Daycare Payroll Guide · Ontario
Payroll Services for Daycare Centres
The complete payroll guide for Ontario daycare centres and childcare providers. Covers the RECE Wage Enhancement Grant, CWELCC funding compliance, staff-to-child ratio payroll planning, part-time and supply staff, Ministry of Education reporting, WSIB, vacation pay, statutory holiday closures and the payroll errors that trigger CRA and Ministry audits. From $125/month. 900+ five-star reviews.
Why Daycare Payroll Is More Complex Than Other Industries
Daycare payroll is uniquely complex because it is driven by government funding, licensing ratios and two separate compliance regimes (CRA for payroll tax and the Ministry of Education for childcare licensing). The Ontario Wage Enhancement Grant adds $2.00/hour plus $0.414/hour for benefits to RECE-qualified staff, but the grant flows through the operator and must be tracked separately on payroll to satisfy Ministry reporting requirements. The CWELCC (Canada-Wide Early Learning and Child Care) funding changes the revenue model entirely, and operators must demonstrate that wage floors are met and payroll costs are reported accurately to maintain funding eligibility.
Staffing is determined by legislated staff-to-child ratios, not by revenue. A centre that is licensed for 50 children at specific age groups must employ the exact number of staff the ratios require, regardless of whether all 50 spots are filled. This creates a payroll structure where labour is a fixed cost, not a variable one. We handle payroll for licensed daycare centres, home child care agencies, before-and-after school programs and EarlyON centres across Ontario. For a general overview of our payroll services, see our payroll services page.
The RECE Wage Enhancement Grant: How It Works on Payroll
The Ontario Wage Enhancement Grant (WEG) provides $2.00/hour plus $0.414/hour in benefits to eligible staff in licensed childcare programs. This is the most misunderstood payroll component in the daycare industry.
| WEG Component | Amount | Payroll Treatment |
|---|---|---|
| Wage enhancement (RECE staff) | $2.00/hour | Added to the employee's gross hourly pay. Subject to CPP, EI and income tax. Reported on the T4 as part of employment income. The grant reimburses the operator, but the employee sees it as regular wages. |
| Wage enhancement (non-RECE program staff in supervisory roles) | $2.00/hour | Same treatment as RECE staff. Must be in a program staff role to qualify. Administrative and kitchen staff do not qualify. |
| Benefit enhancement (employer share) | $0.414/hour per eligible hour | Covers the employer's share of CPP, EI, WSIB, vacation pay and benefits on the $2.00/hour enhancement. This offsets the additional employer costs created by the $2.00 increase. Reported to the Ministry, not directly on the T4. |
| Home child care visitors | $2.00/hour + $0.414/hour | Home child care agency visitors who are employees qualify. Home child care providers (independent operators) do not qualify for the WEG through the agency. |
The WEG Must Flow Through Payroll, Not as a Separate Payment: The $2.00/hour Wage Enhancement is part of the employee's hourly rate on payroll. It is not a separate cheque, not a bonus and not an allowance. It must be included in the gross hourly rate so that CPP, EI and income tax are correctly calculated on the total amount. Operators who pay the WEG as a separate untaxed payment are violating both CRA payroll rules and Ministry of Education grant conditions. CRA reassesses for unremitted deductions. The Ministry can claw back the grant funding.
CWELCC Funding and Payroll Compliance
The Canada-Wide Early Learning and Child Care (CWELCC) system changed how licensed daycare centres are funded in Ontario. Operators who opt into CWELCC agree to fee reductions for parents (capped fees), wage floors for staff and detailed reporting to the Ministry of Education. Payroll is at the centre of CWELCC compliance.
