How to Set Up Payroll for Your First Employee in BC: A Step-by-Step Guide

The quick answer

Hiring your first employee in BC means setting up four things before pay day:

1. A CRA payroll account (RP suffix on your Business Number) so you can remit source deductions.
2. WorkSafeBC registration so the employee is covered for workplace injuries.
3. A payroll system — software, an outsourced bookkeeper, or both — to calculate gross-to-net.
4. A TD1 form signed by the employee so you know how much tax to withhold.

That is the legal minimum. There are also Employment Standards Act rules around vacation pay, statutory holidays, and overtime in BC that apply from day one. This guide walks through each step in the order you should do it.

Step 1: Open a CRA payroll account (RP)

Before you can pay anyone, you need a CRA payroll deductions account. This is added as an "RP" suffix on your existing Business Number.

• If you already have a BN (from registering for GST/HST or incorporating), you add an RP account through CRA My Business Account or by calling CRA's business enquiries line.
• If you do not have a BN yet (most common for new sole proprietors), you register for both at once at Business Registration Online or through ServiceBC.

Once activated, CRA assigns you a remittance frequency — quarterly, monthly, or accelerated — based on your average monthly withholding. New employers default to quarterly remittance for the first year. You will start receiving PD7A remittance slips in the mail (or in My Business Account if you go digital).

CRA remittance schedules get strict fast — late remittances are penalised at 3%, 5%, 7%, or 10% depending on how late, and CRA's interest clock starts the day after the due date. This is the most common payroll mistake first-time employers make.

Step 2: Register with WorkSafeBC

Almost every employer in BC needs WorkSafeBC coverage — including small businesses with one employee. There are a few exemptions (some volunteer arrangements, certain agricultural operations, and short-term casual help under specific conditions), but assume you need to register.

• Apply online at worksafebc.com — typical processing time is 7 to 14 days.
• WorkSafeBC assigns a classification unit based on the type of work, which determines your base rate.
• You report assessable payroll (wages, salaries, taxable benefits) up to the annual maximum, and pay a percentage as the WCB premium. The maximum and rates change yearly — check the current numbers on the WorkSafeBC site.

A common first-employer mistake: registering after the first pay day. You owe WorkSafeBC premiums from the date the employee started work, not from when you registered. Register before the first cheque.

For deeper BC-specific WCB rules, see our WorkSafeBC small business guide.

Step 3: Decide if EHT applies (it usually does not yet)

BC's Employer Health Tax (EHT) only applies once your total annual BC remuneration crosses an exemption threshold — $1,000,000 for non-charitable employers as of 2026. Most first-employee businesses fall well below this.

If you are confidently below the threshold, you do nothing for EHT. If your payroll could grow above it during the year (multiple hires, high-salary roles), set up an EHT account proactively through eTaxBC and budget for the annual filing. Charities and qualifying non-profits use a different (higher) threshold — confirm the current numbers on the BC government EHT page.

Step 4: Choose a payroll system

You have three real options.

Outsource the whole thing to a bookkeeper. Best for first-time employers who want zero CRA risk. A flat-fee bookkeeping plan that includes payroll typically adds $100 to $250 per month for the first 1 to 5 employees. They handle the calculations, remittances, T4s, and ROEs when employees leave.

Use payroll software directly. Wagepoint, Payment Evolution, QuickBooks Payroll, Knit, and Ceridian's Powerpay are all designed for Canadian small businesses. Typical cost is $20 to $60 per month plus a small per-employee fee. You run pay yourself; the software handles the math and the remittance.

DIY in a spreadsheet. Possible, but a bad idea. CRA's online Payroll Deductions Online Calculator (PDOC) gives you the math for free, but you still have to remit on schedule, file T4s in February, and handle ROEs when staff leave. Most owners who try this give up within a year.

If you are reading this article, the right answer is almost certainly outsource or software — not DIY.

Step 5: Collect TD1 forms and onboarding documents

Before the first pay run, you need from the employee:

• TD1 federal form — sets the federal basic personal amount and any additional credits.
• TD1BC — the BC provincial version.
• SIN — confirm the employee provides it within three days of starting (CRA requirement).
• Banking info for direct deposit (account, transit, institution numbers).
• Emergency contact and home address.

You do not file the TD1s with CRA — you keep them on file. They affect how much income tax you withhold from each pay.

Step 6: Run the first pay

A standard Canadian pay calculation goes like this:

1. Gross pay — hours worked × rate, or salary divided by pay periods.
2. Less CPP — based on contributory earnings above the basic exemption ($3,500/year split across pay periods).
3. Less EI — a percentage of insurable earnings, up to the annual maximum.
4. Less income tax — federal + provincial, based on the TD1 amounts.
5. Less any benefit deductions — extended health, RRSP matching, etc.
6. Net pay — what the employee actually receives.

