Hiring Your First Employee in Canada: The CRA Registrations, T4s, and Payroll Rules You Need

Hiring your first employee is one of the most exciting milestones for a growing business — and one of the most administratively complex. Canada's payroll system involves multiple government agencies, strict deadlines, and real penalties for getting it wrong. Here's the complete picture.

Step 1: Open a CRA Payroll (RP) Account

Before you run your first payroll, you need a Payroll Deductions (RP) account with CRA. This is a sub-account under your existing Business Number (BN). Register through CRA's My Business Account online — it's typically activated within 5 business days.

Your RP account number looks like: 123456789 RP 0001.

Step 2: Understand What You Must Deduct

For every employee, you are legally required to deduct and remit three things from their paycheque:

• Income Tax — based on the employee's TD1 form (federal and provincial) and CRA's payroll deduction tables
• Employee CPP Contributions — 5.95% of pensionable earnings above the basic exemption in 2026 (you match this as the employer)
• Employee EI Premiums — 1.66% of insurable earnings in 2026 (you pay 1.4x the employee's premium as the employer)

Step 3: Set Up a Payroll Schedule

CRA assigns a remittance frequency based on your average monthly withholdings. Most small businesses start as regular remitters — remittances are due by the 15th of the month following the pay period. So payroll deductions from January must be remitted to CRA by February 15.

Missing a remittance deadline triggers a penalty starting at 3% for 1–3 days late, climbing to 10% for 7+ days late. These add up fast.

Step 4: Collect a TD1 from Your Employee

Before running their first paycheque, ask your employee to complete a federal TD1 (Personal Tax Credits Return) and the provincial equivalent. This tells you what personal tax credits they're claiming, which affects how much income tax you withhold. Without it, you default to the basic personal amount only — which may result in under-withholding if they have other income sources.

Step 5: Register with WSIB (Ontario)

In Ontario, most employers with workers must register with the Workplace Safety and Insurance Board (WSIB) within 10 days of hiring their first worker. Premiums are based on your industry classification and annual payroll. Some owner-operators in certain industries are exempt — check wsib.ca to confirm your classification.

Similar workers' compensation boards exist in every province under different names (WorkSafeBC, WCB Alberta, CNESST in Quebec, etc.).

Step 6: Issue T4 Slips by February 28

At the end of each calendar year, you must prepare a T4 slip for every employee showing their total employment income, income tax deducted, CPP contributions, and EI premiums for the year. T4 slips and the T4 Summary must be filed with CRA and copies given to employees by February 28 of the following year.

Contractor vs. Employee — A Critical Distinction

Many founders try to save on payroll obligations by classifying workers as independent contractors rather than employees. This is one of CRA's most audited areas. If CRA determines that a "contractor" is actually an employee based on the degree of control, tools, risk, and integration, they can reassess and charge the employer for all unpaid CPP, EI, and income tax — plus penalties and interest — going back years.

Payroll is one of the most compliance-heavy areas of running a Canadian business. It's also one of the core services in Startcorp's Growth and Full-Service Monthly CPA Plans, where we handle remittances, T4s, and year-end payroll compliance on your behalf.