| CWELCC Payroll Requirement | Details |
|---|---|
| Wage floor | CWELCC requires operators to pay at least the wage floor established for their region and position type. RECEs in the GTA: approximately $23.86/hour (2025 floor, indexed annually). Non-RECE program staff have a lower floor. If your current rate is below the floor, you must increase to the floor to remain eligible for CWELCC funding. |
| Wage reporting to Ministry | Operators must report actual wages paid to all program staff as part of the CWELCC funding application and annual reconciliation. Payroll records must match the reported wages exactly. Discrepancies result in funding clawback. |
| No reduction in wages | Once an operator opts into CWELCC, they cannot reduce any employee's wage below the level it was at the time of opting in. Any wage reduction disqualifies the centre from CWELCC funding. |
| Funded vs. unfunded positions | CWELCC funding covers positions required to meet staff-to-child ratios. Additional positions (extra floaters, admin, kitchen) may not be fully covered. Payroll must track which positions are funded vs. unfunded for Ministry reporting. |
| Annual financial statements | CWELCC operators must submit audited or review-engagement financial statements annually. Payroll costs must reconcile to the financial statements and to the Ministry's funding reports. Any inconsistency triggers a review. |
CWELCC Payroll Accuracy Is Tied to Funding: If your payroll records show you paid RECEs $22.50/hour but the CWELCC wage floor is $23.86/hour, the Ministry can withhold funding until the shortfall is corrected and back pay is issued. If your financial statements show $380,000 in payroll costs but your payroll records total $340,000, the Ministry investigates the $40,000 discrepancy. Every dollar on payroll must match every dollar reported to the Ministry. We reconcile payroll to Ministry reports on every filing.
Staff-to-Child Ratios and Payroll Planning
| Age Group | Staff-to-Child Ratio (Ontario) | Maximum Group Size | Payroll Implication |
|---|---|---|---|
| Infant (under 18 months) | 1:3 | 10 | Highest labour cost per child. 10 infants require a minimum of 4 staff (including coverage for breaks). Payroll for the infant room alone is $15,000 to $20,000/month. |
| Toddler (18 months to 2.5 years) | 1:5 | 15 | 15 toddlers require a minimum of 3 staff. Break coverage adds a 4th during peak hours. |
| Preschool (2.5 to 3.8 years) | 1:8 | 24 | 24 preschoolers require 3 staff. This is the most cost-efficient age group for most centres. |
| Kindergarten (3.8 to 5 years) | 1:13 | 26 | 26 children require 2 staff. Kindergarten rooms have the lowest staff cost per child. |
| School-age (6 to 12 years, before/after school) | 1:15 | 30 | 30 children require 2 staff. Part-time hours (7 AM to 9 AM and 3 PM to 6 PM) create split-shift payroll complexity. |
Ratio Non-Compliance Has Licensing Consequences: The Ministry of Education conducts unannounced inspections. If a centre is found to be operating below the required staff-to-child ratio at any time (including during staff breaks), the centre receives a non-compliance order. Repeated violations can result in licence suspension. Payroll planning must account for break coverage, sick call replacements and staggered start/end times so the centre is never below ratio. We help operators build staffing schedules that maintain ratio compliance while controlling labour costs.
