In the past, the most common ways to compensate employees were by cash or physical cheques. However, today employers have a variety of payment methods at their disposal. The primary means of disbursing payroll to workers today can include using payroll software, direct deposit, cheques, and cash.
How to pay employees:
Payroll software
While this is primarily for processing and calculations, payroll software, such can also be utilized for employee payment. It typically includes features like direct deposit and employee portals for accessing paystubs, enhancing convenience and efficiency.
Small businesses may weigh the costs of payroll software against manual preparation methods and see numerous benefits to implementing payroll software and simplifying the overall employee payment process.
In addition to handling payroll processing and employee payments, the software can help centralize all payroll information and data. Automated calculations can eliminate the need for manual wage, deduction, and contribution calculations, which save time and effort.
Simplified tax reporting to the Canada Revenue Agency (CRA) and other entities can reduce the time spent on administrative tasks before, during, and after payday.
Direct deposit
Direct deposit involves electronically transferring funds from the employer's bank account to the employee's bank account. Typically, employees may be asked to provide a void cheque or direct deposit form to set up deposits electronically on payday.
Direct deposit can save time, improve security, and reduce paperwork compared to physical cheques.
However, unless you are using payroll software, you may need to perform the calculations yourself, including contributions, deductions, and applicable taxes.
Cheques
Traditional cheque payments remain a method for some Canadian organizations. Like other payment methods, cheques have pros and cons.
Issuing and mailing cheques may be time-consuming, especially when multiple employees need to be paid at once. Additionally, employees may need to take the extra steps to deposit their cheque using a banking app or financial services location.
What to keep in mind when choosing how to pay employees.
It can be helpful to understand the various tasks involved in payroll, such as determining the amount workers will receive on payday. Here are a few things to consider:
- The total number of employees to pay
- Pay frequency
- Calculating wages and salaries, including regular pay, overtime, vacation pay, and commission
- Calculating payroll taxes and withholdings, such as income tax, Canada Pension Plan (CPP), and Employment Insurance (EI)
- Determining payroll deductions, including employee benefits and contributions
- Maintaining records for reporting and employee records
- Adhering to federal and provincial labour and employment standards
This guide is intended to be used as a starting point in analyzing how to pay employees and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.
