How to do payroll for your small business

This article outlines some of the most important steps to follow when you set up payroll for your small business. It also includes tips for expediting the process while helping you remain compliant with CRA reporting guidelines.

How to do payroll for small business – manual vs. automated

When setting up payroll, you have two options: manual record management versus automated payroll software.

1. Manual payroll systems for small business owners

Every business has slightly different reporting requirements. Managing payroll by hand means that you approach this task without the help of a dedicated payroll software program. It can be a less expensive option if you have five or less employees.

When processing payroll manually, you typically need to:

• Register for a Business Number (BN) with the CRA and open a payroll program account
• Collect employee information including Social Insurance Number (SIN) and completed TD1 forms
• Choose a payroll schedule – i.e., weekly, biweekly, or monthly
• Have employees punch time cards or fill out timesheets
• Calculate the appropriate federal and provincial/territorial income tax withholdings, as well as Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) contributions and Employment Insurance (EI) premiums
• Deduct insurance and/or retirement benefits
• Manage paid time off balances

• Pay your staff using checks or direct deposit
• Remit payroll deductions (income tax, CPP, EI) to the CRA on time
• File annual tax forms, such as T4 slips and T4 Summary for employees

2. Automated payroll systems for small business owners

Many businesses start with manual payroll management. They often switch to dedicated payroll software to combine or streamline some of the time-consuming steps outlined above, especially if they have a growing staff.

Even when using payroll software, you’ll still need to register for a BN and open a payroll program account with the CRA. When hiring team members, you’ll also have to manually enter each employee’s name, Social Insurance number, and TD1 form information. However, the workflows thereafter will be more streamlined. The payroll software can collect employee attendance data, save deduction calculations for income tax, CPP, and EI, manage benefit deductions, and coordinate direct deposits based on your payroll schedule.

With detailed reporting and digital tracking, tax prep also becomes a lot easier. Moreover, many platforms are now cloud-based, so you can manage payroll from any computer or smart device. Some payroll tools even provide token access, which allows employees to securely input their information, instead of you having to do it.

Automate payroll with integrated software solutions

Clover POS systems come with a range of employee management features designed to help save you time. You can track employee hours, run detailed performance reports, and protect and encrypt sensitive employee information.

In addition to dedicated payroll tools, the Clover App Market has third-party plug-ins designed to help you:

• Recruit and hire new talent
• Pool tips among team members
• Track delivery drivers (in real time)
• Distribute commissions, perks, and rewards

Similar integration options exist if you want to increase customer engagement, automate inventory management, or optimize cash flow.

Which payroll option is right for you?

There is no right or wrong way to manage payroll. The important things are that your employees get paid, your tax paperwork stays in order, and you avoid common payroll mistakes.

However, if payroll currently consumes a disproportionate amount of your time and energy, using software can help automate more of these tasks.

How can we help?

If you want to learn more about how Clover can help you accept payments, run your business and sell more, please contact your Clover Business Consultant. You can also follow us on Facebook and Instagram. 

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This information is intended solely for informational purposes and should not be interpreted as legal, financial, or tax advice. Readers are strongly advised to consult with their attorneys, financial advisors, or tax professionals to obtain guidance tailored to their specific circumstances.