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Paying your employees manually is no walk in the park. It’s usually boring, time-consuming and complex.
A recent OnPay survey established that manually paying employees will cost 18 hours monthly.
That’s where correctly setting up payroll comes in: To help eliminate these challenges taking up so much time and streamline employee remuneration.
Yet, most tips on setting up payroll target larger organizations. Whether you’re a small startup, a mom-and-pop store or a budding entrepreneur, learning how to optimize your employee remuneration processes is essential.
In this blog post, we’ll share expert tips for setting up payroll for small business owners in Canada and why it matters.
Why is it important to set up payroll for your small business correctly?
There’s more to payroll than just compensating your employees and paying payroll taxes to the Canada Revenue Agency (CRA). It’s one of those elements that applies to every aspect of your business.
That’s why correctly setting it up will help you:
- Pay your employees promptly and accurately.
- Enhance compliance with payroll laws and regulations, helping you avoid costly fines and penalties.
- Maintain proper and accurate payroll records of your transactions for the taxman and resolve any disputes.
- Save time and money so that you can focus on other business aspects.
- Reduce the risk of headache-inducing errors that could lead to costly fines or penalties.
- Enhance employee morale, trust, loyalty, and satisfaction.
- Protect your business’s reputation, making attracting and retaining top talent and new customers or clients easy.
- To honour your business’s financial obligation.
- Financially plan to forecast labour costs, create budgets and make informed financial decisions for your small business.
- Accurately classify your personnel as employees or independent contractors.
Tips for setting up payroll for small businesses.
While there’s the administrative side of setting up payroll, including registering for a payroll account number, collecting TD1 forms, gathering Social Insurance Numbers (SIN) or Individual Tax Numbers (ITN) for non-residents, setting hourly rates and so on, there are some things you’ll want to consider before diving into all that.
Here are some expert considerations before you ever run payroll:
Payroll is not rocket science, but it can be complex
While setting up payroll for small businesses may not require a physics degree, it does come with its fair share of complexities. It does involve regularly calculating your employees’ benefits, deductions and taxes to determine the final wages (aka net pay) while complying with evolving labour regulations.
Maintaining accurate and current records and reports of your payroll and employee details is also essential. However, this can be time and resource-consuming.
At the same time, not keeping up with the specific tasks related to managing payroll could lead to severe repercussions, such as legal action due to violations of labour laws, government audits, fines, penalties and back taxes and interest.
There’s more to payroll than just issuing cheques and stubs to your employees. That’s why it’s crucial to approach payroll meticulously and seek expert guidance when needed.
Automate your payroll
Gone are the days of tedious manual calculations and paperwork.
You can automate over 50% of tasks, including payroll.
Embrace the wonders of automation to streamline your payroll processes, and it doesn’t have to cost you an arm and a leg.
You can invest in a simple system, such as typical spreadsheets. Or, you can invest in comprehensive payroll software like Wagepoint to automate calculations, payroll tax remittances, generate pay stubs and even handle direct deposits.
Automation saves time and minimizes the chances of errors, ensuring accurate and timely payments to your employees. Automating with payroll software also provides remote access, so you can see your payroll information whenever needed.
Integrate your systems
If you decide to automate your small business, you’ll likely need to leverage more than just your payroll software.
Integrating your payroll system with other relevant systems in your business is the key to a seamless payroll experience. This includes integrating your accounting software, time-tracking tools, office management tools and HR systems.
This integration eliminates duplicate data entry, improves accuracy, optimizes management, keeps you compliant and saves time. It can come with its own challenges, including integration and employee training costs, technical complexity and higher data security risk. Once you’ve got everything up and running, though, it works like a well-oiled machine you were looking for.
Stay current with Canadian payroll and labour regulations
As a small business in Canada, it’s vital to adhere to provincial and Federal labour and payroll regulations. These laws involve employment conditions for hours of work, payment of wages, leaves of absence, vacations, holidays and more. One thing to keep in mind is these laws are subject to frequent updates, so you’ll want to keep your eye on them.
Staying on top of these changes means avoiding mistakes and complying with the latest regulations to avoid penalties and interests.
You can stay up-to-date on Canadian payroll and labour regulations by subscribing to industry publications, attending industry events and visiting government websites. Alternatively, modern payroll software can help you remain compliant, ensuring you calculate payroll accurately based on the most recent laws.
Set up employee records early on
Maintaining accurate and up-to-date employee records is vital for payroll management. When you hire your first employee, make sure you have a system to gather and organize their essential information, such as personal details, tax forms, banking information and employment agreements.
