Ontario payroll 2026: How to run it step by step

At 9:47 on a Thursday night, Tomasz is still at the kitchen island with a laptop, a cold coffee and the spreadsheet that has run payroll for his 11-person HVAC company in Oshawa for three years. Tomorrow is pay day. Jada, his newest installer, started on Monday, and one cell in column K has been “close enough” since last spring.

Column K is a CPP deduction. Tomasz hasn’t skipped a step so much as he’s never written the steps down. Written out, the whole cycle is short:

To run payroll in Ontario, employers must register for a CRA Payroll Program Account, calculate gross pay, withhold statutory deductions such as CPP, EI and income tax using a payroll calculator, and remit those amounts to the Receiver General on time. Registering with WSIB, collecting the right forms from each new hire and filing T4s after year-end complete the cycle.

The arithmetic inside those steps is where a pay run like Jada’s first one quietly goes wrong. Whichever payroll calculator Ontario employers use is only as good as the rates behind it, and those numbers feed everything from take-home pay to an employee’s future retirement income. This guide walks through all six steps, from registration to T4s, with the 2026 rates, rules and dates you need at each one.

Running payroll from a spreadsheet and wondering what comes next?

The basics of Ontario payroll processing

Running payroll means working out what each employee earned, subtracting what the law requires you to withhold, paying the difference and sending the withheld amounts to the right government agencies. The calculations cover wages, hours, benefits, tax deductions and garnishments, and they have to follow federal rules from the Canada Revenue Agency (CRA) and provincial rules from Ontario.

What payroll costs beyond wages

Wages are only part of what an Ontario employer spends. Several statutory costs sit on top, and a payroll budget that ignores them runs short:

For an employee who reaches every ceiling in 2026, the employer’s CPP, CPP2 and EI come to $6,218.75 for the year, before WSIB or EHT.

Doing it yourself or getting help

Anyone learning how to run payroll in Ontario meets the same choice first: run payroll in a spreadsheet, use payroll software or hand it to an accountant or payroll provider.

If you use a payroll service provider, you also need to give the CRA the authorization to deal with them, which you do through My Business Account.

Choosing a pay frequency

Ontario’s Employment Standards Act (ESA) doesn’t force a particular frequency. It requires a recurring pay period and a set pay day, with wages paid no later than that day. Other provinces do set minimum frequencies, so check the rules in each province where you hire.

The choice that matters is operational. A biweekly schedule has 26 pay periods a year, and every period contains the same number of weeks, which makes it consistent and easier to administer for hourly staff. A semi-monthly schedule, usually the 15th and the last day of the month, has 24 pay periods. It suits salaried employees well, but it’s cumbersome for hourly ones: periods contain different numbers of working days, and overtime lands unevenly because the 44-hour weekly threshold doesn’t line up with a half-month. Weekly pay is common in manufacturing, construction and restaurants.

For hourly employees, leave a week between the end of the pay period and the pay date. That gap gives you time to collect timesheets, fix errors and run the numbers without a scramble.

Step 1: Register for a CRA Business Number and Payroll Program Account

Before you pay anyone, you need a Business Number (BN) and a payroll program account with the CRA. If you already have a BN for GST/HST or corporate tax, you add a payroll account to it.

A payroll program account number is 15 characters long. It has three parts: your 9-digit BN, a 2-letter program identifier (RP for payroll) and a 4-digit reference number. The example 123456789RP0001 shows the format. The reference number often starts at 0001, but it identifies one particular account, and a business with more than one payroll account would have others.

Registration is free. You can register through the CRA’s Business Registration Online (BRO) service, which typically issues the number right away, or by calling the CRA business enquiries line at 1-800-959-5525. Have your business details ready, along with the owner’s information.

Register before your first remittance is due, and don’t wait for the account number to start calculating: if you pay employees before your account exists, the deductions still have to be calculated and remitted by the due date. If you begin paying staff in March, for example, the first remittance is due on April 15.

