Payroll Compliance: CRA Requirements & Deadlines
Every Canadian employer must deduct CPP, EI and income tax from employee paycheques, remit those deductions to CRA on time, issue T4 slips by February 28, file ROEs within 5 days and comply with Ontario ESA, EHT and WSIB requirements. Missing any of these triggers penalties starting at 3% and escalating to 20%, plus director liability for trust amounts. This guide covers every payroll compliance obligation in one place. Written by a licensed Ontario CPA.
What Every Canadian Employer Must Deduct and Remit
Payroll deductions are not optional. The Income Tax Act requires every employer to deduct CPP contributions, EI premiums and income tax from each employee's pay, hold these amounts in trust and remit them to CRA. These are trust funds. You collected them on behalf of employees and the government. Failure to remit is treated more seriously than almost any other tax obligation.
| Deduction | 2026 Rate / Details | Employer Obligation |
|---|---|---|
| Canada Pension Plan (CPP) | Employee rate: 5.95% on pensionable earnings between $3,500 and $71,300. Max employee contribution: $4,034.10. | Employer matches the employee CPP contribution dollar for dollar. Total employer CPP cost per employee at max: $4,034.10. |
| CPP2 (second additional CPP) | Employee rate: 4% on earnings between $71,300 and $81,200 (second ceiling). Max employee CPP2: $396.00. | Employer matches the employee CPP2 contribution. Total employer CPP2 cost per employee at max: $396.00. |
| Employment Insurance (EI) | Employee rate: 1.63% on insurable earnings up to $68,900. Max employee premium: $1,123.07. | Employer pays 1.4 times the employee rate (2.282%). Max employer premium per employee: $1,572.30. 2026 EI Rates Guide → |
| Income tax | Federal and provincial rates based on TD1 forms filed by the employee. Calculated per pay period using CRA payroll deduction tables or formulas. | Employer deducts income tax from each paycheque and remits to CRA with CPP and EI. The employer does not pay a matching amount for income tax. |
These Are Trust Funds. Director Liability Applies. CPP, EI and income tax deducted from employee paycheques are trust funds. The employer holds them in trust for CRA. If the corporation fails to remit, CRA can assess the directors of the corporation personally for the full amount under section 227.1 of the Income Tax Act. Directors are jointly and severally liable. This is not a theoretical risk. CRA actively pursues director liability assessments, especially when corporations close or become insolvent without remitting payroll trust amounts.
Remitter Types and Due Dates
CRA assigns every employer a remitter type based on the Average Monthly Withholding Amount (AMWA) from two calendar years prior. Your remitter type determines how often you must remit payroll deductions to CRA. Using the wrong remitter type or missing a due date triggers immediate penalties.
| Remitter Type | AMWA Threshold | Remittance Due Date | Example |
|---|---|---|---|
| Quarterly remitter | Under $1,000 (and CRA-approved) | By the 15th of the month following the end of each quarter. Q1 (Jan to Mar) due April 15. Q2 due July 15. Q3 due October 15. Q4 due January 15. | A new corporation with 1 part-time employee. AMWA under $1,000. Remits 4 times per year. |
| Regular remitter | Under $25,000 | By the 15th of the month following the month in which deductions were made. January deductions due February 15. | A small business with 5 employees. AMWA $8,000. Remits monthly by the 15th. |
| Threshold 1 accelerated remitter | $25,000 to $99,999.99 | Twice per month. Pay periods ending the 1st to the 15th: due by the 25th of the same month. Pay periods ending the 16th to end of month: due by the 10th of the following month. | A growing company with 25 employees. AMWA $45,000. Remits twice per month. |
| Threshold 2 accelerated remitter | $100,000 or more | Within 3 business days after the end of each pay period. Pay periods: 1st to 7th, 8th to 14th, 15th to 21st, 22nd to end of month. | A large employer with 100+ employees. AMWA $180,000. Remits up to 4 times per month, within 3 business days of each period. |
| New employer (first year) | N/A (defaults to regular) | By the 15th of the following month until CRA assigns a remitter type based on actual AMWA. | A newly incorporated company processing its first payroll. Remits monthly until CRA reclassifies. |
Your Remitter Type Can Change Without Notice: CRA recalculates your remitter type annually based on your AMWA from two years prior. If your business grew significantly in 2024 (hired more employees, increased salaries, paid large bonuses), your 2026 AMWA may cross the $25,000 threshold, moving you from regular to Threshold 1 accelerated. CRA does not always send a separate notification. Check your remitter type on My Business Account at the start of each year. If you continue remitting on the old schedule after a reclassification, every remittance is late and penalties apply retroactively.
