Payroll in Canada

Payroll in Canada means calculating gross-to-net salary, withholding CPP and EI from each employee, applying both federal and provincial income tax, paying the matching employer share, issuing payslips and remitting the whole lot to the Canada Revenue Agency by the 15th of the following month. CPP is the Canada Pension Plan, the federal state pension contribution, and EI is Employment Insurance, the federal scheme that funds unemployment and parental benefits. The Canada Revenue Agency, or CRA, is the national tax authority that collects these amounts and audits employers when the figures do not reconcile.

Total employer cost for a $60,000 annual salary is about $64,731, around 8% on top of gross.

Our verdict: No local entity in Canada yet: use an EOR at $199 to $650 per employee per month. Opening a Inc., Ltd., Corp. costs roughly $5,500 in setup fees and takes 6 to 12 weeks to complete, so it only pays off for a settled, longer-term team. Already running a local entity: standard payroll outsourcing is the cheaper route.

The one local complication is that Canadian payroll is federal plus provincial at the same time. CPP, EI and federal income tax are national and identical everywhere, but each province sets its own income-tax brackets and may stack on its own charges, so the same gross salary nets a different figure in Ontario than in Alberta or British Columbia. Quebec runs its own parallel system entirely, with the Quebec Pension Plan and Quebec Parental Insurance Plan replacing the federal versions, so treat it as a separate jurisdiction.

Use this page if you already have, or plan to set up, a local entity in Canada and want to know what running payroll actually involves. If you want to hire in Canada without becoming the legal employer, an Employer of Record is the faster route.

No local entity yet? See our guide to EOR in Canada.

Payroll in Canada at a Glance

How Does Payroll Work in Canada?

Canadian payroll runs on a monthly rhythm. You calculate each employee’s gross salary, strip out their CPP, EI and income tax to reach net pay, add the employer’s matching contributions on top, then remit the deductions to the CRA and report the year on annual slips.

The remittance is the employer’s payroll-tax payment to the CRA. Each month you send the agency the employees’ withheld CPP, EI and income tax, plus the employer’s own CPP and EI share, under a statement called the PD7A. PD7A is simply the CRA’s source-deductions remittance form, the document that tells the agency how much payroll tax you are paying for the period.

What makes Canada distinct is the two-layer tax. Federal income tax runs on a national scale, while each province adds its own income tax on top, so your payroll engine has to apply both layers to the same salary. Our worked example below uses Ontario, the most common starting province for inbound employers.

Ontario can also add charges the federal layer does not. Above a payroll threshold it levies the Employer Health Tax, a provincial payroll levy that funds health services, and almost every Ontario employer must also pay into WSIB, the province’s workers’ compensation insurance that covers workplace injury.

Get the federal and provincial layers in the wrong order, or miss a provincial charge, and two things break at once: the employee’s take-home pay is wrong, and your monthly remittance to the CRA no longer matches what you actually withheld.

Once a year the picture is squared off with T4 slips, the annual statement of each employee’s pay and deductions that you file with the CRA and hand to the worker. The monthly remittance and the year-end T4s both have to reconcile against your actual runs, and both are covered in detail below.

What Payroll Taxes Apply in Canada?

Three charges sit on every Canadian salary: the employee’s CPP and EI, the employer’s matching CPP and EI, and income tax split across the federal and provincial layers. They are calculated in a fixed order, and that order is what makes the gross-to-net result.

Employer Payroll Contributions in Canada

The employer matches the employee’s CPP in full and pays EI at 1.4 times the employee premium. Combined, that lands at roughly 8.23% of pay on the employer side under the standard rates, before any provincial charge.

On top of that, Ontario employers may owe two provincial items. The Employer Health Tax applies only once your annual Ontario payroll passes 1 million, so smaller employers are exempt, while WSIB workers’ compensation premiums vary by industry and are charged separately.

This matters for budgeting. The federal employer loading is light by international standards, but the provincial layer is where Canada’s real variation lives, so confirm the Employer Health Tax and WSIB position for your province before you model total cost.

The true cost of employing in Canada

Statutory employer rates; items can apply to different wage bases or carry conditions, so lines do not always sum to the total.

Canada has no statutory 13th-month, holiday or profit-sharing bonus.

