Record of Employment (ROE)

An ROE must be issued whenever an employee experiences an “interruption of earnings” seven or more consecutive calendar days with no work and no insurable earnings. This includes terminations, layoffs, resignations, and leaves. Electronic ROEs must be filed within five calendar days after the end of the pay period in which the interruption occurred: paper ROEs within five days of the first day of interruption. Employers issuing five or more ROEs annually must file electronically through ROE Web. Later filing penalties reach $2,000 per infraction. 

2. Provincial and Territorial Variations

2.1 Provincial Income Tax

 Every province and territory maintains its own income tax brackets and rates. Employers must withhold provincial tax based on the province of employment—where the employee physically reports to work not the province where the employee resides. Quebec operates a completely separate system: provincial income tax is remitted to Revenu Quebec, not the CRA 2.2 Employer Health Taxes Several provinces levy employer-paid health taxes on payroll: Ontario Employer Health Tax (EHT): Eligible employers receive a $1 million exemption. Above that threshold, rates are tiered starting at 0.98% and increasing to a maximum of 1.95% for payroll above $400,000. Employers with total payroll exceeding $5 million do not qualify for the exemption. Even exempt employers must register and file annually, with returns due March 15. - British Columbia EHT: No tax on BC payroll of $1 million or less. Between $1 million and $1.5 million, the rate is 5.85% on the amount exceeding $1 million. Above $1.5 million, the rate is 1.95% on total payroll. Manitoba Health and Post-Secondary Education Tax Levy: Exempt on payroll up to $2.25 million. Between $2.25 million and $4.5 million, the rate is 4.3% on the excess. Above $4.5 million, 2.15% on total payroll. 2.3 Quebec-Specific Requirements Quebec’s payroll regime is the most complex in Canada. Employers must navigate the Quebec Pension Plan (QPP) at 6.40% (versus 5.95% for CPP), QPIP premiums, reduced EI rates, and the Health Services Fund (HSF). The HSF applies to all Quebec employers there is no small-employer exemption. Rates range from 1.65% for general employers with payroll under $1 million to 4.26% for large employers. Additional obligations include a 0.06% contribution related to labour standards and potentially a 1% Workforce Skills Development and Recognition Fund (WSDRF) levy for employers with payroll over $2 million. 2.4 Workers’ Compensation Workers’ compensation is mandatory in all provinces and is administered through provincial boards such as the WSIB in Ontario, WorkSafeBC in British Columbia, and the CNESST in Quebec. Premiums typically range from 0.5% to 5% of payroll depending on industry classification, payroll size, and claims history. Registration is required when hiring your first employee in most jurisdictions, and failure to register can result in fines and back-premium assessments. 

2.5 Provincial Labour Standards

 The following table summarizes key labour standard variations across Canada’s major provinces: 

British Columbia and Nunavut lead the country at $17.85 and $19.75 per hour respectively, while Alberta’s rate has remained frozen at $15.00 since 2018. Overtime thresholds vary significantly: Ontario and Nova Scotia use weekly-only triggers (44 and 48 hours), while most other jurisdictions apply daily thresholds as well. Vacation pay generally starts at 4% for short-tenure employees and rises to 6%though Quebec accelerates this at three years rather than five.

Common Payroll Mistakes and How to Avoid Them

3.1 Employee vs. Contractor Misclassification

 The CRA evaluates the actual working relationship, not the label on a contract, when determining employment status. Key factors include control over work, ownership of tools, financial risk, and opportunity for profit or loss. If a contractor is reclassified as an employee, the employer becomes liable for both employer and employee CPP and EI for all prior years, plus penalties, interest, and employment standards claims. When in doubt, request a ruling from the CRA using Form CPT1. 

3.2 CPP2 Calculation Errors

 The introduction of CPP2 in 2024 continues to challenge payroll systems. Many smaller businesses using older software or manual processes have not properly configured the second tier, resulting in either under-deductions or incorrect T4 reporting. Verify that your payroll system can distinguish between base CPP (Box 16) and CPP2 (Box 16A), and confirm that the YAMPE threshold of $81,200 is correctly programmed for 2025. High-earning employees should see two separate CPP line items on their pay stubs once their year-to-date earnings exceed the YMPE. 

3.3 Late Remittances

 The most common cause of payroll penalties is missing a deadline—often when dates fall near holidays, when businesses transition remitter types without updating schedules, or when manual reminders fail. The solution is straightforward: use payroll software with automated remittance scheduling or set up pre-authorized debits. Accelerated Threshold 2 remitters (AMWA over $100,000) need fully automated workflows to meet the three-business-day requirement. 

3.4 Wrong Province of Employment

 With the rise of remote work, province of employment errors is increasingly common. The rule is clear: tax withholding is based on where the employee reports to work, not where they live or where the company is headquartered. An employee who works from a home office in British Columbia for an Ontario-based company is subject to BC provincial tax withholding. Remote work arrangements should be documented in writing, and payroll records should reflect the correct province to avoid misallocated tax credits and year-end reconciliation issues. 

3.5 Missing T4 Deadlines

Year-end payroll crunch is predictable, yet thousands of employers miss the February 28 deadline annually. Best practices include: reconciling payroll records monthly, verifying all employee SINs and legal names before filing, ensuring taxable benefits are captured in both Box 14 and Box 40, and filing electronically well in advance. The penalty clock starts March 1 and runs for up to 100 days.