Late Remittance Penalties
| Days Late | Penalty | Example: $10,000 Remittance |
|---|---|---|
| 1 to 3 days | 3% | $300 |
| 4 to 5 days | 5% | $500 |
| 6 to 7 days | 7% | $700 |
| More than 7 days (or no remittance) | 10% | $1,000 |
| Second failure in the same calendar year | 20% | $2,000 |
CRA also charges daily compound interest on the unpaid balance from the due date until the payment is received. The prescribed interest rate is approximately 9% to 10% (2025/2026). Interest is applied on top of the penalty. For repeated failures (two or more late remittances in the same year), the 20% penalty applies automatically. CRA does not issue a warning before applying the doubled penalty.
Penalties Apply to the Full Remittance, Not Just the Late Portion: If your $10,000 monthly remittance is due on February 15 and you remit $8,000 on time but the remaining $2,000 eight days late, the 10% penalty applies to the $2,000 shortfall ($200 penalty). However, if you miss the entire $10,000 remittance by 8 days, the penalty is $1,000. Partial remittances reduce the penalty base but do not eliminate it. If you cannot remit the full amount on time, remit whatever you can by the deadline and pay the balance as quickly as possible.
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CPP, CPP2, EI, income tax, T4s, ROEs, WSIB and all CRA remittances included. Zero late remittances.
Payroll Filing Deadlines: T4, ROE, T4A and Provincial
| Filing Requirement | Deadline | Penalty for Late Filing |
|---|---|---|
| T4 slips (Statement of Remuneration Paid): issue to employees and file with CRA | February 28 of the following year. If February 28 falls on a weekend, the deadline is the next business day. For the 2025 tax year: March 2, 2026 (February 28 is a Saturday). For the 2026 tax year: March 1, 2027 (February 28 is a Sunday). | $100 per slip per day late, up to $7,500 per information return. Plus $25 per day for late summary, minimum $100, maximum $2,500. |
| T4A slips (Statement of Pension, Retirement, Annuity and Other Income): subcontractor payments over $500 | Same as T4: February 28 of the following year (or next business day). | Same penalty structure as T4: $100 per slip per day late, up to $7,500. |
| Record of Employment (ROE): issue when an employee has an interruption of earnings | Within 5 calendar days after the end of the pay period in which the interruption of earnings occurs. Electronic ROEs: within 5 calendar days. Paper ROEs: within 5 calendar days. | CRA can issue penalties. The employee's EI claim is delayed. If the employer fails to issue an ROE, CRA can issue one on the employer's behalf and assess additional penalties. |
| T5018 (Statement of Contract Payments): construction industry subcontractor payments | 6 months after the end of the employer's fiscal year. | $25 per day per late information return, minimum $100, maximum $2,500. |
| Ontario Employer Health Tax (EHT) annual return | March 15 of the following year. For the 2025 tax year: March 15, 2026. | Penalties for late filing and late payment. EHT applies to employers with Ontario payroll exceeding $490,000 (private sector exemption, 2020 to 2028). Rate: 0.98% to 1.95% of total Ontario payroll. |
| WSIB premium reporting (Ontario) | WSIB premiums are reported and reconciled annually by March 31. Monthly reporting for employers on Schedule 1 (self-insured employers report quarterly). | WSIB surcharges for late reporting. WSIB premiums are mandatory for most Ontario employers and are separate from CRA payroll remittances. |
| Final remittance (business closure or change) | Within 7 days of the business ceasing to have employees or ceasing operations. | Standard late remittance penalties (3% to 20%) apply on the final remittance if late. |
Employers Filing More Than 5 T4 Slips Must File Electronically: CRA requires electronic filing (via CRA Web Forms, internet file transfer or payroll software) for any employer issuing more than 5 information returns (T4s, T4As). Paper filing is only permitted for 5 or fewer slips. Filing paper returns when electronic filing is required results in a penalty of $125 per slip (up to $2,500). We file all T4s electronically for every payroll client.
What Is Insurable, Pensionable and Taxable
Not every payment to an employee is subject to all three deductions. Certain amounts are pensionable but not insurable, or taxable but not pensionable. Applying the wrong treatment creates under-remittance or over-remittance, both of which trigger CRA action.