Sources: canada.ca (employer contributions), taxsummaries.pwc.com (bonuses).

Employee Payroll Deductions in Canada

You withhold two contributions from the employee before income tax. CPP is the pension contribution at 5.95% of pensionable earnings above the 3,500 basic exemption, up to the YMPE. The YMPE, or Year’s Maximum Pensionable Earnings, is the CPP earnings ceiling, set at 74,600 for 2026, above which no further base CPP is charged.

EI is the second deduction, at 1.63% of insurable earnings up to a ceiling of 68,900 outside Quebec, capped at a maximum employee premium of 1,123.07. Together CPP and EI take 7.58% off the top of pay at the main rate, before income tax applies.

These are the employee’s contributions, but you are responsible for calculating, withholding and remitting them. If your provider miscalculates CPP or EI, the employee’s net pay is wrong and your PD7A remittance will not reconcile against what you actually owe the CRA.

Income Tax on Salary in Canada

Canada stacks two income-tax scales on the same salary. The federal scale runs from 14% on the first 58,523 up to 33% above 258,482, and Ontario’s provincial scale runs from 5.05% on the first 53,891 up to 13.16% above 220,000.

Each layer is softened by a basic personal amount, a slice of income taxed at zero through a credit. The federal credit covers the first 16,452 of income and the Ontario credit covers the first 12,989, both applied at the lowest rate. The practical effect is that the headline rates overstate the real bite at lower salaries, which is why a worked example matters more here than a rate table.

Payroll Tax Example: Gross Salary to Net Pay

Here is how the charges stack up for a representative Ontario salary. The figures come from the contribution and tax rates above, calculated in the statutory order, in Canadian dollars.

Simplified illustration: Ontario employee, 2026 rates; income tax is federal (14%/20.5% net of the 16,452 basic personal amount) plus Ontario (5.05%/9.15% net of the 12,989 basic personal amount), with no Ontario surtax at this income. Gross of 60,000 is below the 74,600 YMPE so no CPP2 applies. Employer cost excludes Ontario Employer Health Tax (exempt under 1M payroll) and WSIB premiums (industry-variable). [2026-07-02 fix] EI employee rate 1.63% (2026); employer EI 1.4x = 2.282%. A federal credit on the first 16,452 and an Ontario credit on the first 12,989 of income.

Read the two bold rows together. A worker on $60,000 gross takes home $46,842, while your total cost as employer is $64,731 before any Employer Health Tax or WSIB charge.

The federal employer add-on is modest, but the bold employer figure is only the floor in Ontario. Confirm the provincial layer for your headcount and industry before you anchor a salary offer, because that is where Canadian payroll cost actually moves.

What Payroll Filings Are Required in Canada?

Canada splits payroll reporting into a monthly remittance and an annual return, which is a cleaner split than countries that file social and tax separately every month. The monthly piece is the PD7A remittance; the annual piece is the T4 slips and summary.

What the PD7A Remittance Reports

The PD7A is the CRA’s source-deductions statement, reporting the CPP, EI and income tax you withheld from employees plus the employer’s matching CPP and EI for the period. In one remittance it covers the whole workforce for that pay cycle and tells the CRA exactly what you are paying.

Because it is the agency’s running record of what you owe, it has to reconcile with your payroll run and your year-end T4s. The CRA cross-checks the monthly remittances against the annual T4 summary, and a mismatch is a common trigger for a payroll review.

When the PD7A Remittance Is Due

For a regular remitter, the deductions are due by the 15th of the month following the pay period. Pay run in May is remitted by 15 June, and the filing of the remittance and the payment of the amount fall on the same date.

Larger employers can fall into faster remitter categories, so the exact due date depends on your remitter type. That type is set by your average monthly withholding amount, or AMWA, from two calendar years ago, which is the figure the CRA uses to decide how often you must remit.

Who Files It

The legal obligation sits with the employer. In practice, your payroll provider prepares and submits the PD7A remittance and pays the CRA on your behalf, or your in-house team does it directly if you run your own Canadian entity.

Either way, confirm in writing who presses submit each month and who pays. The liability for a late or wrong remittance stays with you as employer regardless of who does the keying.