Overtime, Split Shifts and ESA Rules for Daycare Centres
| ESA Rule | Daycare Application | Common Violation |
|---|---|---|
| Overtime: 44 hours/week at 1.5x | All daycare staff (RECEs, assistants, cooks, admin) are entitled to overtime at 1.5x after 44 hours. There is no childcare exemption from overtime provisions. | Asking staff to stay late for parent pickup delays or ratio coverage without tracking overtime. These hours count toward the 44-hour threshold. |
| Split shifts (before/after school programs) | Before-and-after school staff often work 7 AM to 9 AM and 3 PM to 6 PM. Both segments count toward total weekly hours. A worker doing 5 hours/day across 2 segments for 5 days works 25 hours/week. | Not tracking total hours across split segments. If a worker also covers a PD day (full day), total hours for that week may exceed 44. |
| Rest period: 11 hours between shifts | A staff member who works a late afternoon shift until 6:30 PM cannot start an early morning shift at 6:30 AM (only 12 hours between, but must account for travel). Generally not an issue in daycares unless the worker also has a second job. | Rare in daycare but applies during special events (overnight field trips, extended care programs). |
| Eating period: 30 minutes every 5 hours | Staff must receive a 30-minute break for every 5 hours of work. The break can be unpaid. Coverage must be arranged so the room remains in ratio during the staff break. | Not providing a break because the centre cannot maintain ratio without the staff member in the room. The solution is scheduling break coverage, not skipping breaks. |
| Public holiday closures | Most daycare centres close on all 9 Ontario public holidays. Staff receive public holiday pay (4 weeks wages / 20) for each holiday. Some centres also close between Christmas and New Year (not statutory holidays except Christmas and Boxing Day). | Not paying public holiday pay for part-time staff with variable hours. The formula must be calculated individually for each employee on each holiday. |
| Closure days (PD days, winter break, March break) | Centres that close on school PD days, March break or additional winter break days (beyond statutory holidays) are not required to pay staff for these days unless there is a contractual obligation. | Treating non-statutory closure days as public holidays. Staff are not entitled to pay for non-statutory closures unless the employment contract says otherwise. |
Vacation Pay, Public Holiday Pay and Supply Staff
| Entitlement | Amount | Daycare-Specific Notes |
|---|---|---|
| Vacation pay (under 5 years) | 4% of gross wages earned | Many daycare centres pay vacation pay on every cheque (common for part-time and supply staff). Full-time staff typically accrue vacation pay and take 2 weeks off (often during summer or December closures). |
| Vacation pay (5+ years) | 6% of gross wages earned | Daycare has higher staff retention than restaurants but lower than healthcare. Track hire dates carefully. The increase from 4% to 6% applies from the 5th anniversary of employment. |
| Public holiday pay (variable hours) | (4 weeks wages / 20) | Part-time staff with variable hours must have public holiday pay calculated individually for each of the 9 Ontario public holidays using the actual wages earned in the 4 weeks before the holiday. This is the most common payroll error in daycare centres. |
| Supply/casual staff | Paid per shift, vacation pay on each cheque | Supply staff cover sick calls, vacations and ratio gaps. They are employees (not contractors) and must be on payroll with CPP, EI, income tax and 4% vacation pay deducted. T4s issued. ROEs issued when they have 7 consecutive days without work. |
| Student placements (ECE students) | Unpaid (placement, not employment) | ECE students on college placement are not employees and are not on payroll. They must not be counted toward staff-to-child ratios. If the centre starts paying the student for additional hours outside the placement, those hours are employment and must go through payroll. |
Daycare Payroll from $125/Month. T4s and ROEs Included.
WEG tracking, CWELCC compliance, ratio-based staffing, supply staff, CPP/EI/tax. We handle it all.
