So you’ve started a business a while back and now you are looking to expand. You are looking to hire your first external employee. You are moving from sole proprietor to becoming an actual employer. You probably have a number of questions. Here is a look at ten tips for hiring your first employee.
Ten Tips for Hiring Your First Employee
In Canada, the Canada Revenue Agency considers an employer to be someone (i.e. a business) that:
- Pays salary or wages to another person
- Pays bonuses or vacation pay to another person
- Provides certain taxable benefits or allowances to another person
Here are some useful resources regarding payroll that you should be familiar with as you hire your first employee:
CRA Payroll Web pages:
CRA Payroll cycle:
This article is intended for information purposes only and should not be considered as the only steps to follow when hiring employees. It is recommended that you consult with a legal and/or financial professional for additional clarity and details.
Once you have determined that you need to hire an “external employee” or another person to assist you in your business you will need to consider the following:
- You will need a registered Business Number with a payroll deductions account. This needs to be completed before the employee starts work. To register for the Business Number and Payroll Deductions account you can call CRA’s toll free number 1-800-959-5525 (English) or 1-800-959-7775 (French).
- Prepare a detailed job description – unless you already have someone ready to assume the role, you will need to advertise the position that you are hiring for. In order to do so, you will need to create a detailed job description that highlights the requirements of the job.
- Prepare a job offer in writing – include salary, job duties, terms of relocation (if applicable), benefits, work hours, probationary period and the starting date. The job offer must comply with the employment standards for your province or territory.
- Understand the process of paying an employee – you must conform with the Employment Standards legislation for your province. For example in British Columbia, employers must pay employees at least twice a month. Be familiar with:
- Guidelines regarding the payment of wages
- Minimum wage thresholds
- Rules for vacation pay
- Guidelines for hours worked, breaks and payment of overtime
- Understand which Federal deductions you are responsible for (and how much you are responsible for deducting) – as an employer, you are responsible for deducting:
- Federal tax
- Canada Pension Plan contributions
- Employment Insurance (EI) premiums
- Understand which Provincial deductions you are responsible for (and how much you are responsible for deducting) – You need to check with your provincial or territorial government to determine what, if any, deductions are required as health premiums and workers’ compensation deductions may be required.
- Plan out your accounting practices – you will need to determine how you will go about your accounting practices. For example, will you:
- Leverage accounting software with a payroll module
- Use a payroll service (where a third party manages your payroll)
- Use free software or manual tables that are accepted by the Canadian government
- Understand which records you will need to retain – Employers are required to keep the following records:
- Form TD1, Personal Tax Credits Return (Federal)
- Form TD1, Personal Tax Credits Return (Provincial or Territorial)
- Time worked by employee(s)
- EI premiums and income tax withheld
- Documentation to support CPP contributions
- Registered pension plan information
- CRA letter of authority for reducing income tax at source
- Tax returns filed (and any related information slips)
- Ensure that the candidate/person is legally entitled to work in Canada – You need to ensure that the person is legally entitled to work in Canada. Under the Immigration Act, only the following persons are authorized to work in Canada:
- Canadian citizens
- Permanent residents
- People with valid employment authorization (such as a work visa)
- Have the necessary paperwork ready upon hiring an employee – this would include both the Federal and Provincial/Territorial Form TD1, Personal Tax Credits Return. You will be required to get your employee’s social insurance number. Note: If the employee works for you and you cannot get the SIN or Federal or Provincial/Territorial Form TD1, you are still responsible to start calculating and withholding payroll deductions.
Prior to hiring your first employee, there are a few things that you will need to do to prepare for your new hire. Using the tips above, you should be familiar with the necessary steps to take when you hire an employee. As mentioned you should consult with legal or financial professionals as required prior to proceeding to ensure that you follow the proper protocol for hiring employees.
Need assistance with your HR efforts? Contact us today to set up a consultation. Speak with one of our experienced HR consultants and begin hiring your new staff members today!