Paying Employees

Congratulations on being ready to employ staff! This is a big step for your company. While it can be scary to put your company’s reputation in the hands of someone else, knowing your responsibilities as an employer can help ease your transition.

When you hire employees, you must register for a CRA payroll account. This account will be linked to your Business Number (BN). To open your CRA account, you will need to complete a
RC1B form.

As an employer, you will need to submit the following forms to the Canada Revenue Agency (CRA):
TD1AB

TD1

These forms are Personal Tax Credits Return forms that you have to give all new employees to complete. These forms help you determine what deductions you need to make from their paycheque.

What if employee is being paid hourly + commission?

It is common to pay beauty industry employees by commission, unless your employee is claiming expenses, the forms above will suffice.

Additionally, Alberta Employment Standards Code requires you to keep the following records for every employee:

**NOTE: Payroll records must be kept for at least 3 years from creation date.

PAY SCHEDULE

At the end of each pay period, you must provide each employee with a statement of earnings that includes:

• regular and overtime hours of work;
• wage rate and overtime rate;
• earnings paid that show each component separately;
• deductions from earnings and the reason for each deduction;
• time off in lieu of payment of overtime; and
• statement period.

FYI- cash shortages can only be deducted from an employee IF:
1. the employee is the ONLY ONE with sole access to the cash
2. the employee authorizes the deduction in writing with the amount and date of shortage being deducted

If you plan to reduce any employee’s wage rate, overtime rate, general holiday pay, vacation pay or termination pay, the employee must be notified before the start of the pay period in which the reduction is to take effect.
Keep in mind, these rates must always be at least the
minimum required by the legislated standards.

REMITTING TO THE CRA

You must remit to the CRA all deductions you made from an employee’s paycheque (federal and provincial income tax deductions, E.I. premiums, and CPP) before the 15TH of the month AFTER the month in which you made the deductions.

All remittances must be made in bulk for all of your employees.

You can use the Payroll Deductions Online Calculator (PDOC) to calculate payroll deductions.

ISSUING T4s
You must provide a T4form to your employees ON or BEFORE the last day of February for the previous calendar year. This T4 contains information on the total CPP, E.I. premiums, and income tax deductions you made on your employees behalf for the previous calendar year.

For more information view the Employers’ Guide
Payroll Deductions and Remittances.

If you have any questions or concerns with the information provided on this article please contact Executive Spa Group.

‘Cultivating the Beauty Industry’

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Executive Spa Group
(780) 604 2772
info@executivespagroup

Defining the difference

• An employee works under an employee/employer relationship.
• A contractor carries out their work under an independent business/contractor relationship.
• Chair renters and room renters are self-employed.

Four major differences

We will explore 4 different categories to help you understand the difference between an employee vs contractor:

1. Working Conditions

👉 Pay Schedule

Employees are paid a wage, commission, or a combination on a regular schedule.

Contractors are usually paid solely on commission and receive payment after submitting invoices.

On the other hand, chair or room renters pay a monthly rent to the salon/spa owner.

👉 Training

Generally, the employer pays for an employee’s additional training. Meanwhile, contractors pay for their own training costs.

👉 Hours of Work

Chair or room renters may work during their hours of choosing within the salon’s hours of operation.

In contrast, the employer determines an employee’s hours of work.

2. Tools and Equipment

All necessary tools and equipment are provided and maintained by the employer. However, employees can choose to work with their own tools.

A good service provider will extend the life of any tool or equipment by using it properly and sanitizing it after every client.

On the other hand, contractors provide and maintain their own tools and equipment. Moreover, chair or room renters rent space to provide services.

3. Taxation Deductions/Reporting

A contractor’s pay does not include tax deductions. Subsequently, contractors submit their own federal and provincial tax deductions to the CRA.

On the contrary, an employee’s pay includes deductions. After that, deducted taxes are submitted by the employer to Canada Revenue Agency (CRA).

SPECIAL NOTE: It is the salon owner’s responsibility to pay EI employer premiums of chair/room renters.

Employees do not collect GST from their clients. Chair or room renters must collect and remit GST if their gross annual revenues reach over $30K.

4. Employment Laws

Alberta’s Employment Standard Code entitles employees to general holiday pay, overtime pay, and minimum wage, in addition to some other benefits.

Unlike employees, the Alberta’s Employment Standard Code does not protect contractors.

In conclusion, there are major differences between an employee vs contractors.

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EXECUTIVE SPA GROUP
Beauty Industry Resource Centre
(780) 604-2772
info@executivespagroup.com