3.4 – Federal Payroll Accounts

Hiring an Employee

When you hire an employee, you must:

• get their social insurance number;
• have them complete a Form TD1 (Personal Tax Credits Return).

The TD1 is a form that is used by you to determine the amount of federal and provincial tax to be deducted from an individual’s employment income. You keep the TD1 and are not required to send it to CRA. All individuals who have a new employer must complete the form. If the employee claims more than the basic personal amount, then the Saskatchewan TD1 must also be completed.

The form does not have to be completed every year, but if there is a change in entitlement to either the federal or provincial credit entitlement, a new form must be completed within seven days of the change.

Even if you cannot get a social insurance number or TD1, you are still responsible for calculating payroll deductions once the employee starts to work for you, allowing the basic personal amount only.

The CRA website has information about all the forms and the tax tables needed to complete them.

Calculating Deductions and Contributions

You calculate the deductions based on the amounts you pay your employees. Deductions are taken for:

• income tax
• CPP contributions
• EI premiums

In addition to the deductions taken from an employee’s remuneration, you have to calculate and set aside your share of CPP and EI. There is no employer contribution required for income tax.

You hold all of the amounts deducted from your employees’ remuneration, plus your employer contribution to CPP and EI, in trust for the Receiver General. It is recommended that these amounts be held in a separate account from your general operating account.

Want more information?
To learn about the Employment Insurance Premium Reduction Program, see Canada’s EI Premium Reduction Guide.