What Our Daycare Payroll Service Includes
| Service | What We Do |
|---|---|
| Pay run processing (biweekly or semi-monthly) | Every pay run calculated with correct CPP, EI and income tax. WEG $2.00/hour included in gross pay for eligible staff. Variable hours for part-time, supply and split-shift staff tracked. Overtime calculated at 1.5x after 44 hours. |
| Wage Enhancement Grant tracking | WEG $2.00/hour and $0.414/hour benefits tracked per eligible employee per hour worked. Eligible hours reconciled to the Ministry funding application. Reports prepared for the Ministry showing WEG distribution by employee. Grant claim amounts verified against payroll records. |
| CWELCC wage floor compliance | All program staff wages monitored against CWELCC regional wage floors. Alerts issued if any employee is below the floor. Payroll adjusted before the discrepancy reaches the Ministry. Annual wage reports prepared for CWELCC reconciliation. |
| Supply and casual staff payroll | Supply staff paid per shift with 4% vacation pay on each cheque. CPP, EI and income tax deducted. T4s issued. ROEs filed when 7 consecutive days without work. Supply cost tracked separately from permanent staff for Ministry reporting and budgeting. |
| Vacation pay accrual and payment | 4% (or 6% at 5+ years) calculated on every pay run. Part-time and supply staff: paid on each cheque. Full-time staff: accrued and paid during vacation period. Year-end balances verified. |
| Public holiday pay calculation | Variable-hours formula applied individually for each employee on each of the 9 Ontario public holidays. Full-time staff: regular daily rate. Part-time and supply staff: 4 weeks wages / 20 calculated for each holiday. |
| CRA remittances | CPP, EI and income tax remitted by the deadline. Monthly or quarterly frequency. Penalties for late remittance: 3% to 10%. We never miss a deadline. |
| ROE filing | ROE filed within 5 days of every separation: resignation, termination, end of contract, maternity leave. Supply staff ROEs filed when 7+ consecutive days without work. Correct reason codes applied. |
| WSIB tracking | WSIB premiums calculated on insurable earnings. Daycare industry rate applied. Annual reconciliation filed. Premiums tracked as a payroll cost for Ministry reporting. |
| T4 and T4 Summary preparation | All T4s prepared and filed by February 28. WEG amounts included in employment income. Taxable benefits reported. T4 Summary reconciled to total remittances. Ministry wage reports cross-referenced to T4 totals for consistency. |
Worked Example: Biweekly Payroll for a 50-Child Licensed Daycare Centre
| Line Item | Amount | Notes |
|---|---|---|
| 4 full-time RECEs (gross including WEG) | $9,120 | RECE 1: 80 hrs x $27.86/hr ($25.86 base + $2.00 WEG) = $2,229. RECE 2: 80 hrs x $26.50 ($24.50 + $2.00) = $2,120. RECE 3: 80 hrs x $25.86 ($23.86 floor + $2.00) = $2,069. RECE 4: 80 hrs x $27.00 ($25.00 + $2.00) = $2,160. Supervisor RECE included. |
| 3 non-RECE program staff | $4,800 | Staff 1: 80 hrs x $21.00 = $1,680. Staff 2: 80 hrs x $20.00 = $1,600. Staff 3: 80 hrs x $19.00 = $1,520. Non-RECE staff do not receive WEG unless in a supervisory program role. |
| 1 cook | $1,520 | 80 hrs x $19.00/hr. Not eligible for WEG (not a program staff role). Full-time employee. |
| 1 admin/office | $1,760 | 80 hrs x $22.00/hr. Not eligible for WEG. Full-time. |
| 2 supply staff (5 shifts each this period) | $1,900 | Supply 1: 40 hrs x $24.00 = $960. Supply 2: 40 hrs x $23.50 = $940. 4% vacation pay paid on each cheque ($76 total). |
| Total gross payroll | $19,100 | 9 permanent staff + 2 supply staff. WEG included in RECE gross pay. |
| WEG component (tracked separately for Ministry) | $1,280 | 4 RECEs x 80 hrs x $2.00/hr = $640 per pay period. Plus benefit enhancement: 4 x 80 x $0.414 = $132.48/pay period. Total WEG cost reimbursed by Ministry: $772.48/pay period. Annual: approximately $20,085. |
| Employee CPP deductions (total) | $1,062 | 5.95% on pensionable earnings above basic exemption (prorated biweekly). |
| Employee EI deductions (total) | $313 | 1.64% on insurable earnings. |
| Employee income tax withheld (total) | $2,290 | Federal + Ontario based on each employee's TD1 and total gross including WEG. |
| Employer CPP (1:1 match) | $1,062 | Employer matches employee CPP deduction. |
| Employer EI (1.4x employee) | $438 | Employer pays 1.4x the employee EI deduction. |
| Vacation pay accrued (4%) | $688 | 4% of $17,200 (permanent staff gross). Supply staff vacation pay already paid on cheque. |
| Total CRA remittance (this pay period) | $5,165 | Employee CPP + EI + tax ($3,665) + Employer CPP + EI ($1,500). Due by the 15th of the following month. |
WEG Reimbursement Timing: The Ministry reimburses the WEG quarterly or semi-annually. The operator must pay the $2.00/hour on every paycheque regardless of when the reimbursement arrives. This creates a cash flow gap. A centre with 4 RECEs working full-time advances approximately $10,000 in WEG wages before the first Ministry reimbursement. Budget for this gap in your cash flow planning.