Setting up employee records early on promotes:
- Accurate payroll processing.
- Enhanced regulatory and tax compliance.
- Efficient onboarding process for new hires.
- Organized documentation.
- Peace of mind.
Payroll software, HR Information Systems, cloud-based solutions, Document Management Systems, employee self-service portals, or spreadsheets are great options to help you set up employee records and make sure you have all the necessary information on hand.
Invest in robust cybersecurity solutions
Cybersecurity experts estimate that 2,200 cyberattacks occur daily, one attack every 39 seconds! Alarmingly, 95% of the attacks occur due to human error. These attacks range from malware infections and ransomware to social engineering and Point-of-Sale (POS) attacks and more.
The best way to counteract threats like these is with robust cyber security solutions to safeguard sensitive payroll information from unauthorized access or data breaches.
- Implementing next-generation firewalls and Virtual Private Networks (VPN).
- Data encryption.
- Strong passwords.
- Regular software updates and security patches.
- Employee training on security best practices.
- Implement strong access controls.
- Backup payroll data regularly.
- Partner with a trusted payroll service provider or payroll software.
- Regularly review payroll procedures and controls.
- Stay up-to-date on the latest cybersecurity threats.
Cyber threats are becoming more advanced. The need to protect your business and payroll cannot be overstated.
Foster transparency with your employees about your payroll process
Every business must have a culture; the shared values, beliefs, attitudes and behaviours exist within it. Among this culture should be transparency within your business about your payroll processes through open communication between employers and employees.
Explain how you calculate their pay, including deductions, taxes, and benefits, and when they should expect their pay. It also includes providing pay stubs so the employees can examine them for accuracy and have a system for solving pay-related disputes. This could be something you consider including in an employee handbook.
Being open with your employees about the payroll process fosters trust and eliminates misunderstandings or doubts about compensation.
Allow employees to access their pay stubs online
Not every employee is usually open or willing to visit your office to get their pay stubs. Plus, coming to you or whatever department handling pay stubs is time-consuming, especially during working hours.
Instead, let employees conveniently and securely access their pay stubs online through a secure self-service web portal, mobile app or email. Not only does Wagepoint help you handle your payroll, but it also provides a secure and easy-to-use web portal for employees.
This access empowers them to conveniently review their earnings, payroll deductions and tax withholdings. They’ll also have access to their year-end tax forms so they can easily handle filing their income taxes. Having this option promotes self-service and technology use and reduces administrative inquiries. (No more handing out a ton of pay stubs and payroll forms!)
Most importantly, it improves accuracy, as employees can review their pay stubs immediately after you issue them, allowing for prompt resolutions.
Be consistent with your payroll
Besides accuracy, nothing matters more to payroll than consistency. This means processing payroll and issuing pay cheques on time and in the correct amount. It also means following the same procedures for calculating taxes and deductions according to the law.
Payroll consistency builds trust and reliability among your employees. It also helps you stay organized, avoid confusion or misunderstandings and maintain a smooth payroll workflow.
To achieve payroll consistency:
- Set up a regular payroll schedule.
- Use a payroll calendar.
- Use payroll software with reminders.
- Automate payroll calculations to reduce human errors and apply the same calculation procedures.
While payroll consistency matters, be flexible for any changes, such as employees leaving or starting or changes in tax laws and legal requirements.
Maintain accurate payroll and employee records and backups
Payroll compliance relies on precise record-keeping and reporting.
That’s why it’s crucial to maintain organized records of payroll-related documents, including timesheets, tax forms, employment contracts and wage calculations.
Regularly back up your payroll data to prevent data loss or corruption. These backups will also ensure business continuity if your business breaks down due to cyber attacks, data corruption, natural disasters or other reasons.
Modern payroll software provides secure storage and backup capabilities, safely preserving your records for future reference and tax and audit purposes.
Streamline your small business payroll with Wagepoint.
Setting up payroll for small businesses might not sound like the most thrilling business topic, yet it’s among the business aspects that matter the most. Setting it up can be a pain – though it doesn’t have to be – but it’s essential to do it right, especially when your employees’ salaries are on the line.
If you’re a small Canadian business owner looking for a reliable and easy-to-use payroll solution, sign up for Wagepoint. Our comprehensive payroll solution takes the stress out of payroll and promotes compliance so you focus on growing your business. It’s simple to set up and use to help you maximize your investment.