Step 2: Register with WSIB and the Ontario Ministry of Finance

Ontario adds two provincial registrations to the federal one.

Workplace Safety and Insurance Board (WSIB)

Most Ontario employers must register with WSIB within 10 days of hiring their first employee. A few sectors fall outside mandatory coverage, so confirm that your industry is covered.

WSIB insurance is an employer-paid, provincial program. It pays for medical care and lost income when an employee is hurt at work. It is not deducted from employees’ pay.

Your premium is a rate per $100 of insurable earnings, and the rate depends on your industry classification. WSIB sets the average rate for 2026 at $1.23 per $100, down from $1.25 in 2025. Insurable earnings are capped for each worker: for 2026 the maximum insurable earnings ceiling is $121,700, up from $117,000 in 2025. A worker paid $150,000 contributes $121,700 of insurable earnings to your premium calculation.

Employer Health Tax (EHT)

Ontario also runs the Employer Health Tax, which funds provincial health care. Eligible private-sector employers get an annual exemption on the first $1,000,000 of Ontario payroll. If your total payroll is under that amount, no EHT is payable. Employers above it pay a rate that runs from 0.98% to 1.95%, depending on total remuneration, and the single rate that matches your payroll applies to the taxable amount after the exemption. Associated businesses share one exemption, and employers with payroll above $5,000,000 lose it.

If your payroll is near the exemption, register with the Ministry of Finance and track the number as you grow. The annual return is due on March 15.

Step 3: Onboard employees and collect required data

Jada’s first day sets up everything that follows. Collect the following before her first pay run.

Social Insurance Number and tax forms

• Social Insurance Number (SIN). Ask for it within three days of the day an employee starts work.
• Federal Form TD1 and Ontario Form TD1ON. These forms record the personal tax credits an employee claims, which set how much income tax you withhold. Ask for both when someone starts. Updating them every year is a good habit, and they must be updated whenever an employee’s situation changes.
• Form TD1X applies to employees who earn commission income and can claim expenses against it.

Ask for signed copies and keep them on file. The federal basic personal amount for 2026 is $16,452 for most employees, and the Ontario amount is $12,989. Your payroll calculator uses those claim amounts.

An onboarding checklist

An employee with more than one employer should claim the basic personal amount on only one TD1. Otherwise, too little tax is withheld across their jobs, and the shortfall shows up on their return.

Guard against payroll phishing

Scammers email employers pretending to be an employee with “new banking details” or a “corrected TD1”. Update bank accounts and tax forms in person, or by a method you’ve verified, never through an email request alone. Two minutes of checking beats redirecting a paycheque to a stranger.

New Ontario hiring requirements

Two recent ESA changes touch onboarding and hiring if you have 25 or more employees:

• Written information for new hires (since July 1, 2025). Provide a written document before the employee’s first day, or as soon as reasonably possible afterward. It covers your legal name and any operating name, contact information, where the employee is expected to work, their initial anticipated hours, their starting wage or commission, and the pay period and pay day. The 25-employee threshold is measured on the employee’s first day.
• Job posting rules (since January 1, 2026, under Bill 149). Publicly advertised postings must include the expected compensation or a range, and a range can’t span more than $50,000 a year. Postings must disclose when AI is used to screen, assess or select applicants. They also can’t require Canadian experience. Postings for roles paying $200,000 or more are exempt from the pay disclosure rule.

Step 4: Track hours, gross pay and minimum wage

Gross pay is what an employee earns before any deductions, and it is the starting number for every calculation that follows.

Tracking hours

Ontario’s ESA expects you to record the hours each employee works every day and every week. Accurate records matter most for hourly staff because they determine overtime, and for anyone near the 44-hour line. Employees are also entitled to a 30-minute eating period within every five consecutive hours of work, and it can be unpaid when the employee is free from work during it. If your system auto-deducts a lunch, confirm that employees actually take it.

Calculating gross pay

For a salaried employee, divide the annual salary by the number of pay periods. A $60,000 salary on a biweekly schedule is $60,000 ÷ 26 = $2,307.69 per period.