You also accrue employer-side costs on top of gross pay:

• Employer CPP match (equal to employee CPP).
• Employer EI (1.4× the employee EI amount).
• WorkSafeBC premium (percentage of assessable payroll).
• Vacation pay accrual (minimum 4% of gross, rising to 6% after 5 years per the BC Employment Standards Act).

Your true cost of an employee is gross pay plus roughly 12 to 18 per cent in employer obligations, before benefits. A $60,000 salaried employee in BC actually costs about $68,000 to $71,000 a year before any extended health, RRSP, or bonus.

Step 7: Remit source deductions on time

After each pay run, you owe CRA:

• Federal and provincial tax withheld
• Employee CPP + employer CPP match
• Employee EI + employer EI (1.4×)

This is the PD7A remittance. New employers default to quarterly remittance for the first year as long as your average monthly withholding stays under $1,000. Quarterly remittances are due April 15, July 15, October 15, and January 15. Once your monthly withholding exceeds the threshold, CRA moves you to monthly, then accelerated.

Missing remittance deadlines is the most expensive payroll mistake. CRA's penalty for late remittance starts at 3% and escalates fast.

Step 8: Year-end — T4 slips and the T4 Summary

Every February, you owe two things to CRA:

• T4 slips for each employee (showing gross, deductions, and net for the year).
• T4 Summary consolidating all T4s.

Deadline is the last day of February. Filing late triggers per-slip penalties.

You also give each employee a copy of their T4 by the same deadline so they can file their personal tax return.

BC-specific rules to remember

A few BC Employment Standards Act items that apply from day one:

• Vacation pay: Minimum 4% of gross earnings; rises to 6% after 5 years of employment.
• Statutory holidays: 11 stat holidays in BC. Employees who qualify get either the day off with regular pay or 1.5× pay if they work it.
• Minimum wage: Verify the current BC minimum wage at the time of hire — it has been adjusted yearly since 2018.
• Overtime: After 8 hours in a day or 40 in a week, at 1.5×; after 12 in a day, at 2×.
• Termination notice: Statutory minimums depend on years of service. Common law notice can be much higher — get advice before terminating.

These are minimums. You can pay more. You cannot pay less.

Common first-employer mistakes

Hiring before registering. Onboarding an employee before WorkSafeBC is set up means you are technically uninsured during the gap. Premiums backdate.

Missing the first quarterly remittance. First-year small employers (under $1,000/mo withholding) default to quarterly remittance, then forget the deadline because there is no monthly rhythm. Set a calendar reminder for April 15, July 15, October 15, and January 15.

Treating a contractor as an employee (or vice versa). CRA looks at control, ownership of tools, chance of profit, and several other factors. Miscategorising costs you CPP, EI, and back-payroll if CRA reviews — easily $5,000 to $25,000 per misclassified worker.

Forgetting vacation pay accrual. It is a liability from day one, not when the employee takes their first vacation. Track it.

Skipping the ROE when an employee leaves. Record of Employment is mandatory within 5 days of an employee's last pay. EI claims hinge on it. Missing or late ROEs cause employee EI delays and CRA correspondence.

What does payroll cost in BC?

A practical breakdown for a typical first-employee BC business:

• Outsourced payroll through a bookkeeper: $100 to $250 per month for up to 5 employees.
• Payroll software (Wagepoint, QuickBooks Payroll, Knit): $30 to $80 per month plus $4 to $8 per employee.
• WorkSafeBC premium: Varies by industry — 0.5% to 4% of assessable payroll is typical. Higher-risk industries (construction, forestry) pay more.
• Employer CPP + EI: Roughly 8 to 9 per cent of gross pay.

For a deeper view of overall bookkeeping plus payroll cost, see how much a bookkeeper costs in Canada.

Frequently asked questions

Do I need a separate bank account for payroll?

Not legally, but most accountants recommend one — separate operating from payroll so you do not accidentally spend the source deductions you owe CRA. The fastest way to get into trouble with CRA is treating withheld tax like working capital.

How long do I have to register for payroll after hiring?

Register before the first pay day, ideally before the employee starts. CRA expects the RP account to be active by your first remittance period.

Do I need WorkSafeBC if my employee works from home?

In most cases, yes. WorkSafeBC coverage is tied to the employment relationship, not the work location. Some exceptions exist for fully remote out-of-province workers — confirm with WorkSafeBC.

Can I pay myself through payroll if I am incorporated?

Yes — owner-managers of incorporated businesses often pay themselves a T4 salary, dividends, or a mix. The decision is part of the incorporation tax-planning conversation and worth getting right.

Do I need to file T4s if I only had one employee for two months?

Yes. Any employee who received employment income in the calendar year gets a T4 by the end of February of the following year.

Want help getting payroll set up properly?

Hiring your first employee is one of the few business decisions where the cost of doing it wrong is concrete — CRA penalties, WorkSafeBC backdating, EI delays for the employee, ROE issues. We do free 30-minute calls where we walk you through your specific setup and decide whether you need full outsourced payroll or just a check-in. Book a discovery call. Calendar booking only.