal employer of record for your Canadian hires, handling CPP, EI, and income tax deductions, remitting to the CRA and Revenu Québec on schedule, issuing T4 slips by the February deadline, and filing ROEs whenever they’re required. You manage the work; the EOR manages the compliance stack. RemotePass EOR services cover the full payroll cycle for Canadian employees across all provinces, including Quebec. Book a demo to see how RemotePass manages Canadian payroll compliance from deductions to year-end filing.
