Many business owners will find that their payroll is the most complicated element of their business accounting. In addition to having to track employee hours, business owners also need to pay payroll taxes and meet all provincial and government regulations. Here are a few of the challenges that many business owners will encounter.
1. Modifying Their Employee’s Hours
Your employee’s self-reported hours cannot be adjusted on-the-fly, especially if you aren’t certain that they’re incorrect. Many small business owners will correct hours as they come in, but this can lead to fines and penalties regarding underpayment. If you believe that your employee may have made a mistake on their time card, the mistake needs to be discussed with them and well-documented.
2. Failing to Deduct EI or CPP
Employers in Canada must deduct EI and CPP from payroll taxes. CPP doesn’t need to be paid for workers who are over the age of 65 (or who have retired but have continued to work). EI can be waived once the individual is 70 years or older. Otherwise all your employees must have EI and CPP deducted from their payroll amounts.
3. Docking Employee Pay
Employee pay cannot be used for unanticipated reimbursements. A common example is when restaurant owners may dock an employee’s pay for glassware that has been broken or for tables who have “run out” on the bill. Docking an employee’s pay is not allowed: the pay is for their hours worked, not for anything else. They must be separately asked to reimburse any items that they have broken or damaged, and even then there are certain things that the employee cannot be considered liable for.
4. Paying Employees Late
This happens in many businesses. When you have a lot to do, you may not be able to run the payroll on time — especially if it’s complicated. But not paying your employees in a timely fashion could have tremendous consequences, not the least of which is a failure to maintain your staff. Not being able to pay the associated payroll taxes on time will also lead to significant issues. Employees should generally be paid within two weeks of the payment period.
Business owners who don’t want to have to wrangle with their payroll accounts can instead outsource their accounting to a professional accountant. This can often save money long-term because it will remove many of the potential fines and penalties associated with doing payroll incorrectly.