How to Open a Payroll Account
Your first employee: opening an RP payroll account, CPP, EI and tax to deduct, employer costs, remittance deadlines, penalties and T4s.
The short version
- Before the first payday for your first employee, open a payroll program account (an RP account) on your business number, in My Business Account or by phone.
- From each pay you deduct income tax, CPP (and CPP2) and EI. You add the employer's share: the same CPP again and 1.4 times the EI.
- Most small employers remit by the 15th of the next month. Under $3,000 a month of average withholding with a clean record, you may remit quarterly.
- Late remittances cost 3% to 10% of the amount, more for repeat failures, plus daily interest. Directors can be personally liable.
- Year-end: T4 slips to employees and CRA by the last day of February. When someone leaves, issue a Record of Employment.
How to Open a Payroll Account
Hiring your first employee is a milestone and a paperwork event in equal measure. Overnight you become a part-time tax collector for the federal government, with deadlines that are not optional and penalties that are not small. The good news: once it's set up, payroll is the same every month. Here's the setup, the deductions, the deadlines, and the mistakes that cost new employers money.
Setup, Step by Step
- Business number: if you don't have one, you get it when you register for the first program account. Many owners already have one from GST/HST; see registering for GST/HST.
- Open the RP (payroll) account before your first remittance is due, through Business Registration Online or My Business Account.
- Get a TD1 (federal and provincial) from each employee, and their SIN.
- Set up payroll software, or use CRA's payroll deductions online calculator for each pay.
- Provincial items: workers' compensation (WSIB in Ontario), and in Ontario the Employer Health Tax, which most small employers don't pay below $1 million of payroll.
Hiring your first employee?
Tell the assistant the wage, pay frequency and province. It lists exactly what to deduct, what you pay on top, your remittance due dates and what to file at year-end.
What Comes Off, and What You Add
| Item | Employee pays (2026) | Employer adds |
|---|---|---|
| CPP | 5.95% of earnings from $3,500 to $74,600 | The same amount |
| CPP2 | 4% from $74,600 to $85,000 | The same amount |
| EI | 1.63% up to $68,900 | 1.4 times the employee's premium |
| Income tax | Per CRA's formulas and the TD1 | Nothing (you just send it in) |
A $50,000 employee costs about $2,770 of employer CPP and $1,140 of employer EI on top of the salary, plus workers' compensation and any benefits. More on CPP and EI deductions; what the employee sees is on paycheque deductions.
Remittance Deadlines
| Remitter type | Average monthly withholding | Due |
|---|---|---|
| Quarterly | Under $3,000, with a perfect compliance record | April 15, July 15, October 15, January 15 |
| Regular | Under $25,000 | The 15th of the next month |
| Accelerated, threshold 1 | $25,000 to $99,999.99 | Twice a month |
| Accelerated, threshold 2 | $100,000 or more | Up to four times a month |
Late remittance penalties: 3% if 1 to 3 days late, 5% for 4 or 5 days, 7% for 6 or 7 days, 10% after that, and 20% for repeated failures in a year. Withholding and not remitting is treated much more seriously than income tax owing; see payroll penalties and director liability, penalties and interest and CRA collections.
Mistakes New Employers Make
- Paying a "contractor" who is really an employee. CRA can assess both halves of CPP and EI, plus penalties; see employee vs contractor.
- Paying family without payroll. Spouses and children can be employees, with the right paperwork and reasonable pay; see paying your spouse and paying your children.
- Forgetting taxable benefits such as a company vehicle or cell phone; see taxable employee benefits.
- Mixing payroll money with operating cash. Treat deductions as trust money from the day you take them.
- Missing the T4 deadline: the last day of February; see T4 filing deadline.
Closing a Payroll Account
When you stop having employees or close the business: remit all deductions within seven days of the business ending, issue a Record of Employment to each employee, file final T4 slips within 30 days, then close the RP account through My Business Account or on form RC145. Leaving it open with nothing to report can bring CRA letters asking for missing remittances. Year-end slips: T4 filing.
Payroll Account Questions
When do I need a payroll account in Canada?
Before your first payroll remittance is due, which in practice means as soon as you hire your first employee, including a family member you pay a salary.
How do I open a CRA payroll account?
Register for an RP program account using your business number, through Business Registration Online, My Business Account or by phone. If you have no business number yet, you get one in the same step.
When are payroll remittances due?
Most small employers remit by the 15th of the month after the pay date. Employers with average monthly withholding under $3,000 and a perfect compliance record may remit quarterly. Larger employers remit more often.
How much does an employer pay for CPP and EI?
The employer matches the employee’s CPP and CPP2 contributions and pays 1.4 times the employee’s EI premium.
What is the penalty for late payroll remittances?
3% to 10% of the late amount depending on how late it is, 20% for repeated failures in the same year, plus interest. Directors can be personally liable for unremitted deductions.
How do I close a CRA payroll account?
Remit the last deductions, issue Records of Employment, file final T4 slips within 30 days of the business closing, then close the RP account through My Business Account or form RC145.
Sources: CRA, When to remit source deductions; CPP rates and maximums. Checked October 2026. The 20% penalty applies to repeated failures made knowingly or with gross negligence. Ontario's Employer Health Tax exemption has eligibility conditions for associated employers. Workers' compensation is provincial and not covered here.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.