Registration

Depending on the type of your business structure and whether you are running the business by yourself or have employees, your circumstance will dictate what is required of you as a business owner, lets consider the following business structures and what is required from each one of them:

1. Sole Proprietor

If you are a sole proprietor, you would not need to pay yourself a salary, as all income generated by the business is basically your pay. However, if you hire staff, then you will need to set up a payroll account with Canada Revenue Agency (CRA), and depending on your industry and type of operation, you may also be required to register with Workplace Safety and Insurance Board (WSIB)

2. Partnership

For partnership, same requirements for Sole Proprietor will apply to a partnership structure

3. Corporation

As a corporation is considered a separate entity from its owners (shareholders), the business owner (shareholder) is considered an employee of the corporation, therefore, setting up a payroll account with CRA will be required even if the business owner is the only employee. As for WSIB, in most cases, the business owner/director/shareholder has the option of whether to register for WSIB and opt in for coverage, some industries however, will require the business owner to be registered for WSIB even if the owner is the only employee of the business. There are industries that are exempt from this requirement even if they have employees, we will be glad to advise you based on your situation.

Payroll deductions

As business owner and for a Corporation, the business is required to withhold and remit payroll deductions to CRA and premiums to WSIB, the premium for WSIB will depend on your industry group. We will concentrate here on payroll deductions only, as for WSIB, please see our WSIB post for more information.

There are three main deductions a business must withhold from their employees pay; these are:

1. EI — Employment Insurance — If your business provides insurable employment, you are required to deduct EI premiums from your employees pay (and yours if you, as business owner, opt in for EI). There is no age limit for deducting EI premiums. EI provides temporary financial assistance for the unemployed and is actively looking for work, EI is also paid if the unemployed is upgrading their skills, are sick, pregnant, caring for newborn or adopted child, and if caring for a seriously ill family member. For more information on EI eligibility and benefit amounts, please click here. EI deductions are remitted to CRA along with the employer’s share of premiums. EI rate for 2019 is 1.62% from the employee plus 2.268% from the employer. Maximum annual employee premium in 2019 is $860.22 and employer premium is $1,204.31.

2. CPP — Canada Pension Plan — All employed persons (including business owner) between the ages of 18 and 65 who are employed in pensionable employment, and are not receiving CPP retirement or disability pension, will be subject to CPP contribution that will be deducted from their pay. CPP provides basic benefits when you, as a contributor to the plan, become disabled or retires. In the event of the death of the contributor, the plan provides benefits to the survivors. For more information on CPP, please click here. CPP deductions are remitted to CRA along with the employer’s share of contributions. CPP rate for 2019 is 5.10% from the employee plus 5.10% from the employer. Maximum annual employee contribution in 2019 is $2,748.90 and employer contribution is $2,748.90. If you are a sole proprietor or in a partnership setup, your maximum annual contribution will be $5,497.80.‍

3. Income Tax — As an employer, you are required to deduct income tax from salaries and wages paid to yourself and your employees. The amount of tax deducted will depend on the employee’s total claim amount on Form TD1 — Personal Tax Credit Return and using approved calculation methods by CRA. There is no annual limit as to the total amount of income tax deducted in a year, however, if an employee expects to be making less than the total claim amount indicated on Form TD1 for an entire year, an employee can ask the employer or payer to not make any deductions. If an employee works for more than one employer, the employee can ask one or more employers to deduct more income tax from their pay.‍

4. Other deductions — There may be other amounts that an employer must deduct from the employee(s) pay such as pension plan contributions, union dues or a court order

Benefits

Various businesses offer their employees any number, or none, of other benefits, such as extended health, dental, life insurance, etc., these benefits are optional and usually are used to attract and retain employees. However, depending on the province where a business is located, the business must conform to the provincial employment standards act and employees will be entitled to certain benefits under this act, in Ontario, the following are some of the benefits an employee is entitled to:

1. Vacation Pay — Employees with less than five years of employment are entitled to two weeks of vacation time after each 12-month vacation entitlement year. Vacation pay must be at least 4% of gross wages (excluding any vacation pay) earned in the 12-month vacation entitlement year or stub period. Employees with five or more years of employment are entitled to three weeks of vacation time — at least 6% of gross wages earned in the 12-month vacation entitlement year or stub period.‍

2. Public Holiday and Public Holiday Pay — Each province has several days during the year that are considered public holidays, in Ontario, there are nine public holidays. Most employees who qualify for these holidays are entitled to take these days off work and be paid public holiday pay.‍

3. Paid time off — some employers offer their employees paid time off either as part of their incentive hiring package or due to a contract. Examples of those paid time off are Sick Day, Bereavement Leave, however, the Employment Standards Act does allow the employee to take such days off, but they are unpaid.