| Payment Type | CPP Pensionable? | EI Insurable? | Income Tax Taxable? |
|---|---|---|---|
| Regular wages, salary, commissions | Yes | Yes | Yes |
| Overtime pay | Yes | Yes | Yes |
| Vacation pay | Yes | Yes | Yes |
| Bonuses and incentives | Yes | Yes | Yes |
| Retroactive pay increase | Yes | Yes | Yes |
| Tips and gratuities (controlled, received through employer) | Yes | Yes | Yes |
| Tips and gratuities (direct, cash tips from customers) | Yes (if employer can track) | Yes (if employer can track) | Yes (employee reports on T1) |
| Taxable benefits (vehicle, housing, group life insurance over $25K) | Yes (most) | Yes (most) | Yes |
| Retiring allowance (severance) | No | No | Yes (withhold income tax at prescribed rates) |
| Death benefit (first $10,000) | No | No | No (exempt up to $10,000) |
| Workers' compensation payments (WSIB) | No | No | No (paid by WSIB, not the employer) |
Director Liability for Payroll Trust Amounts
| Factor | Details |
|---|---|
| What triggers director liability | The corporation fails to remit CPP, EI or income tax deducted from employee paycheques. CRA assesses the corporation, the corporation cannot pay, and CRA assesses the directors personally under section 227.1 of the Income Tax Act. |
| Amount | The full amount of unremitted source deductions plus interest and penalties. Directors are jointly and severally liable. CRA can collect the full amount from any single director. |
| Time limit | CRA can assess directors within 2 years of the date the person ceased to be a director. If you are still a director, there is no time limit. |
| Due diligence defence | A director is not liable if they can demonstrate they exercised reasonable care, diligence and skill to prevent the failure to remit. Positive steps: verifying My Business Account monthly, setting up pre-authorized debit for payroll remittances, hiring a CPA or payroll provider, ensuring dedicated funds are set aside each pay period. |
| How to protect yourself | Process payroll through a licensed CPA or payroll provider with automated remittances. Verify CRA My Business Account monthly. Set up pre-authorized debit. Never use payroll trust funds for operating expenses. If the business is in financial difficulty, prioritize payroll remittances over all other payments. |
| GST/HST director liability | Directors are also personally liable for unremitted HST under section 323 of the Excise Tax Act. Same due diligence defence and 2-year limitation period apply. CRA Objection Services → |
CRA Trust Examination (Payroll Audit)
A CRA trust examination is a payroll-specific audit. CRA reviews your payroll records to verify that all CPP, EI and income tax deductions were calculated correctly, remitted on time and reported accurately on T4 slips. Trust exams are one of CRA's most common audit types for small and mid-size businesses.
| Trust Exam Element | What CRA Reviews |
|---|---|
| Source deduction accuracy | Were CPP, EI and income tax calculated correctly for every employee on every pay period? CRA recalculates using the payroll deduction formulas and compares to your remittances. |
| Remittance timing | Were remittances made by the due date for your remitter type? CRA checks every remittance date against the required due date for the year under review. |
| T4 reconciliation | Do the total CPP, EI and income tax reported on all T4 slips match the total amounts remitted to CRA during the year? Any discrepancy triggers an assessment for the shortfall. |
| Worker classification | Are workers classified correctly as employees or independent contractors? If CRA determines a worker classified as a contractor is actually an employee, CRA assesses retroactive CPP, EI and income tax for every pay period. |
| Taxable benefits | Were taxable benefits (vehicle, housing, parking, group life insurance, employer-paid health premiums) included in insurable and pensionable earnings and reported on T4s? |
| ROE accuracy | Were ROEs issued within 5 calendar days of each interruption of earnings? Were the insurable hours and insurable earnings reported correctly? |
CRA Can Go Back 4 Years: A CRA trust examination typically covers the most recent 1 to 2 years, but CRA can review up to 4 years of payroll records. If CRA finds errors in one year, they frequently expand the review to additional years. Maintain payroll records (pay stubs, timesheets, remittance confirmations, T4 working papers, ROE copies) for a minimum of 6 years.
