Episode 21: Like A Boss – Hiring Your First Employee

Welcome back to another episode of Chat with Brandy, a weekly show where we talk personal & business finance, taxes, and how to make money while doing what you love! I’m your host, bookkeeper and tax preparer Brandy Miron, and this is episode 21 and the final episode of season 1!

As I’ve mentioned in the past couple of episodes, I will be taking a season break for the next couple of months in order to serve you all better during tax season, but I’ll be back and hopefully even better for season 2 in May!

You can always find my videos on facebook, or at booksbybrandymiron.com, complete with show notes, links, and blogs.

Today, I want to talk about the steps you’ll want to take if you’re hiring an employee for the first time in your business. Last week, we talked about the profit-focused reasons you should or shouldn’t be hiring, things to consider when searching for a candidate, and the true cost of having an employee, so if you missed that episode, be sure to go back and watch episode 20.

There’s a lot to cover today, so let’s dive right in! Once you’ve decided the position you want to hire for, the wage & hours you want to offer, and how often you will pay them, it’s time to get down to business:

1. You will need a registered payroll deductions account before the employee starts work. If you already have a corporation open, you should have a business number, but you will still need to open a payroll account. To register for the Payroll Deductions account you can call CRA's toll free number 1-800-959-5525, send a form request by mail or fax, or register online. CRA will ask how often you plan to pay the employee, so be sure to have that planned before you call.

2. Draw up an employee contract or agreement. It’s not required by law, but it is a great idea in order to set up expectations and to protect both parties. Just make sure that your contract isn’t breaking any Employment Standard rules. Here are some things to include in your agreement:

• Is there a probationary period? (Alberta Employment Standards allows 90 days where no notice is required by either party to terminate)

• What is the policy on holidays? (In most situations, you aren’t required to provide vacation pay or time until the employee has been there for 1 year. After that, you must give 2 weeks with pay, and after 5 consecutive years, 3 weeks with pay – you can choose to be MORE generous than this, but not less. Also, there are certain types of leaves that are mandated by employment standards, such as bereavement, maternity, and compassionate care, so be sure to follow those guidelines.

• How should the staff person tell you when they are sick or not able to come to work?

• What is the policy for lates and absences?

• Are benefits available, and when? (Medical, dental, and extended health benefits are one of the only things you can provide to your employee without them being taxed on it).

• Salary: Be specific. How much will they be paid (remember to stick to the minimum wage)? When will they be paid (once a month, every two weeks, etc.)? Will reviews be done on salary on any timely basis?

• Hours: Is it part time or full time? Will there be any overtime (for most employees, this is over 8 hours in a day or over 44 hours in a week, then the employee gets at least 1.5x regular pay or paid time off)? Are there specific hours? The basic employment standard rules are that employees are allowed to work up to 12 hour days, 30 minute breaks are required for every 5 hours of work, and there must be 8 hours of rest between shifts.

• Responsibilities: What do you expect the staff to do? Place of work: Is it in the household, travelling, at office? What can the staff expect from you?

• Confidentiality and Intellectual Property: For certain companies and industries, it may be very important for you to have a non-disclosure, non-competition, or non-solicitation clause in place

• Termination: In order to be in accordance with Alberta Labour Laws, after the 90 probationary period is up, you may only terminate an employee by giving termination notice, termination pay, or a combination of the two. The notice period depends on how long the employee has been employed for.

• There are a few instances where this termination notice would not be required (i.e. seasonal or construction workers, and dismissal for just cause), but in all cases, you should always be providing termination notice in writing to the employee.

• In the agreement, you should also specify how the Employee may terminate the contract. According to Alberta Labor Laws, an employee must give 1 week’s when length of employment is under 2 years; 2 weeks when length of employment is 2+ years.

• Whether the employee quits or the employer terminates their employment, the employee’s earnings must be paid all wages, overtime pay, vacation pay, general holiday pay, and termination pay within 3 days after their last day of employment when proper notice is given.

• If the employee does NOT give you required notice, you have 10 days AFTER the day the notice should have expired to pay the final pay.

• A record of employment must also be filed and sent to the employee within 5 days.

3. Once you have your contract written out and everyone is in agreement, you must obtain your employee’s SIN and have them sign federal and provincial TD1 forms which will give you the information you need in order to calculate and remit their deductions. These records must be kept for at least 3 years. If you choose to offer direct deposit, you will also need a void cheque or direct deposit form.

AND NOW YOU’RE READY TO PAY!

Last week, we talked a little bit about deducting taxes, CPP and EI from your employee’s pay. Using the TD1 forms that your employee filled out, you can choose to either calculate the source deductions on your own (using the payroll calculator), produce your own paystubs, T4’s, records of employment, and keep a detailed record of all amounts paid and remitted. Or, you can use a software system or service that will take care of all of it for you.

Quickbooks Online has a great add-on payroll program, which I am fully certified in. It offers direct deposit, automatic payroll source deductions remittance (so it pays the bill for you!), and printable pay stubs. It will also calculate vacation pay, medical benefits, and it will aid in preparing T4’s and records of employment. You will have a detailed log of all amounts paid and remitted to comply with CRA’s regulations. I recommend this software to clients a lot to either run on their own or as part of my payroll services. As I mentioned in my last video, you are typically looking at about $50 per pay for this type of full service package.

When determining pay for your employees, whether it’s hourly or a salary, don’t forget about stat holidays. Immediately after employment, stat holidays must be paid to eligible workers. Workers are eligible if they:

• work their scheduled shift before and after the holiday (unless consent is given for the absence)

• If required and scheduled to do so, work on the general holiday

If the employee isn’t required to work on the stat holiday, but they did work the shift before & after, then they are entitled to an average day’s pay.

If the employee does work on a stat holiday, then the employee is entitled to either 1.5x their regular wage, or their regular wage + a paid day off. In Alberta, the mandatory stat holidays are: New Years Day, Family Day, Good Friday, Victoria Day, Canada Day, Labour Day, Thanksgiving Day, Remembrance Day, and Christmas day.

Of course, there are exceptions to every rule, and this video can’t possibly cover them all. There are extra-special rules when employing minors, and lots of rules about what is considered a taxable benefit (hint: almost everything), for example. Be sure to check out my show notes for tons of links and resources to learn more.

That’s it for this week, and for season 1 of Chat with Brandy. It’s been such a pleasure to film these last 21 videos for you and I hope they’ve been helpful in your small business or financial wellness journey. See you after tax season!