Bringing on your first team member is a milestone, but the paperwork behind that first paycheque catches a lot of new employers off guard. Getting first employee payroll in Ontario right means opening the correct accounts, withholding the correct amounts, and meeting a handful of firm deadlines — and the penalties for getting it wrong land quickly. This guide walks you through what you actually have to do, in the order you need to do it, so nothing slips.
Step one: open a CRA payroll account
Before you can pay anyone, you need a payroll (RP) program account with the Canada Revenue Agency. This account sits under your nine-digit business number — if you already have a GST/HST or corporate income tax account, the payroll account simply attaches to the same number as an "RP" extension. You can register through CRA's Business Registration Online, by phone, or with our help. Do this as soon as you know your start date, because you cannot legally remit deductions without it.
If you are a sole proprietor without a business number yet, registering for payroll will generate one for you. Keep the account details somewhere safe; you will reference the RP number on every remittance.
Step two: collect the right information from your employee
On or before the first day, gather two essentials. First, your employee's Social Insurance Number — you are required to see the card or an official document and record the number within three days of their start date. Second, a completed and signed TD1 Personal Tax Credits Return, both the federal form and the Ontario provincial form. The TD1 tells you how much to withhold based on the credits the employee claims. If they do not complete one, you withhold as though they claim only the basic personal amount.
This is also the moment to confirm you are hiring an employee and not an independent contractor. The distinction is not a matter of preference — the CRA looks at who controls the work, who owns the tools, and who bears the risk of profit or loss. Misclassifying a worker to avoid payroll deductions is one of the more expensive mistakes a small business can make, because the CRA can assess the unremitted amounts against you, with interest and penalties.
Step three: register with WSIB
Most Ontario employers must register with the Workplace Safety and Insurance Board within 10 days of hiring their first worker. WSIB provides no-fault workplace injury coverage, and it is funded by employer premiums calculated as a percentage of your insurable payroll, based on the type of work your business does. A few industries are exempt or optional, but the safe assumption is that you need coverage — and registering late can bring penalties on top of the premiums you owe.
Once registered, you report your payroll and pay premiums on a schedule WSIB sets for you, typically monthly, quarterly, or annually depending on your size. Budget for this as a real cost of employment; it is separate from anything you send to the CRA.
Step four: calculate and withhold source deductions
Every time you run payroll, you withhold three things from your employee's gross pay and send them to the CRA: Canada Pension Plan contributions, Employment Insurance premiums, and federal and Ontario income tax. These are collectively called source deductions.
CPP and CPP2
For 2026, the CPP contribution rate is 5.95% for the employee, and you as the employer match it dollar for dollar. Contributions apply to earnings above the $3,500 basic exemption up to the year's maximum pensionable earnings, which rose to $74,600 for 2026. A second contribution, CPP2, now applies at 4% on earnings between that first ceiling and a higher second ceiling — so higher-paid employees will see an extra deduction, matched again by you. The employer match is the part new owners most often forget to budget for.
Employment Insurance
EI is withheld at the 2026 employee rate of 1.63% on insurable earnings up to the annual maximum, and here the employer share is 1.4 times the employee's — so you pay more in EI than your employee does. Confirm the current maximum insurable earnings figure before running your first pay, since it is indexed each year.
Income tax
Income tax withholding depends on the employee's earnings and their TD1 claims. Note that for 2026 the lowest federal personal income tax rate was reduced to 14%, which affects the tables. The simplest, most reliable approach is CRA's free online Payroll Deductions Online Calculator, which builds in the current CPP, EI, and tax figures for you.
Payroll is not just your employee's money — a large share of every paycheque is money you are holding in trust for the CRA, and the deadline to hand it over is not flexible.
Step five: remit on time
The amounts you withhold, plus your employer share of CPP and EI, must be remitted to the CRA. As a new employer you will almost certainly start as a regular remitter, which means your remittance is due by the 15th day of the month following the month you paid your staff. So deductions from wages paid in March are due by April 15. Miss the deadline and the CRA charges a penalty on the late amount — starting at 3% and climbing to 10% the further behind you fall, with steeper penalties for repeat lateness.
Set the money aside the moment you run payroll. Treating source deductions as available cash flow is the single most common way small employers end up in trouble with the CRA, because the shortfall is not obvious until the remittance comes due.
Year-end: T4 slips and summary
After the calendar year ends, you prepare a T4 slip for each employee summarizing their earnings and deductions, give them their copy, and file the T4 slips and a T4 Summary with the CRA. The deadline is the last day of February following the year in question. Filing late, or handing employees their slips late, carries its own penalties — so build year-end into your calendar the same way you do your remittances.
Don't forget the employment-standards side
Payroll numbers are only half the picture. Under Ontario's Employment Standards Act you also owe your employee a written wage statement each pay period, at least the minimum wage, vacation pay, public holiday pay, and proper record-keeping. Keeping clean records from the first paycheque makes every subsequent step — remittances, T4s, and any future CRA or Ministry of Labour review — far less stressful.
Key takeaways
- Open a CRA payroll (RP) account before your employee's first pay date — you cannot remit without one.
- Collect the SIN and a signed federal and Ontario TD1 on day one, and confirm the worker is truly an employee, not a contractor.
- Register with WSIB within 10 days of your first hire; premiums are a separate cost from CRA remittances.
- Withhold CPP (5.95%), EI (1.63% for employees), and income tax, and budget for the employer match plus 1.4× EI.
- Remit by the 15th of the following month as a regular remitter, and set the money aside as you run each pay.
- File T4 slips and the T4 Summary by the last day of February.
Setting up payroll correctly the first time saves you from penalties, back-payments, and a lot of stress down the road. If you would rather hand the calculations, remittances, and year-end filings to someone who does this every day, we can set your payroll up properly and keep it running. Book a consultation or learn more about our payroll and HST services, and we will make sure your first hire is handled right.
This article is general information, not tax, legal, or financial advice. Rules and figures are current as of 2026 and can change. Please confirm your own situation with Lewis Partners.