Rules and regulations

Each province has in place an Employment Standards Act, which provides the minimum standards for most employees working in that province. Also, provinces instituted legislation and rules that deals with workplace violence and harassment. Below are some items that are covered by the Employment Standards Act, 2000, S.O. 2000 and the Occupational Health and Safety Act, R.S.O. 1990, c. O.1 in Ontario:

Rights of an Employee

a) How to tell who an employee is

An individual may be considered an employee under the ESA when at least some of the following describes the relationship:

• The work the individual performs is an important part of the business
• The business decides:
• What the individual is to do
• How much the individual will be paid
• Where and when the work is performed
• The business provides the individual with tools, equipment or materials to perform the work
• The individual cannot subcontract their work to someone else
• The business has the right to suspend, dismiss or otherwise discipline the individual

b) How to tell who an independent contractor is

An independent contractor is someone who is in business for themselves. An individual may be considered an independent contractor, and not covered by the ESA, when at least some of the following applies:

• The business can end the individual’s contract for services, but cannot discipline the individual
• The individual: Has the opportunity to make a profit and has a risk of losing money from the work, determines how, when or where the work is performed, decides whether to subcontract some of the work

c) Employee or independent contractor: Common misconceptions

An individual may be considered an employee even if:

• The individual and the business agree (orally or in writing) that the individual is an independent contractor. It is the relationship between the individual and the business (or person) that matters, not the label that is given to it
• The individual: Charges the harmonized sales tax (HST), submits invoices to the business, uses their own vehicle for work purposes, the business does not make statutory deductions (for example, tax, Canada Pension Plan (CPP) or Employment Insurance (EI) from the person’s pay), another government agency (for example, the Canada Revenue Agency) determines that the individual is not an employee under their legislation

Highlights from the Ontario Employment Standards Act

i. Minimum Wage — General minimum wage is $14.00 per hour‍

ii. Hours of Work‍

a) Daily: Maximum 8 hours — Can be extended through a written or electronic agreement between the employee and the employer

b) Weekly: Maximum 48 hours — Can be extended through a written or electronic agreement between the employee and the employer

iii. Breaks — Employees are entitled to a half-hour unpaid eating period after working no more than five hours in a row

iv. Overtime Pay — Overtime begins after an employee have worked 44 hours in a work week. Hours over 44 must be paid at the overtime pay rate of 1½ times the employee’s regular rate of pay (time and a half)

v. Vacation Pay — Employees with less than 5 years of employment with same employer are entitled to vacation pay equal to 4% of their wages (two weeks). Employees with 5 or more years with same employer are entitled to 6% of vacation pay (three weeks)

vi. Public Holidays and Public Holidays Pay — Ontario has nine public holidays: New Year’s Day, Family Day, Good Friday, Victoria Day, Canada Day, Labour Day, Thanksgiving Day, Christmas Day, and Boxing Day. Employees are entitled to take these days off and be paid public holiday pay for them

vii. Equal Pay for Equal Work — An employer cannot pay one employee at a rate of pay less than another employee on the basis of sex when they perform substantially the same kind of work in the same establishment.

viii. Pregnancy and Parental Leave — Pregnant employees have the right to take pregnancy leave of up to 17 weeks of unpaid time off work. Employers do not have to pay wages to someone who is on pregnancy leave. New parents have the right to take parental leave — unpaid time off work when a baby or child is born. Federal Employment Insurance Act provides eligible employees with maternity and/or parental benefits that may be payable to the employee during the period they are taking and ESA pregnancy or parental leave. Maternity and parental benefits are also available for self-employed if they opt in.

