7 Payroll Mistakes Ontario Small Business Owners Make (and How to Fix Them)

Payroll errors can lead to missed deadlines, extra costs, and avoidable stress. The good news: most problems are easier to prevent with a clear payroll calendar, accurate worker records, and a regular review of your CRA and Ontario requirements. If you’re looking for payroll services for small business, these seven common mistakes are a useful place to start.

Metarithmika is a virtual accounting department located in Ottawa, serving small businesses, startups, self-employed professionals, and non-profit organizations across Ontario.

1. Are you missing your CRA payroll remittance due date?

A payroll remittance is the payment of deductions such as income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums to the Canada Revenue Agency (CRA). Your due date depends on your assigned remitter type, not simply on when you run payroll.

The CRA generally bases your remitter type on your average monthly withholding amount (AMWA) from two calendar years earlier. The main schedules are:

For Threshold 2, the periods end on the 7th, 14th, 21st, and the last day of the month. Check the CRA’s remittance due-date guidance for your specific schedule.

Late remittances can result in penalties of 3%, 5%, 7%, or 10%, depending on how late the payment is. A second or subsequent failure in a calendar year can result in a 20% penalty when the failure was knowing or due to gross negligence. Interest compounds daily.

The fix: Confirm your remitter type in CRA online services, record every due date in a shared calendar, and schedule payments early enough for the chosen payment method to be processed on time.

2. Are you assuming you must remit monthly, or that you qualify to remit quarterly?

A smaller payroll does not automatically mean you can choose a quarterly schedule. Eligibility depends on the CRA’s requirements and your compliance history.

A new small employer may qualify for quarterly remittances when its monthly withholding amount is under $1,000, and it has a perfect compliance record. An established small employer may qualify when its AMWA is under $3,000, and it has a perfect compliance record. Quarterly remittances are generally due April 15, July 15, October 15, and January 15.

If you do not meet the requirements, or the CRA has assigned you a different remitter type, follow the schedule shown for your account. Remitting more often than required does not automatically change your assigned remitter type.

The fix: Review your CRA account and notices instead of choosing a frequency based on habit. If you think your remitter type should change, contact the CRA to confirm your options.

3. Are you leaving T4 filing until the last minute?

Employers generally need to file T4 information returns and provide T4 slips by the last day of February following the calendar year being reported. For the 2026 calendar year, the usual deadline is the last day of February 2027. Since February 28, 2027 falls on a Sunday, check the CRA’s information-return deadline rules for the next-business-day adjustment.

Year-end payroll reporting can take longer when employee details, pay records, benefits, or deductions need review. Filing late may lead to penalties.

The fix: Reconcile payroll records throughout the year. In January, confirm employee information, total earnings, deductions, and taxable benefits so you can prepare and file T4s before the deadline. See the CRA’s 2026–2027 tax deadlines.

4. Are you treating a worker as a contractor based only on their contract?

A contract or invoice that calls someone a contractor does not, by itself, settle their employment status. The CRA considers the facts of the working relationship as a whole.

Relevant factors include who controls the work, who supplies tools and equipment, whether the worker can subcontract, their financial risk, and their opportunity for profit. If the worker is an employee, the employer is generally responsible for required deductions and employer CPP and EI contributions. Failing to deduct required amounts may leave the employer owing both shares, plus penalties and interest.

The fix: Review how the relationship works in practice, not just what the agreement calls it. If you’re uncertain, the payer or worker can request a formal CRA CPP/EI ruling. When you begin paying employees, check whether you need to open a CRA payroll account.

5. Have you checked whether your business can claim Ontario’s EHT exemption?

Ontario’s Employer Health Tax (EHT) is a tax on eligible remuneration paid to current and former employees. Eligible employers may claim an exemption on the first $1 million of Ontario payroll, subject to the rules. Generally, employers with annual Ontario payroll above $5 million cannot claim the exemption. A registered charity may claim it even when its payroll exceeds that threshold.

Only one annual exemption is available to an associated group of employers. In addition, “non-profit” and “registered charity” are not interchangeable categories for this exemption. Your organization’s eligibility depends on the Ontario rules and its circumstances.

The fix: Review the Ontario Ministry of Finance’s EHT exemption guidance and calculate payroll across any associated employers before claiming an exemption. The exemption is scheduled for an inflation adjustment on January 1, 2029.

6. Do you report nil remittances during the off-season?

If your business has seasonal employees or no employees and makes no source deductions in a period, you may still need to report a nil remittance. Not having a payment to send does not necessarily mean there is nothing to report.

The CRA requires a nil remittance by the due date for your remitter type. It also asks you to provide the date when you expect to make source deductions again, or an estimate if you do not know. Do not report a nil remittance for a period in which you made deductions.

The fix: Add nil-remittance dates to your seasonal payroll calendar. Use CRA payroll guidance to confirm how to report and what information to provide.

To make every deadline in this list easier to remember, Metarithmika offers a free deadline tracker for business owners and management teams at deadline-tracker.metarithmika.ca. Subscribe and you'll get the key CRA and Ontario deadlines by email notification, ready to sync with your calendar if you want.

7. Are you putting off payroll corrections?

A missed payment, incorrect amount, or misapplied remittance is easier to investigate when you address it promptly. Delaying a correction can make it harder to match payroll records, CRA account entries, and bank payments. Repeated failures can also carry more serious consequences: the CRA’s 20% penalty may apply to a second or subsequent failure in a calendar year when it was made knowingly or through gross negligence. Interest on unpaid amounts compounds daily.

The fix: Compare your payroll reports, payment confirmations, and CRA account regularly. If you find an error, contact the CRA or use its payroll remittance guidance to review next steps. Keep a record of the correction and the supporting documents.

What should you remember about payroll compliance in Ontario?

• Check your remitter type: Your assigned schedule determines when payments are due.
• Keep year-end records current: Reconciliations make T4 preparation more manageable.
• Review worker status carefully: The working relationship matters more than the label in a contract.
• Check Ontario EHT eligibility: Consider associated employers and confirm whether your organization qualifies.
• Report nil periods when required: Seasonal breaks do not automatically remove reporting obligations.
• Fix discrepancies early: Keep payment confirmations and payroll records together.

Frequently asked questions

How often does a small business in Ontario remit payroll deductions?

It depends on the remitter type assigned by the CRA. Some eligible small employers may remit quarterly; regular remitters generally remit monthly, and accelerated remitters follow more frequent schedules. Confirm the schedule in your CRA account.

When are T4 slips due in Ontario?

T4 information returns are generally due by the last day of February following the calendar year being reported. If the date falls on a weekend or CRA-recognized public holiday, the next-business-day rule may apply.

Does every Ontario non-profit qualify for the EHT exemption?

No. Non-profit status alone does not confirm eligibility. The Ontario exemption has specific eligibility requirements, and registered charities have a separate exception to the general $5 million payroll threshold. Review the Ministry of Finance guidance for your organization’s situation.

Can I report nil payroll remittances during a seasonal closure?

If you have no employees or seasonal workers and made no source deductions for the period, the CRA says to report a nil remittance by your normal due date. You should also provide when you expect deductions to resume, or an estimate.

Get support with payroll services for your small business

Metarithmika provides full payroll processing and compliance support from Ottawa for Ontario businesses, startups, self-employed professionals, and non-profit organizations. Our virtual accounting department can help you manage payroll schedules, remittances, and year-end reporting.

Book a Financial Clarity Call or email info@metarithmika.ca.