For an hourly employee, multiply hours by the hourly rate, then add overtime. Ontario’s overtime threshold is 44 hours a week, and overtime hours are paid at 1.5 times the regular rate. Take an employee who earns $22 an hour and works 48 hours:

• Regular pay: 44 × $22 = $968
• Overtime pay: 4 × $33 = $132
• Gross pay: $1,100

Gross pay also includes vacation pay and public holiday pay when they’re paid out. In Ontario, vacation pay is at least 4% of gross wages for employees with under five years of service and 6% after five years. Our vacation pay calculator gives you a figure to check against.

Public holiday pay is generally the regular wages and vacation pay payable in the four work weeks before the holiday week, divided by 20. Our Ontario statutory holiday pay guide covers the exceptions and the premium rules for working a holiday.

Minimum wage

Ontario’s general minimum wage rose to $17.95 an hour on October 1, 2026, up from $17.60. Two specialized rates rose the same day: the student rate went from $16.60 to $16.90, and the homeworker rate went from $19.35 to $19.70. Check that every hourly rate in your system is at or above the right figure for each employee, and remember that commission and piece-rate pay must still reach minimum wage for every hour worked.

New leave and layoff rules that affect payroll

Three ESA changes affect how you track time and pay:

• Long-term illness leave. Since June 19, 2025, eligible employees can take up to 27 weeks of unpaid, job-protected leave in a 52-week period. Employees need at least 13 consecutive weeks of service and a certificate from a qualified health practitioner.
• Job-seeking leave. Since November 27, 2025, an employee who receives notice of a mass termination (50 or more employees within four weeks) can take up to three unpaid days to look for work.
• Extended temporary layoffs. Since November 27, 2025, a non-union temporary layoff can run beyond the usual 35 weeks in 52, up to less than 52 weeks in a 78-week period. It requires a written agreement with the employee, which includes a firm recall date and confirmation that the employee can’t withdraw from it, plus approval from the Director of Employment Standards. It isn’t a right you can use on your own.

Keep leave and layoff records on file. The ESA generally requires employers to retain most employment records for three years, which sits alongside the CRA’s six-year rule for tax records.

Curious how your own Ontario pay run would look in a payroll platform?

Step 5: Calculate CPP, EI and income tax deductions

In Ontario, employers must withhold income tax, Employment Insurance (EI) premiums and Canada Pension Plan (CPP) contributions from each employee’s pay. This is the technical core of any payroll tax calculator Ontario employers use, so it helps to understand the arithmetic even if software does it for you. The framework is broader than one province, and our guide to calculating payroll deductions in Canada explains it in full. For the exact limits, see the 2026 CPP and EI contribution rates.

CPP and CPP2

Employers match the employee’s CPP contribution dollar for dollar. CPP is calculated on pensionable earnings above a basic exemption, which is $3,500 a year, prorated across the pay periods the employee works in. For 2026:

• The CPP rate is 5.95% for the employee and 5.95% for the employer, on earnings between $3,500 and the Year’s Maximum Pensionable Earnings (YMPE) of $74,600. The maximum contribution is $4,230.45 each.
• The second earnings ceiling applies to higher earners. CPP2 is 4% for the employee and 4% for the employer on earnings between $74,600 and $85,000, a maximum of $416.00 each.

EI

For 2026, the employee EI premium is 1.63% of insurable earnings up to $68,900, a maximum of $1,123.07. Employers pay 1.4 times the employee portion. If an employee’s EI deduction for a pay period is $10.00, your portion is $14.00. EI has no basic exemption, so it applies from the first dollar.

When an employee reaches the annual maximums

Stop deducting once an employee’s year-to-date contributions hit the annual maximum. For 2026, those maximums are:

An employee earning $85,000 on a biweekly schedule earns $3,269.23 per period, so EI runs out partway through the 22nd period, when insurable earnings reach $68,900, and take-home pay rises for the rest of the year. Software should handle this automatically, which is another reason to check a high earner’s pay stub in the fall.

