Payroll isn’t just about issuing paycheques—it’s about keeping accurate records, staying compliant with government regulations, and ensuring your team is adequately compensated. For growing businesses, payroll accounting is a crucial function that enables the tracking of employee compensation, benefits, deductions, and remittances in a structured and reliable manner.
At Infinity & Beyond Business Inc., we guide businesses through the complex world of payroll accounting with clarity and precision. Whether you have one employee or an entire team, understanding how payroll accounting works is crucial for maintaining smooth operations and ensuring compliance.
What Is Payroll Accounting?
Payroll accounting is the process of recording and managing everything related to employee compensation. It includes tracking salaries, wages, bonuses, withholdings, benefits, employer obligations, and remittances to the Canada Revenue Agency (CRA).
- Employees are paid accurately and on time
- The proper deductions are made (income tax, CPP, EI)
- Employer contributions are calculated and remitted
- Payroll reports are transparent and compliant with government standards
Key Components of Payroll Accounting
Understanding the main elements of payroll accounting can help business owners avoid errors and penalties.
1. Employee Compensation
- Hourly wages or salaries
- Overtime pay
- Bonuses or commissions
- Vacation pay or statutory holiday pay
2. Deductions
Standard deductions in Canada include:
- Canada Pension Plan (CPP)
- Employment Insurance (EI)
- Federal and provincial income tax
Additional deductions might consist of:
- Benefits (health, dental)
- Group RRSP contributions
- Union dues or garnishments
3. Employer Contributions
- CPP and EI (matching or more, depending on regulations)
- Workers’ compensation premiums
- Employer-paid benefits or insurance premiums
4. Remittances
Employers are required to remit payroll source deductions to the CRA on a monthly, quarterly, or more frequent basis, depending on their reporting status.
Why Is Payroll Accounting Important?
- Compliance: Maintaining proper payroll records and remittances helps businesses avoid audits and penalties.
- Accuracy: Accurate payroll helps build employee trust and prevent disputes.
- Organization: Clear payroll records streamline year-end reporting and tax preparation.
- Audit Trail: Payroll records provide essential documentation in case of reviews or disputes.
A Simple Payroll Accounting Process
If you’re handling payroll internally, here’s a step-by-step guide to help you stay organized:
Step 1: Collect Employee Information
- Social Insurance Number (SIN)
- Signed TD1 tax forms (federal and provincial)
- Direct deposit details
- Employment contract and compensation terms
Step 2: Track Work Hours and Salaries
- Use a time-tracking system or software
- Include overtime and holiday hours if applicable
Step 3: Calculate Gross Pay
- Hourly rate × hours worked, or monthly salary
- Add bonuses or commissions
Step 4: Deduct and Remit Withholdings
- Calculate CPP, EI, and income tax
- Include any additional voluntary deductions
- Submit the correct amounts to the CRA
Step 5: Record Entries in the Books
- Debit: Wage Expense
- Credit: Payable accounts (wages, deductions, remittances)
Step 6: Pay Employees and Submit Remittances
- Issue net pay to employees (via cheque or direct deposit)
- Remit deductions and contributions to the CRA
Step 7: Maintain Payroll Records
- Pay stubs and remittances
- Time sheets and contracts
- Annual T4 and T4A slips
Common Payroll Mistakes to Avoid
- Misclassifying employees vs. contractors
- Missing remittance deadlines
- Not updating deduction rates annually
- Forgetting to issue year-end slips (T4, T4A)
Even small errors can lead to CRA notices, employee disputes, or unexpected penalties.
How We Help at Infinity & Beyond Business Inc.
Payroll can be time-consuming and detailed, but you don’t have to handle it alone. We provide:
- Setup and management of payroll systems
- Ongoing payroll processing and remittances
- CRA compliance support and reporting
- Year-end slip preparation and submission
Whether you’re just hiring your first employee or running a team, we’ll ensure your payroll system is clear, accurate, and tailored to your business structure.
Payroll accounting is more than just a task—it’s a cornerstone of responsible business management. When done correctly, it builds trust, supports planning, and maintains your business’s good standing with employees and the CRA.
If you’re also looking for reliable financial support in British Columbia, Infinity & Beyond Business Inc. offers trusted North Vancouver accounting services for small businesses and entrepreneurs.