10 Common Payroll Errors Ontario Daycare Centres Make
| # | Error | Consequence |
|---|---|---|
| 1 | Paying the Wage Enhancement Grant as a separate untaxed payment | CRA reassesses for unremitted CPP, EI and income tax on the full WEG amount. Ministry of Education claws back the grant funding because the WEG was not paid through payroll as required. Double penalty. |
| 2 | Paying RECEs below the CWELCC wage floor | Ministry withholds CWELCC funding until the shortfall is corrected and back pay is issued. If underpayment is systemic, the centre may be removed from CWELCC entirely, increasing parent fees by $10,000+ per child per year. |
| 3 | Treating supply staff as independent contractors | Supply workers who cover shifts at your centre on your schedule using your materials are employees. CRA reclassification: CPP, EI, income tax and penalties for all years. Common in home daycare agencies. |
| 4 | Not calculating public holiday pay for part-time staff | Part-time staff with variable hours are entitled to public holiday pay using the formula (4 weeks wages / 20). Using a flat amount or skipping the calculation is an ESA violation. Ministry of Labour orders back pay plus penalties. |
| 5 | Not filing ROEs for supply staff after 7 days without work | Service Canada requires an ROE when an employee has 7 consecutive calendar days without work or earnings. Supply staff who are not called for 7+ days need an ROE. Failure delays their EI claim and flags your account. |
| 6 | Counting ECE student placements toward staff-to-child ratios | Students on college placement are not employees, are not on payroll and cannot be counted in the ratio. If a Ministry inspector finds a room in ratio only because a student is counted, the centre receives a non-compliance order. |
| 7 | Not tracking WEG hours separately for Ministry reporting | The Ministry requires a detailed report showing which employees received the WEG, how many hours each worked and the total WEG amount paid. If your payroll cannot produce this report, the Ministry may deny or claw back funding. Payroll Services → |
| 8 | Mixing funded and unfunded positions in Ministry reports | CWELCC funds ratio-required positions. Additional staff (floaters, kitchen, admin) may not be fully funded. Reporting all staff as funded overstates the claim and triggers a Ministry audit with clawback. |
| 9 | Not paying overtime for staff staying late for parent pickups | When a parent is late picking up a child, a staff member must stay to maintain ratio. Those extra 15 to 30 minutes every day add up. If total weekly hours exceed 44, overtime at 1.5x is owed. Not tracking these minutes is an ESA violation. |
| 10 | Missing CRA remittance deadlines | Penalties: 3% (1-3 days late), 5% (4-5 days), 7% (6-7 days), 10% (7+ days or repeated). On a $5,000 biweekly remittance, a 7-day delay costs $350. Repeated late filing triggers accelerated remitter status. |
Daycare Payroll Setup Checklist
- Register for a CRA payroll account (RP program account) if not already registered
- Collect TD1 (federal) and TD1-ON (Ontario) from every employee before the first pay period
- Configure payroll software with WEG tracking: $2.00/hour for RECE-eligible staff as a separate payroll component included in gross pay
- Set up CWELCC wage floor monitoring: alert if any program staff rate falls below the regional floor
- Configure position categories: RECE, non-RECE program staff, cook, admin, supply/casual (for Ministry reporting)
- Set up vacation pay accrual at 4% (or 6% for 5+ years). Supply staff: paid on each cheque.