What Happens If Payroll Filings Are Wrong

Late remittances draw a graduated penalty on the outstanding amount: 3% if one to three days late, 5% if four or five days late, 7% if six or seven days late, and 10% if more than seven days late or for failure to remit. A 20% penalty may apply for repeated failures, so a habit of late payment escalates fast.

Late T4 filing is penalised separately, based on the number of slips filed late and calculated daily, with a minimum of $100 and a maximum of $7,500. Beyond the money, a remittance that does not reconcile against your T4 summary invites scrutiny of the whole payroll, which is why getting CPP, EI and tax right the first time matters more than the headline penalty suggests.

What Are the Payroll Deadlines in Canada?

Most Canadian payroll obligations land monthly, anchored to that 15th-of-the-following-month remittance date for a regular remitter. The exception is new-hire setup, which is event-driven: you need the employee’s SIN on file before their start date, not at month end.

Late filing: Penalties apply for both late remittances and late filing of information returns (T4s).

Late T4 Filing Penalty: The penalty is based on the number of information returns (slips) filed late, calculated daily, with a minimum of $100 and a maximum of $7,500.

Payroll Operations Risk in Canada

Employers in Canada file with 3 separate agencies.

Sources: canada.ca (compliance), bankofcanada.ca (payments).

What Payslip and Employee Record Rules Apply in Canada?

Canada requires you to issue a payslip to every employee for each pay run, showing gross pay, every deduction and net pay. Your payroll provider should produce compliant payslips automatically and keep them in step with each change of salary or status.

The record that anchors the employee to payroll is the Social Insurance Number, or SIN, the nine-digit identifier the CRA uses to track an individual’s tax and benefits. You must have a valid SIN on file before the employee’s start date, because without it you cannot file accurate T4 slips or remit correctly against that worker.

Record-keeping then runs across the year. You hold the SIN, the pay history and the deduction records, and at year end those records produce the T4 slips that must reconcile with every monthly PD7A remittance. When you assess a provider, treat record accuracy as seriously as the monthly remittance: a clean monthly run with a sloppy year-end reconciliation still leaves you exposed at T4 time.

How Much Does Payroll Outsourcing Cost in Canada?

There are two separate numbers in Canadian payroll cost, and confusing them is the most common budgeting mistake. The first is your statutory employer cost, which is the employer CPP and EI match plus any provincial charge such as the Ontario Employer Health Tax and WSIB.

11 of the 14 EOR providers we track publish Canada fees; they range from $199 to $650 per employee per month.

Published list prices in USD: EOR fees are per employee per month, contractor fees per contractor per month. Providers that publish neither fee for Canada are not shown.

According to Whichapp’s July 2026 analysis of EOR fees across 40 countries, providers charge $199 to $650 per employee per month in Canada.

11 of the 14 providers we track publish Canada EOR fees. The lowest published rate is $199 per employee per month and the highest is $650.

Contractor management fees in Canada run from $6 to $49 per contractor per month.

The second is the fee you pay a provider to run the payroll for you. They are unrelated, and only the second is negotiable.

Managed Payroll Provider Fees

Managed payroll in Canada is normally priced per employee per month, and most providers quote rather than publish a rate. The price turns on headcount, on whether you also need accounting or HR support, and on how many provinces you run in, because each province adds its own tax table and possible charges.

The fee buys the calculation, the PD7A remittance, year-end T4 production and payslips. It does not include the statutory contributions themselves, which you fund on top, so gather two or three quotes before committing.

What Payroll Provider Fees Usually Include

A standard managed payroll fee in Canada should cover the monthly gross-to-net calculation, withholding of CPP, EI and both layers of income tax, preparation and submission of the PD7A remittance to the CRA, year-end T4 slips and summary, and monthly payslips. Ask for that list in writing. If any of it sits outside the headline fee, you want to know before the first run, not after.

Extra Payroll Costs to Ask About

The gaps tend to appear at the edges of the standard cycle. Ask specifically about Employer Health Tax and WSIB registration and reporting, multi-province setup, termination and severance calculations under provincial employment standards, T4 amendments when something has to be restated, and onboarding setup fees for taking on your entity. These are the line items that turn a tidy per-head quote into a larger annual number.

