This article will show you how to use our simple payroll template for paying yourself from your incorporated business in Canada.
Free Payroll Template Purpose and Limitations
The purpose of this template is to help calculate payroll amounts and remittances for owners of Canadian incorporated businesses.
Limitations
This template exists to help incorporated business owners complete semi-monthly payroll as a salaried employee. It can be used for up to five business owner employees.
It is simplified to fit this purpose and shouldn't be used for employees who are not also owners of the business.
There are requirements for paying regular employees that this template doesn’t meet, such as:
- It doesn’t track vacation pay
- There are no pay stubs
- It doesn’t track overtime pay or stat holiday pay
- There is no option to include deductions for employee benefits
- There’s no support for hourly employees, just salaried employees
The template is designed to solve a very specific purpose in a user-friendly way.
Who This Payroll Template is For
Incorporated business owners who want to pay themselves a salary while keeping the payroll process simple and free.
Template Overview
The template is a Google Sheet with tabs along the bottom that you’ll use for calculating payroll amounts, paying payroll remittances and preparing T4s.
Grab a copy of the payroll template here and follow along with the short overview video below.
Start Here
The first tab at the bottom is labeled “Start Here” and it contains some basic information about the template, instructions and your payroll remittance schedule.
You’ll notice there are some cells that are shaded light blue and some that are shaded light gray.
Blue cells are input cells where you enter information.
Gray cells are calculated cells. Avoid entering values directly into the gray cells; it can break how the template functions.
If you attempt to write something into a cell that’s not shaded blue, you’ll get a warning message. Again, stick to entering info into the blue cells to make sure the template works properly.
Employee Tabs
There are five employee tabs that you can use to record individual employees’ payroll each period. You’re welcome to rename the tabs with the actual employee names if that’s helpful.
I’ll go into more detail on these in the how-to section.
T4 Summary
The last tab in the sheet is the T4 summary tab.
It includes general information about T4s, details for each employee that you can use for preparing T4s and a T4 summary section for verifying that you’ve prepared the T4s accurately.
I’ll get into how this works in the how-to section as well.
How to Use the Simple Payroll Template
I’ll start with a quick reminder that this template is intended to simplify the process for business owners to run their own payroll.
If you are finding that the template is missing details or isn’t customized for your needs, it may be better to look at purpose-built payroll software like Wagepoint.
If you need something more robust, check out a list of my favorite payroll software applications here.
Step 1 - Information Gathering
Assuming you’ve already registered your business for payroll with CRA, your first step is to gather a bit of information.
Within the “Start Here” tab, enter the name of your company and the payroll year in question.
Then, for each employee you’ll want to gather the following information and fill in the blue cells at the top of the employee tabs. Remember, gray cells are to be left alone.
- Employee name
- Province of employment
- Annual salary amount
- Federal TD1 Claim Amount
- Provincial TD1 Claim Amount
- Amount of additional tax to withhold from each paycheque (if applicable)
- Whether the employee is CPP exempt
- Whether the employee is EI exempt
You can find links to more information beside each field within the template and check out the video walkthrough above for additional context.
Step 2 - Calculate Payroll Amounts and Pay Employees
Once you’ve entered the employee’s information, you’ll be calculating the amount of payroll deductions to deduct from each employee’s pay.
We’ll be using the CRA Payroll Deductions Calculator to do this. Check out this short clip showing how to calculate payroll deductions.
Once you’ve calculated payroll deductions or all employees, enter the amounts in the blue cells for the pay date in question.
The table will calculate net pay, employer portions of CPP and EI and the total CRA remittance for that employee’s deductions. Pay employees their net pay amount by whatever method works best for you.
Repeat for payroll dates on the 15th and last day of each month.
The total CRA remittance amount for each employee will be added to the remittance table in the “Start Here” tab as well. More on payroll remittances coming up next.
Step 3 - Make Payroll Remittances On Time
Payroll deductions, also known as "source deductions," are amounts you’re required to withhold from an employee’s paycheck and remit to the Canada Revenue Agency).
These deductions typically include Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and federal and provincial income tax.
