Payroll Mistakes, Switching Problems and Official Sources
Common payroll and HR software mistakes in Canada, and the official sources to check
The payroll errors Canadian employers make most often, with or without software, how to catch them early, and which official source answers what.
Most payroll problems in Canada come from a short list of causes: set-up errors (wrong province, wrong earning flags, wrong vacation rule), late remittances, wrong year-to-date balances after a switch, missed or wrong ROEs, T4s that do not match remittances, and contracts that renew before anyone reviews them. Software prevents many of these but cannot prevent a wrong set-up, and the CRA, Service Canada and employment standards offices hold the employer responsible regardless of who pressed the button. The fix is a few routine checks, and knowing which official source answers which question.
This is the pillar guide of the failures and sources section; it links to every other guide here. The patterns described are general, not accounts of named businesses.
The mistakes, by stage
| Stage | Mistake | Consequence | Check that catches it |
|---|---|---|---|
| Set-up | Province of employment wrong for a remote or relocated employee | Wrong tax, wrong standards | Review province per employee each quarter |
| Set-up | Earning type flagged non-pensionable or non-insurable wrongly | Under-deducted CPP or EI, assessment | Test each pay code in a demo; compare with the PDOC |
| Set-up | Taxable benefit not entered (for example employer-paid group life) | Wrong T4, under-deduction | Year-end benefit review in November |
| Pay runs | Hours re-keyed incorrectly | Under- or over-payment | Time integration; payroll register review |
| Pay runs | Vacation percentage not stepped up at anniversary | Underpaid vacation pay, complaint | Anniversary report |
| Remitting | Remittance late or short | Graduated penalty plus interest | Due-date calendar; reconciliation with CRA statement |
| Leaving | ROE late or with wrong reason code | Delayed EI claim, amendments | Termination workflow that creates the ROE |
| Year-end | T4 totals do not match remittances | CRA review, assessment | Year-end reconciliation report |
| Switching | Year-to-date balances not migrated | Double CPP/EI deductions, duplicate T4s | Parallel run and YTD sign-off |
| Records | History lost after leaving a vendor | Cannot answer CRA or employee requests | Exit export before the contract ends |
| Contract | Auto-renewal at a higher price | Budget overrun, locked in | Calendar the notice date |
Each row links to deeper guides:
- penalties: CRA penalties for late remittances and late or paper filing
- switching: switching payroll providers mid-year
- go-live problems: payroll implementation failure patterns
- records and privacy: record retention and employee privacy
- contracts: contract renewal and exit terms
Five routine checks that prevent most problems
- Every pay run: review the payroll register before approval: new hires, terminations, unusual amounts, anyone with zero deductions.
- Every remittance: confirm the amount paid equals the remittance report, and that the payment reached the CRA on time. Check the CRA's My Business Account statement monthly.
- Every quarter: check provinces of employment, vacation rules and service dates for employees whose situation changed.
- Every November: review taxable benefits, update addresses and SINs, plan year-end runs.
- Every February: reconcile T4 (and RL-1) totals with the year's remittances before filing.
Illustrative example of a reconciliation. Remittances for the year per the CRA statement: $184,250. Deductions plus employer share per the T4 Summary: $184,890. Difference: $640. The cause turns out to be a December remittance short by $640 because a bonus run was processed after the remittance report was printed. Paying the $640 now limits the penalty and interest; finding it after the CRA's review would cost more.
Official sources by question
| Question | Official source |
|---|---|
| Current CPP, CPP2, EI rates and maximums; tax formulas | Canada Revenue Agency, payroll pages and T4127 |
| Remitter type and due dates | CRA, "Types of remitters" and "When to remit" |
| T4 and T4A slips, electronic filing | CRA, T4 guide and filing information returns electronically |
| ROEs | Service Canada, ROE guide; ROE Web |
| Is a worker an employee or self-employed? | CRA rulings (CPT1 request) |
| Quebec deductions, RL-1, HSF | Revenu Québec |
| Labour standards in Quebec | CNESST |
| Provincial vacation, holiday and overtime rules | Your provincial employment standards office |
| Federally regulated employers | Labour Program (ESDC), Canada Labour Code |
| Privacy of employee records | Office of the Privacy Commissioner of Canada; provincial commissioners in Alberta, British Columbia and Quebec |
| Text of federal laws | Justice Laws Website |
When a vendor's help article and an official source disagree, follow the official source and ask the vendor to correct its configuration.
What a vendor can and cannot do for you
- Can: keep tax tables current, calculate deductions, produce reports and filings, warn about due dates, sometimes remit and file for you.
- Cannot: decide which province an employee works in, whether a benefit is taxable in your circumstances, whether a worker is an employee, or what your collective agreement requires. Those decisions are yours, with professional help where needed.
If the software makes a calculation error, the CRA still assesses the employer. Whether the vendor compensates you depends on the contract. See contract renewal and exit terms.
When to get help
Talk to an accountant, payroll professional or employment lawyer when you need to correct prior years, when the CRA has started a review or trust examination, when an employee files an employment standards complaint, or when you employ people in Quebec or in several provinces for the first time. The CRA's Liaison Officer service offers free help to small businesses on tax obligations.
For choosing a system that avoids these problems, use the selection checklist; for the rules themselves, see the payroll and HR software comparison overview.
FAQ
What is the most common payroll penalty for small employers?
Late remittance penalties are among the most common, because they apply even when the amount is right but the payment arrives after the due date. Automatic reminders or automatic remittances reduce the risk.
Can I correct a payroll error from a previous year?
Usually yes, through amended T4s and, where needed, a request to the CRA. Corrections across years can be complex, especially for CPP and EI, so get professional advice.
How do I know if the CRA has received my remittance?
Check your payroll account in My Business Account or the statement of account the CRA sends. Your bank confirmation shows that you paid, not that the CRA applied it to the right account and period.
Where do employees complain about unpaid wages or vacation pay?
To the employment standards office of the province or territory where they work, the CNESST in Quebec, or the federal Labour Program for federally regulated workplaces.
Sources
- Canada Revenue Agency — payroll, penalties, My Business Account, Liaison Officer service, CPT1 rulings
- Employment and Social Development Canada — ROEs and the federal Labour Program
- Revenu Québec — Quebec payroll
- CNESST — Quebec labour standards and complaints
- Office of the Privacy Commissioner of Canada — privacy of employee information
- Justice Laws Website — federal statutes and regulations