When Payroll Outsourcing Becomes Cheaper Than EOR

The choice between running your own payroll and using an EOR is mostly about headcount and how long you plan to stay. An EOR carries a higher monthly fee per person because the provider is the legal employer and absorbs the entity, but it saves you setting one up.

Running your own payroll through a Canadian corporation is cheaper per head once you are past a handful of employees and committed to staying, because the entity and provider fee spread across more people. In our assessment, the more people you hire and the longer the horizon, the more the economics favour your own entity with outsourced payroll.

Payroll in Canada vs EOR in Canada

The line between the two routes is simple: standard payroll assumes you are the legal employer through a Canadian entity, while an EOR makes the provider the legal employer so you do not need one.

Use payroll outsourcing if you already have a local entity (Inc., Ltd., Corp.) or are hiring enough people to justify one. Use an EOR if you need to hire before setting up an entity.

If that second case is you, our guide to EOR in Canada covers the providers, entity model and costs in full. EOR pricing and provider ranking live there, not on this page.

Best Payroll Providers for Canada

These providers all run payroll in Canada, but they are built for different situations. Below is where each one fits and the local point to check before you sign. We do not list EOR prices here; for unpriced managed payroll, treat the fee as by quote and confirm it during your shortlist calls.

3 providers in Whichapp’s independent index cover Canada. The top 3 by composite score:

1. Deel (9.1/10). From $599/month. Best for scale, automation and contractor volume. Runs its own Canada entity.
2. Remote (8.0/10). From $599/month. Best for IP protection and owned-entity purity. Runs its own Canada entity.
3. Rippling (6.4/10). Best for unified IT, HR, and global finance. Runs its own Canada entity.

Rankings come straight from Whichapp’s provider index (coverage 30%, pricing transparency 25%, security and compliance 25%, integration depth 20%); see how we score.

All 3 major EORs we track in Canada run their own local entity there.

Entity model as reported on provider websites, last checked 2026-06-06. An own entity means the provider is the direct legal employer; a partner model adds a third party to the chain.

Deel for Payroll in Canada

Deel is a strong fit if Canada sits alongside other North American or global hires you want on one platform, with a single dashboard and API across markets. Canada watch-out: confirm whether your Canadian payroll runs on Deel’s own local entity or a partner bureau, and that it handles each province’s tax tables and the PD7A remittance directly rather than handing it to a third party. Read our Deel review.

Remote for Payroll in Canada

Remote runs much of its payroll through owned entities, which gives a cleaner compliance chain than a partner-network model. That suits employers who want a direct line of accountability for CPP, EI and income-tax remittances.

Canada watch-out: confirm Canadian payroll is on Remote’s owned entity rather than a local partner, and that it covers provincial charges such as the Ontario Employer Health Tax and WSIB where they apply. Read our Remote review.

Papaya Global for Payroll in Canada

Papaya Global is built for consolidating payroll across many countries with finance-grade reporting and audit trails, so it earns its place when Canada is one market in a larger stack. Its weakness is the opposite case: for a single Canadian entity in one province, the platform is heavier than the job requires.

Canada watch-out: Papaya leans on local partners in some markets, so confirm whether your Canadian payroll runs on its own entity or a third-party bureau, and how directly it owns the PD7A remittance and T4 filing. Read our Papaya Global review.

Rippling for Payroll in Canada

Rippling appeals when you want payroll wired into the same system as HR, IT and device management, with automated journal entries. Canada watch-out: it is platform-first, so confirm the depth of its Canadian statutory handling, specifically CPP and EI withholding, federal and provincial tax, and PD7A remittance, against what a local specialist would offer. Read our Rippling review.

Multiplier for Payroll in Canada

Multiplier is the value option for multi-country payroll where price predictability matters, which fits smaller Canadian teams. The trade-off for that price is depth: in markets with a provincial layer it tends to carry less local specialist weight than a Papaya or an in-country bureau.

Canada watch-out: confirm it files the PD7A remittance and produces T4 slips directly rather than through a reseller, and that its gross-to-net engine models both the federal and the correct provincial tax layer before you anchor any salary offers on it. Read our Multiplier review.

