What are payroll source deductions and what am I required to withhold as an Ontario employer?
Payroll source deductions are amounts you must withhold from an employee's pay on each paycheque and remit to the Canada Revenue Agency (CRA). This is a federal obligation under the Income Tax Act and applies to all Ontario employers regardless of size.
The three main withholdings are: federal and provincial income tax (calculated using CRA payroll deduction tables), Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums. As the employer, you also make matching CPP contributions and pay a share of EI premiums on top of what you withhold.
You must remit these amounts to CRA by a deadline that depends on your average monthly withholding — most small businesses remit monthly. Failing to remit on time triggers penalties and interest. Directors of corporations can become personally liable for unremitted amounts. Keeping payroll records for at least six years is also required.
Key takeaways
- Three deductions: income tax, CPP, and EI — all federal obligations
- Employers must match CPP contributions and pay a share of EI
- Late remittances attract penalties; directors can be held personally liable
- Keep payroll records for at least six years