Ontario Provincial Payroll Requirements
| Requirement | Details | Deadline / Rate |
|---|---|---|
| Ontario Employer Health Tax (EHT) | A payroll tax paid by employers on total Ontario remuneration. Private-sector employers with payroll under $490,000 are exempt (2020 to 2028). Employers with payroll over $5,000,000: no exemption. | Rate: 0.98% (on first $200,000 above exemption) to 1.95% (on amounts over $400,000 above exemption). Annual return: March 15. Monthly instalments required if annual EHT exceeds $600. |
| WSIB (Workplace Safety and Insurance Board) | Mandatory workplace insurance for most Ontario employers. Premiums based on insurable earnings and the employer's rate group. Covers workplace injuries and occupational diseases. | Monthly reporting for Schedule 1 employers. Annual reconciliation by March 31. Premiums vary by industry: $0.30 to $14.00+ per $100 of insurable earnings. |
| Employment Standards Act (ESA) compliance | Minimum wage ($17.20/hour, subject to annual increases), overtime (1.5x after 44 hours), vacation pay (4% minimum, 6% after 5 years), public holiday pay, termination and severance requirements. | Ongoing compliance on every paycheque. Ministry of Labour can audit and assess penalties for non-compliance. |
| Ontario ESA pay transparency | Employers must provide a pay stub with every payment, showing gross pay, deductions, net pay and the period covered. Stubs can be electronic. | Every pay period. Failure to provide a pay stub is an ESA violation subject to fines. |
| Termination and severance pay | Termination pay: 1 week per year of service (up to 8 weeks). Severance pay (separate): 1 week per year of service for employers with $2.5M+ payroll and employees with 5+ years of service. Both are taxable. CPP and EI do not apply to retiring allowances (severance). | Payable on termination or within the ESA timelines. Income tax withholding required at CRA prescribed rates. |
Payroll Year-End Compliance Checklist
- Verify 2026 CPP, CPP2 and EI rates are loaded into your payroll system before the first 2026 pay run (CPP 5.95%, CPP2 4%, EI 1.63%)
- Confirm the 2026 maximum insurable earnings ($68,900 for EI) and maximum pensionable earnings ($71,300 for CPP, $81,200 for CPP2) are updated
- Update federal and provincial tax tables for 2026 (basic personal amount and bracket changes)
- Reconcile total CPP, EI and income tax remitted to CRA against year-to-date payroll records before preparing T4s
- Add all taxable benefits to T4 slips: vehicle allowances, employer-paid health premiums (taxable portion), parking, group life insurance over $25,000, housing, employer-paid tuition
- Prepare and issue T4 slips to all employees by February 28 (or next business day)
- File T4 Summary and all T4 slips with CRA electronically by February 28 (mandatory if more than 5 slips)
- Prepare and issue T4A slips for subcontractor and other payments over $500 by February 28
- Reconcile T4 totals to remittance totals: any discrepancy triggers CRA assessment
- File all ROEs for employees who had interruptions of earnings during the year (verify 5-day compliance for each)
- File Ontario EHT annual return by March 15 (if payroll exceeds $490,000)
- Report and reconcile WSIB premiums by March 31
- Archive all payroll records for the year: pay stubs, timesheets, remittance confirmations, T4 working papers, ROE copies. Retain for 6 years minimum.
- Confirm remitter type for the new year on CRA My Business Account (check for reclassification due to AMWA changes)
10 Common Payroll Compliance Errors
| # | Error | Consequence |
|---|---|---|
| 1 | Using outdated CPP, EI or tax rates at the start of a new year | Under-deduction or over-deduction of employee premiums. Under-remitted employer contributions trigger CRA penalties. Update rates before the first January pay run. |
| 2 | Missing the remitter type reclassification | Business grows, AMWA crosses $25,000, and CRA reclassifies you from regular to Threshold 1. If you continue remitting monthly instead of twice-monthly, every remittance is late. Penalties apply retroactively. |
| 3 | Not issuing ROEs within 5 calendar days | CRA penalty. Employee's EI claim delayed. CRA can issue the ROE on your behalf and assess additional penalties. Set a process trigger for every termination, layoff, leave and reduction in hours. |
| 4 | Missing taxable benefits on T4 slips | CRA trust exam finds unreported vehicle allowances, employer-paid health premiums, parking or group life insurance. CRA reassesses CPP, EI and income tax on the unreported amounts plus penalties and interest. |
| 5 | Filing T4s late (after February 28) | Penalty: $100 per slip per day late, up to $7,500 per information return. A company with 20 employees filing 5 days late: $10,000 in penalties (capped at $7,500). |
| 6 | Classifying an employee as an independent contractor to avoid payroll | CRA reclassifies the worker. Employer assessed for retroactive CPP (employee and employer portions), EI (employee and employer portions) and income tax for every pay period. Plus penalties and interest. |
| 7 | Not remitting the employer's share of CPP and EI | The employer match (CPP dollar-for-dollar, EI at 1.4x) is a separate obligation. Some employers deduct the employee portion but forget to calculate and remit their own share. CRA assesses the shortfall plus 10% to 20% penalties. |
| 8 | Using payroll trust funds for operating expenses | Deducting CPP, EI and income tax from employee paycheques and then spending those funds on rent, inventory or other expenses instead of remitting to CRA. This is the most common trigger for director liability assessments. |
| 9 | Not filing T5018 for construction subcontractor payments | Construction industry employers must file T5018 slips for all subcontractor payments. Failure to file: penalty of $25 per day per late return ($100 to $2,500). CRA uses T5018 data to identify unreported contractor income. |
| 10 | Not reconciling T4s to CRA remittances at year-end | If the total CPP, EI and income tax on all T4 slips does not match the total remitted to CRA, CRA assesses the difference. Under-remittance: penalties and interest. Over-remittance: you must apply for a refund. |
Frequently Asked Questions: Payroll Compliance
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