Worked example: a biweekly pay run

Here’s the CPP and EI arithmetic for an employee earning $60,000 a year on a biweekly schedule. Gross pay is $2,307.69.

The $134.62 is the annual $3,500 exemption divided by 26 pay periods. Income tax depends on the employee’s TD1 claims and Ontario’s brackets, so use the CRA’s calculator for that line.

Income tax

Federal and Ontario income tax are both withheld, and the amount depends on the employee’s taxable income, TD1 claim amounts and pay frequency. For payroll, you use the tax tables for the employee’s province of employment, which is the province where they report to work. At filing time, an employee’s provincial tax is based on where they live on December 31, so the two can differ.

Income tax withholding is built from the employee’s annualized pay, so a TD1 that’s out of date skews every pay run. Ask employees to update their forms when they move, marry, take on a second job or have a change in credits. An employee can also ask you to withhold extra tax if they expect to owe at filing.

Some benefits can be offered on a pre-tax basis, such as contributions to a registered retirement savings plan. The tax treatment of each benefit is different, so check the CRA’s chart before you set one up.

If you give an employee a taxable benefit, you may also owe GST/HST on it. For a benefit like a reimbursed personal-use portion of a phone plan, an Ontario employer that’s a small business for these purposes multiplies the benefit’s value by 12/112. A $576 taxable benefit works out to $61.71 of HST to remit. Large businesses follow different rules, and the amount is due by the last day of February of the following year.

Which calculator to use

An Ontario payroll calculator needs four inputs: the pay period, the province of employment, the gross pay for the period and the employee’s TD1 claim amounts. The CRA’s tool takes those and returns CPP, EI and income tax for the period. Run a few employees through it by hand before you trust any other tool, including your own spreadsheet, and compare the answers.

Use the CRA’s Payroll Deductions Online Calculator (PDOC) for exact figures. It calculates federal and provincial (except Quebec) deductions for the most common pay periods and confirms what belongs on the official statement of earnings. If you build or maintain your own formulas, the CRA publishes them in the Payroll Deductions Formulas guide (T4127) twice a year. A few facts keep you current:

• The 123rd Edition took effect on July 1, 2026. It’s the one to use now. The 122nd Edition applied from January 1 to June 30, 2026. The July 1 update changed provincial tax in British Columbia, Newfoundland and Labrador and Prince Edward Island, not in Ontario, and didn’t change CPP or EI.
• Payroll Deductions Tables (T4032) are digital. The CRA stopped publishing paper and CD versions with the January 1, 2017 edition and recommends PDOC for your 2026 deductions.
• Free updates. You can subscribe to the CRA’s payroll electronic mailing list, at no cost, to hear about new tables and tax changes as they’re announced.

Why accurate CPP calculations matter for employees

A spreadsheet or in-house program carries one specific CPP risk. If you use your own formulas that differ from the CRA’s, you have to submit them to a tax services office or tax centre for approval. And the CRA warns that some payroll software, in-house programs and bookkeeping methods, when used improperly, treat all employment as full-year employment. For a part-year employee, that incorrectly lowers both the employee’s and the employer’s contributions, and a program may then indicate a CPP over-deduction on the T4 slip.

The consequences reach beyond the pay run. The employee may receive an unwarranted tax refund when they file, and the CRA says refunds of CPP over-deductions adversely affect their pensionable service, which could affect their CPP income when they retire. The employer would also receive a credit it isn’t entitled to. If Jada, who started on Monday, is Tomasz’s newest part-year employee, her first year of CPP is the place to double-check.

Step 6: Remit source deductions and file tax reports

Withheld deductions don’t belong to the business. They are held for the Receiver General, and the CRA expects them on a schedule.

When to remit

Most small employers are regular remitters. You remit your withholdings, plus your share of CPP and EI, by the 15th of the month following the month you paid your employees. March payroll is due April 15. If the due date falls on a weekend or holiday, it moves to the next business day. Employers with larger average monthly withholding amounts remit more often, and the CRA tells you which schedule applies to you.

