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Top 3 Payroll Compliance Risks (and How to Avoid Them)

  • The STP Advisor
  • Aug 7
  • 2 min read
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Running payroll isn’t just about cutting cheques—it’s about staying compliant with Canadian regulations that change more often than most business owners realize. One small oversight can snowball into penalties, audits, or unhappy employees.

Here are the top 3 payroll compliance risks in Canada—and how you can avoid them:



1. Misclassifying Employees and Independent Contractors

The Risk: The CRA takes worker classification seriously. If you’re treating a worker as a contractor when they legally qualify as an employee, you could be responsible for back payroll taxes, CPP, EI contributions, and penalties.

How to Avoid It:

  • Use the CRA’s employee vs. self-employed criteria to evaluate each working relationship.

  • Review contracts and roles regularly, especially as responsibilities evolve.

  • When unsure, ask your accountant to review the arrangement—proactive advice is cheaper than penalties.



2. Errors in CPP, EI, and Income Tax Deductions

The Risk: Under-deducting or over-deducting from employee pay can result in CRA penalties or employee complaints. Many business owners miss updates to contribution rates or miscalculate insurable earnings.

How to Avoid It:

  • Always use the current year’s payroll deduction tables or an approved calculator.

  • Automate payroll using CRA-compliant software.

  • Do regular audits or ask your accountant to do a compliance review annually.



3. Late or Missed Payroll Remittances

The Risk: The CRA enforces strict deadlines for payroll source deductions. Missing a payment—even by one day—can trigger interest charges and late penalties.

How to Avoid It:

  • Know your remittance frequency (monthly, quarterly, or accelerated) based on your payroll size.

  • Set calendar reminders or automate payments through your accounting software.

  • Partner with a payroll service provider to ensure accurate, on-time remittances.


In Canada, payroll compliance is non-negotiable. With changing rules, evolving employment laws, and CRA oversight, it pays to have a system—and a team—you can trust.

At STP Accounting Services, we help Canadian businesses stay compliant, stress-free, and focused on what they do best. Whether you need a one-time audit or full-service payroll support, we’re here to make it simple.

Ready to get payroll off your plate? Let’s talk.


 
 
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