- Configure public holiday pay calculation for variable-hours staff (4 weeks / 20 formula)
- Register with WSIB and set up premium tracking at the daycare industry rate
- Set up supply staff tracking: per-shift pay, 4% vacation on each cheque, ROE after 7 consecutive days without work
- Establish CRA remittance schedule (monthly or quarterly based on annual deductions)
- Set up ROE electronic filing through Service Canada for separations and maternity leave
- Configure Ministry reporting: WEG hours by employee, funded vs. unfunded positions, wage reports for CWELCC annual reconciliation
Need Daycare Payroll Set Up Correctly? From $125/Month.
WEG tracking, CWELCC compliance, supply staff, T4s, ROEs. We handle every pay run.
Frequently Asked Questions: Payroll for Daycare Centres
How does the Wage Enhancement Grant work on payroll?
The $2.00/hour WEG is added to the RECE employee's gross hourly rate and processed through regular payroll. CPP, EI and income tax are deducted on the total amount including the WEG. The Ministry reimburses the operator for the $2.00/hour plus $0.414/hour in benefit costs. The WEG must flow through payroll. It cannot be paid as a separate untaxed cheque.
What is the CWELCC wage floor and do I have to meet it?
Yes. If you have opted into CWELCC, you must pay all program staff at or above the regional wage floor set by the Ministry. RECEs in the GTA: approximately $23.86/hour (2025, indexed). Paying below the floor risks CWELCC funding suspension. We monitor all program staff wages against the floor on every pay run.
Are supply staff employees or contractors?
Employees. Supply workers who cover shifts at your centre on your schedule using your classroom materials and resources are employees. They must be on payroll with CPP, EI and income tax deducted, 4% vacation pay paid on each cheque and T4s issued. CRA reclassification of contractors as employees in daycare is common and costly. Payroll Services →
How is public holiday pay calculated for part-time daycare staff?
Formula: total regular wages earned in the 4 work weeks before the holiday, divided by 20. This must be calculated individually for each employee on each of the 9 Ontario public holidays. Using a flat daily rate is incorrect. Part-time staff with variable hours will have a different public holiday pay amount for each holiday.
Do I need to file an ROE for supply staff?
Yes. An ROE must be filed when a supply employee has 7 consecutive calendar days without work or earnings. If a supply worker is not called for a full week, file the ROE within 5 calendar days. Use Reason Code A (Shortage of Work). If they are called again later, a new ROE is filed on the next interruption.
Can ECE students on placement be counted in staff-to-child ratios?
No. ECE students on college placement are not employees, are not on payroll and cannot be counted toward the staff-to-child ratio. If a room is in ratio only because a student is present, the centre is out of compliance. Students may assist but cannot be relied upon for ratio purposes.
How do I handle payroll during centre closures?
For the 9 Ontario statutory holidays, staff receive public holiday pay. For non-statutory closure days (March break, extra winter break days, PD days), there is no ESA requirement to pay unless your employment contract includes paid closure days. Many centres offer 2 weeks paid vacation during summer and winter closures as part of the employment agreement.
Is WSIB required for daycare centres?
WSIB coverage is not mandatory for daycare centres in Ontario (unlike construction). However, it is strongly recommended. Without WSIB, an employee injured at work can sue the employer directly. Most daycare operators carry WSIB voluntarily. The daycare industry rate is approximately $1.20 to $2.00 per $100 of insurable earnings.
How much does daycare payroll cost?
From $125/month for the first employee, $75/month for each additional employee. Includes every pay run, WEG tracking, CWELCC wage floor monitoring, supply staff payroll, vacation and holiday pay, CPP/EI/tax remittances, T4 preparation, ROE filing and Ministry report support. Know Your Exact Fee →
Can you prepare Ministry wage reports from payroll data?
Yes. We configure payroll to track WEG hours by employee, funded vs. unfunded positions and wage rates by position category. Ministry wage reports for WEG claims and CWELCC annual reconciliation are prepared directly from payroll data. Every number on the Ministry report matches the payroll records exactly.
Daycare Payroll Is Complex. Let a CPA Handle It Correctly.
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