Allow time. The CRA counts a payment as made when it receives it, so schedule it before the due date instead of on it.

What a late remittance costs

The CRA charges a penalty on late remittances: 3% if the amount is one to three days late, 5% if it’s four or five days late, 7% if it’s six or seven days late and 10% if it’s more than seven days late or not remitted. The penalty generally applies to amounts over $500. Interest accrues as well. A calendar, set up in advance, keeps these dates from sneaking up on you.

Year-end reporting

File T4 slips for the previous calendar year and give each employee their copy by the last day of February. For 2026 slips, February 28, 2027 falls on a Sunday, so the deadline is Monday, March 1, 2027.

For employee security (stock) options, use T4 codes 38, 39 and 41 for 2026 and later years. For 2025 slips, employers could use codes 38, 39 and 41 if filed on or after January 12, 2026, or the alternative codes 90, 91 and 92.

Fixing a mistake

Mistakes in a pay run are normal, and what matters is how quickly you catch them. If you over-deducted CPP or EI and find out in the same year, reimburse the employee and use the resulting credit in your payroll account to reduce your next remittance. Don’t include the reimbursed amount on the T4. If you find the problem after you’ve filed the T4, the CRA has a process for amending the slip. Under-deductions have a fix too: you can recover the amount through additional deductions, but the contribution is reported on the T4 for the year it was owed.

Records and pay statements

• Tax records: keep payroll records for at least six years from the end of the last tax year they relate to.
• Pay statements: Ontario requires you to give employees a statement with each payment. Electronic pay statements are acceptable when employees can reasonably access them and save or print them.

Ontario provincial tax rates and credits

Ontario’s 2026 provincial tax brackets are below. Thresholds are indexed annually, and for 2026 the first two bracket limits rose about 1.9% from 2025.

The Ontario basic personal amount is $12,989 for 2026, and it’s credited at the lowest rate of 5.05%.

Surtax, health premium and tax reduction

Three adjustments sit on top of the brackets:

• Surtax. Ontario charges 20% of basic provincial tax above $5,818, plus another 36% on basic provincial tax above $7,446. It applies to tax, not income, so it acts as a multiplier on the higher brackets.
• Ontario Health Premium. An income-tested amount that starts above $20,000 of taxable income and reaches a maximum of $900 a year.
• Ontario tax reduction. A credit that can reduce provincial tax to zero at very low incomes.

The CRA’s payroll formulas build the surtax and health premium into withholding, so a correctly configured calculator handles them. You see them in the final deduction rather than as separate lines.

Paying yourself as an owner

Business owners can pay themselves as employees through their corporation. That puts the owner on payroll like anyone else, with the same deductions, remittances and T4. Whether salary, dividends or a mix is the right mix is a tax-planning question for your accountant.

A payroll calendar you can keep

Many payroll problems come down to a missed date. Put these in your calendar once and they’ll repeat.

Check your work before the pay run

The most useful habit in Ontario payroll is checking your own numbers against an outside source. Run two or three employees through the CRA’s calculator and compare the result with whatever your spreadsheet or software produced. If the figures match to the cent, your setup is sound. If they don’t, the gap is usually somewhere specific: a part-year employee whose basic exemption was applied as though they’d worked the full year, an hourly rate that didn’t move on October 1, a TD1 that was never collected or a benefit that should have been taxable.

New hires are where this matters most. An employee who starts in March has a different CPP calculation from one who started in January, and that difference is the single most common place a payroll error begins its quiet career. It’s worth running every new hire’s first pay period through the calculator by hand.

The rest is structure. Register the right accounts, collect the right forms, calculate from the current tables and remit on a calendar you set once. Do those four things and you end up with pay runs you can explain to an employee, an accountant or the CRA, which is the real test of a payroll process.

Have an Ontario payroll setup you’d like to see in action?