ix. Sick Leave — Employees have the right to take up to three days of unpaid job-protected leave each calendar year for personal illness, injury or medical emergency. Some employers provide paid one or two sick days per calendar year

x. Bereavement Leave — Employees have the right to take up to two unpaid job-protected leave each calendar year due to the death of certain family members. Again, some employers provide paid bereavement days off due to the death of immediate family members

xi. Termination of Employment — When an employer ends the employment of an employee who has been continuously employed for three months, the employer must provide the employee with either a written notice of termination, termination pay or a combination. Employees that have been employed for less than three months are not entitled to notice of termination or termination pay

xii. Severance Pay — A compensation for qualified long-term employees when their employment is severed. A qualified employee is one that have worked for the employer for five or more years and the employer has a payroll in Ontario of at least $2.5 million or have severed the employment of 50 or more employees in a six-month period because all or part of the business permanently closed

Highlights from the Ontario Occupational Health and Safety Act

Everyone should be able to work in a safe and healthy workplace. The Occupational Health and Safety Act sets out roles and responsibilities of workplace parties with respect to workplace violence and workplace harassment, including developing and implementing policies and programs and providing information and instruction on these.

Ontario’s Occupational Health and Safety Act (OHSA) sets out the rights and duties for occupational health and safety of all parties in the workplace. The act provides for enforcement of the law in cases where compliance has not been voluntarily achieved.

i. Workplace Harassment — Workplace harassment can involve unwelcome words or actions that are known or should be known to be offensive, embarrassing, humiliating or demeaning to a worker or group of workers, in a workplace. It can also include behavior that intimidates, isolates or even discriminates against the targeted individual(s)

ii. Workplace Sexual Harassment — it is defined as:

• Engaging in a course of vexatious comment or conduct against a worker because of sex, sexual orientation, gender identity or gender expression where the course of comment or conduct is known or ought to reasonably to be known to be unwelcome, or
• Making a sexual solicitation or advance where the person making it is in a position to confer, grant or deny a benefit or advancement to the worker and the person knows or ought reasonably to know the solicitation or advance is unwelcome

It is important for employers to recognize these behaviours and to deal with them promptly. Addressing incidents of harassment not only helps the targeted worker but their co-workers as well. Taking action can also prevent harassment from escalating in the workplace and possibly resulting in physical violence by either the harasser or the targeted worker.

Workplace Harassment Policy

Employers must prepare and review a policy on workplace harassment at least annually, as required by OHSA. The policy is required regardless of the size of the workplace or the number of workers.

The workplace harassment policy should:

• Show an employer’s commitment to addressing workplace harassment;
• Consider the roles and responsibilities of the workplace parties in supporting the policy and program; and
• Be dated and signed by the highest level of management of the employer or at the workplace as appropriate

The workplace harassment policy should encourage workers to bring forward workplace harassment concerns, whether their own, or information about workplace harassment that they have witnessed.

iii. Workplace Violence — it is defined as the exercise of physical force by a person against a worker, in a workplace, that causes or could cause physical injury to the worker. It also includes an:

• Attempt to exercise physical force against a worker in a workplace, that could cause physical injury to the worker; and a
• Statement or behavior that a worker could reasonably interpret as a threat to exercise physical force against the worker, in a workplace, that could cause physical injury to the worker

This may also include:

• Verbally threatening to attack a worker;
• Leaving threatening notes at or sending threatening e-mails to a workplace;
• Shaking a fist in a worker’s face;
• Wielding a weapon at work;
• Hitting or trying to hit a worker;
• Throwing an object at a worker;
• Sexual violence against a worker;
• Kicking an object the worker is standing on such as a latter; or
• Trying to run down a worker using a vehicle or equipment such as a forklift.

Workplace Violence Policy

Every employer must prepare and review, at least annually, a policy on workplace violence, as required by the OHSA. This policy is required regardless of the size of the workplace or the number of workers

The workplace violence policy should:

• Show an employer’s commitment to protecting workers from workplace violence;
• Address violence from all possible sources (customers, clients, employers, supervisors, workers, strangers and domestic/intimate partners);
• Outline the roles and responsibilities of the workplace parties in supporting the policy and program; and
• Be dated and signed by the highest level of management of the employer or at the workplace as appropriate

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Please note that the above information is intended as a general source of information and should not be considered as specific source of legal or financial advice. Rules and regulation are subject to change at any time, as we at MMS Accounting & Bookkeeping Services will help you navigate and put in place workplace policies as required. You are also encouraged to consult with your business lawyer to ensure your policies are conforming with local laws and regulations. Please call our office at 647.749.8798 or email us at info@mmsaccounting.ca for further information and/or to connect you with a law firm.

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