Five ways to avoid payroll fines

Have you recently hired an employee for your farm? Are you doing your own payroll and bookkeeping? If so, I’m offering you an opportunity to learn from my mistakes.


There is a lot of information available about conducting job interviews, creating job descriptions and deciding how much to pay employees. However, it’s hard to find a simple checklist of the practical, hands-on things you have to do to legally hire an employee. None of the steps are hard, but, as I’ve learned, there are many ways for the best-intentioned farm employer to get things wrong. 


You’ll be filing paperwork with at least three different government agencies, each with its own deadlines and Byzantine website. There are financial consequences for small mistakes. I’m not claiming this is a complete list of ways to avoid fines or problems, but it’s a start. There are probably steps I’ve missed. I’ll be paying for that. 


While we are not legally required to carry Workers Compensation for farm employees in Saskatchewan, we wouldn’t be without it on our farm. 


This program is great, but it’s also a paperwork minefield. There are several ways to be fined by Workers Compensation for faulty paperwork. 


Once you’ve signed up and talked to WCB staff about your initial payment, there is more paperwork. Every year, you must send in a statement showing your total payroll (they call it the Employer’s Payroll Statement, EPS). You must do this by February 28, even if that date has nothing to do with your corporate year end. Once you’ve enrolled in the program, this rule applies to you even if you run for a year with no employees. If you miss this deadline, you’ll be fined.


The other complication that can arise with WCB is estimating your payroll before the start of the year. You give them a value, and they use it to set your premiums. If, during the year, you hire more employees or increase employee hours and your payroll increases up to twice what you’ve estimated, you will be fined for underestimating. It’s not hard to make this mistake in a seasonal business with a variable number of employees. You can avoid the fine by adjusting your estimate online. Just don’t forget. 


The Canadian Revenue Agency has come a long way. These days, they have a slick website to calculate payroll deductions — no more leafing through those thick books of small-print tables! Find that easy-to-use calculator by searching online for “Payroll Deductions Online Calculator.” You can even use it to print reasonable-looking pay stubs, if you’re not using accounting software.


If you’re using accounting software, you likely won’t need that online calculator. AgExpert calculates deductions quite nicely, and also prints an adequate pay stub. However, make sure your AgExpert deductions are correct. The first few times your pay your new employee, check your software deductions against the CRA’s online calculator. If they don’t match, you may find you don’t have the updated payroll package on your AgExpert software. You may need to phone the AgExpert support line to make this work. 


Once you take the deductions off your employees’ paycheques, you need to remit that money to the CRA, plus your share of the employees’ Canada Pension Plan and Employment Insurance. You have until the 15th day of the month after payday. If you forget to make that payment, or if you were confused by the remittance process, the CRA will not want to hear about your troubles. You can expect a response along the lines of, “Just pay the fine, Ma’am.”


Now, I’m in the habit of remitting my deductions as soon as I made out the employee paycheque. Sure, I’ve foregone a little interest by not waiting until the absolute deadline, but one late fine certainly outweighed that.


At first, I was confused by the process. You may notice that the CRA web page titled, “Remitting Payroll Deductions” has no link to the actual site where you remit payroll deductions. Neither does the “Make a payment” link on the main “business” page. After an exasperating afternoon, I phoned the CRA for some navigational help: Go to “My business account” (there are directions about setting one up), and you can make a payment from there. Oddly, you won’t be asked for much information about which tax you’re remitting — they don’t want to know how much is for EI, CPP, or taxes. They won’t even ask for your employees’ names. They only want to know the amount of your gross payroll, and the amount of your payment. 


I like to submit my own personal tax returns early, so I never make employees wait for their T4s. I prepare them in early January and get them out right away. 


That’s not why I was fined.


After you provide those forms to your employees, you must also submit them to the government. I did this online. First, I downloaded the file AgExpert creates for this purpose, and then I used the CRA website to upload the file. 


Unfortunately, we had two employees that year. I thought I had chosen the “Summary” file to send in information for all employees. I only sent information for one employee. This fine hurt. I’d tried so hard. 


While I wasn’t fined for this, I was surprised to find out I’d been doing it wrong. 


When you let an employee go (even a summer student at the end of the season), as well as a T4, you must send that person home with a Record of Employment (ROE). A summer employee heading back to school might not notice if she doesn’t get one, but if you lay someone off and they hope to collect Employment Insurance, they need this form. Right away!


AgExpert will create one of these for you, but it will take a little coaxing. You must go to “Payroll Setup” (which doesn’t seem obvious), then under the “Employees” section, select the correct employee. Then, find the small second tab that says “Payroll Information” and hunt down the tiny button labeled “ROE” — it’s near “Date Terminated.” 


The Service Canada website has a long, easy-to-find document explaining how to fill out the form. That should be relatively straightforward. If you have weekly or semi-monthly pay periods, you have five days to submit this information to Service Canada.


If you’re on top of things, you can send a paper copy of that report home with your employee on her last day.


You will also need to file your copy with Service Canada. If you want to do this electronically, make sure you have a few extra days the first time you do it. I had three days to spare when I completed my form and had it ready to file. Then I realized that I needed to register with Service Canada. Before they would allow me to do this online, they needed to use Canada Post to mail us a letter with my new authorization code. The letter was addressed to the “Chief Executive Officer,” so they could feel sure our farm’s senior management knew what I was up to. This practice is in place to prevent EI abuse, but it can also cause honest first-time employers a little grief. But now that you know, you can plan ahead.


I’m embarrassed to admit that I’ve made so many mistakes on my way to learning this process. Here’s hoping you can get some value out of my errors!