It’s important to understand that these funds don’t technically belong to your business. Once deducted from your employees’ pay, they must be held in trust and remitted to the CRA.
Failing to remit these amounts on time can result in quite costly penalties and interest, so it's crucial to stay on top of your payroll remittance schedule.
Most small businesses in Canada remit payroll deductions on a monthly basis with remittances due by the 15th of the following month.
The payroll template automatically calculates monthly payroll remittances for you on the “Start Here” tab.
Check out the short clip below which shows how the template works and how to make your payroll remittances using CRA’s My Payment service.
I recommend setting a reminder to make payroll remittances by the 10th of each month to avoid any late filing penalties.
Keeping a regular schedule is so important here; if payments are late or get allocated to the wrong period, it can often cause confusion in your CRA account that can be difficult and expensive to unravel.
Step 4 - File T4s with the CRA and Distribute to Employees
Once the year is over, one of your most important payroll tasks is filing T4 slips for yourself and any other employees in your incorporated business. The T4 slip summarizes the total income earned and deductions made over the year, including CPP contributions, EI premiums, and income tax deducted.
Your T4s are due by the last day of February each year, so it’s important to file them on time to avoid penalties. Luckily, if you’ve been using our simple payroll template, the T4 Summary Tab makes this process a lot easier!
How the T4 Summary Tab Works
The T4 Summary Tab in the payroll template is designed to consolidate all the relevant information you’ll need to file your T4s with the CRA. It collects and calculates the data for up to five employees, giving you a clear view of what needs to be reported on the T4 slips.
Here’s a breakdown of the key sections in the T4 Summary Tab:
- Employment Income (Box 14): The total employment income earned by each employee throughout the year.
- CPP Contributions (Box 16): The amount of Canada Pension Plan contributions deducted.
- EI Premiums (Box 18): The Employment Insurance premiums withheld.
- Income Tax Deducted (Box 22): The total federal and provincial income tax deducted for each employee.
In addition to the individual employee details, the T4 Summary Tab also provides important totals such as:
- Total Employment Income (Line 14): Sum of all employees’ income.
- Total Employee and Employer CPP Contributions (Lines 16 and 27): These are critical for ensuring you’ve calculated the right amounts.
- Total EI Premiums (Lines 18 and 19): Including both employee and employer portions.
- Total Income Tax Deducted (Line 22): This confirms the total amount withheld and sent to CRA throughout the year.
All of these figures can be cross-checked with your remittances, making sure everything aligns before you submit your T4s.
How to File T4s Using Your CRA My Business Account and Web Forms
Once your T4 Summary is ready, you can easily file your T4s online using the CRA’s Web Forms feature within your My Business Account.
Web Forms allows you to manually enter the T4 data directly on the CRA website and submit it electronically.
Here's how to file your T4s using CRA's Web Forms:
- Log in to your CRA My Business Account and navigate to the Payroll section.
- Select “File T4 Slips” from the menu and choose Web Forms as your method of filing.
- Manually enter the employee information as listed in your payroll template's T4 Summary Tab. This will include details such as employment income, CPP contributions, EI premiums, and tax deducted.
- Once all the required data is entered, submit your T4 slips and the T4 Summary through Web Forms. The system will confirm the number of T4 slips filed and give you a receipt of submission.
- After filing, distribute the T4s to your employees, either electronically or by mail.
Make sure to keep a copy of your payroll template and the T4 summary for your records, as CRA may request these during an audit.
For more information on how to file T4s using CRA’s Web Forms, check out the video above, where I demonstrate the process step by step.
Avalon Can Help
While we share a free method for DIY payroll, payroll management is a crucial part of any business and often requires more detail than expected.
The peace of mind that comes from having professionals handle your payroll, and avoiding costly mistakes, is invaluable.
Give us a shout to see how we can help 👈
Other Payroll Resources
- How to use the CRA My Business Account
- How to run payroll in Canada - a step-by-step guide
- How to complete a TD1 form
- Vacation and stat holiday pay guide
- Best payroll software for Canadian businesses
- Employment insurance benefits for business owners
- How to use the CRA payroll deductions calculator
- How to read a pay stub
- Paying family members in your Canadian business