Safeguard Global for Payroll in Canada

Safeguard Global is a payroll-led specialist rather than an HR platform with payroll bolted on, which appeals when running the payroll correctly is the whole point and you do not need a wider people stack. That focus is also its limit: if you want integrated HR, devices and onboarding in one tool, it does less than Rippling or Deel.

Canada watch-out: confirm its Canadian coverage is run in-house rather than subcontracted, and that the service includes provincial charges such as WSIB and Employer Health Tax plus CRA correspondence, not just the monthly calculation. Read our Safeguard Global review.

How to Choose a Payroll Provider in Canada

The questions below separate a provider that genuinely runs Canadian payroll from one that resells a local bureau without owning the detail. Ask them before you sign, not after the first run.

Can They Handle the PD7A Remittance?

Confirm the provider prepares and submits the PD7A source-deductions remittance to the CRA directly, and that it reconciles the remittance against the actual payroll and the year-end T4 summary each period. Ask who presses submit and by when.

Do They Manage SIN and T4 Records?

Check that new-hire setup captures a valid SIN before the start date and that year-end T4 slips are produced and filed on time. A provider that treats year-end reconciliation as an afterthought leaves you exposed at T4 season.

Can They Model Gross-to-Net Salary Accurately?

Canada’s two-layer income tax means the same gross nets differently by province, so a net-pay request in Ontario is not the same as one in Alberta. A capable provider models gross-to-net per province and helps you frame offers, rather than just processing whatever number you hand over.

How Do They Update for Payroll Law Changes?

Federal CPP and EI rates, the YMPE ceiling and every provincial tax table change yearly. Ask how the provider tracks both the federal and the provincial changes and how quickly updates reach your payroll runs.

Who Is Liable for Payroll Errors?

The statutory liability stays with you as employer, but the contract should set out what the provider is accountable for if a miscalculation or late remittance is their fault. Get the indemnity and correction process in writing.

Can They Support Multi-Country Reporting?

If Canada is one of several markets, confirm the provider can consolidate reporting across them in a single view, so your finance team is not stitching country files together by hand.

What Support Do They Offer During Terminations or Audits?

Terminations and CRA queries are where weak providers show their limits. Ask what support you get during a termination calculation under provincial employment standards or a CRA review, and whether a named contact handles it or you are routed through a ticket queue.

What Does Terminating an Employee Cost in Canada?

Severance: The greater of: two days’ regular wages for each completed year of service, or five days’ regular wages.

Statutory leave: 10 days of paid annual leave plus 10 public holidays a year.

Sources: laws-lois.justice.gc.ca (severance), canada.ca (notice periods), canada.ca (leave).

Canada Payroll Checklist Before Hiring

• Confirm whether you need payroll or an EOR
• Check your local entity status
• Model gross-to-net salary for your offers
• Confirm employer contribution rate (employer CPP + EI)
• Confirm employee deductions (CPP, EI)
• Confirm income tax treatment
• Check who files PD7A / T4 and by when
• Confirm SIN registration is handled
• Confirm the payslip process
• Check leave, sick pay and termination workflows
• Ask who carries liability for calculation errors
• Confirm provider pricing and any extra fees

Work through this before your first hire. The income-tax treatment at point six is the one foreign employers underestimate most often, because it depends on which province each employee works in, not just on the federal rate.

FAQs About Payroll in Canada

Methodology and Disclosure

Contribution rates, the income tax brackets, filing deadlines and penalty figures on this page come from Whichapp’s Canada statutory dataset, grounded in Canada Revenue Agency payroll deduction rules, 2026 CPP and EI rates and Ontario’s provincial tax brackets, and refreshed as rates change. The worked example uses an Ontario employee and reconciles by construction.

Provider assessments reflect our independent editorial view of payroll fit for Canada; we do not sell payroll, EOR or contractor services. Some provider links may carry affiliate referrals, which never affects our editorial judgement or the figures above.

Already hiring contractors instead of employees? See contractor management in Canada, or start from the Canada hiring hub for the full picture.

Primary sources

• Income tax and employee contributions: taxsummaries.pwc.com
• Employer contributions: canada.ca
• Minimum wage: canada.ca
• Payroll filing deadlines: canada.ca
• Notice periods and leave: canada.ca
• Severance rules: laws-lois.justice.gc.ca
• Entity setup benchmark: ised-isde.canada.ca