Most new business owners really don’t give much thought as to what it is going to cost them to hire employees other than what that worker’s wage is going to be. Unfortunately there is more to it than that, and if you are truly doing a cost projection for running your business then you need to know what the true costs are for hiring.
First there is the actual wage that you are going to pay to your new employee. The very minimum you can pay here is $11. per hour. So if you are going to utilize this employee for a full 40 hours per week, then the gross pay for the employee is $440. However, that is not the amount that you are going to be writing out the pay cheque for. Out of this you will need to withhold the income tax, the EI premiums and the CPP.
You now have to open a payroll program account with the government. This is going to provide you with a unique payroll number for your business. You will also be given all of the payroll requirements that you have to meet.
It may be that you are not utilizing your employee on a full time basis, so you assume that because they are only working a few hours a week you don’t have to be concerned about payroll deductions. While this may have been the case years ago, this is no longer true. For example, a part time employee who gets paid on a week basis that is making between $67.31 to $67.60 the CPP contributions for the employee is 0.01 cent. For the $440. employee the CPP contribution is $18.45. You as the employer are responsible for contributing an equal amount towards this employee’s CPP.
Now you have to deal with the EI deductions. You will have to check the schedule of rates, and deduct this amount from your employee’s gross wages, plus you will have to pay 1.4% as your contribution towards this.
This seems like a lot, and it appears confusing and until you get used to it, it really is. Once you have taken the time to sort it out, payroll deductions are not all that difficult. The difficulty may be in keeping up with your remittances, and you don’t want to fall behind in these because doing so could result in a penalty, which is just going to cost you more money.
You should also be aware, that the Ontario government is also proposing a new pension plan for Ontario. So again this is going to be a shared cost between the employee and the employer.
All these extra payroll costs can add up, but at the same time there may be some small business incentives that are available to you that could really help offset some of these costs. Having a good accountant on board can potentially save you a lot of money with your business venture, not only in payroll issues but other financial matters.