How does payroll software work?

Apr 20, 2022
min read

Calculating payroll deductions in Canada

Businesses in Canada looking for long-term success need to manage payroll accurately from the beginning. This means compliance with the requirements of the Canada Revenue Agency (CRA), including payroll deductions (aside from businesses in Quebec, who will need to comply with different regulations). Calculating these deductions can be a confusing and cumbersome process, so to help you understand it better, we’ve created a guide on calculating payroll deductions in Canada. The good news is that there’s an easy way to manage payroll, and that’s through payroll software

It can be very easy for new or small businesses to get lost in the complexity of payroll processing. But that’s ok! We understand there’s a lot to do, and that’s why payroll software exists, to make the job easier. If you’ve been wondering whether acquiring payroll software is the right move for your business, you’ve come to the right place: in this guide, we’ll outline the steps to running payroll, and what payroll software can do for your company. 

What is the payroll process?

Payroll is one of the most important aspects of any business. People work to get paid, and payroll deals with just that: the financial compensation of employees in a company. It determines the overall financial standing of a company and even affects company culture; if your team is paid accurately and on time, it contributes to motivation and morale. The payroll process also ensures that you are compliant with the government’s regulations regarding taxes and deductions. 

No matter the size of a business, there are basic principles to follow in order to process payroll properly. The process, as currently defined by the CRA, is outlined in the following steps:

Step 1: Determine if you’re an employer, trustee, or payer

Step 2: Open a payroll program account with the CRA

Step 3: Hire employees and enter their information into your CRA account

Step 4: Calculate deductions

Step 5: Remit deductions and complete year-end summary

Step 6: Keep record of payroll information for at least 6 years


Prior to running your first successful payroll, you’ll need to set up a CRA account. Each organization that conducts business in Canada must register with the CRA. Upon registering, you’ll receive a payroll program account number, which is required in order to make the appropriate remittances to the government. This account number is assigned to an employer, a trustee, or a payer of other amounts related to employment to identify themselves when dealing with the CRA. If the business is conducted in the province of Quebec, then the business must also register with the Revenue Québec (RQ).

Employer obligations pre-payroll generally include:

  • Gathering business number, SIN number, date of birth, and deposit information for employees
  • Adding employees to payroll system
  • Updating employee tax exemptions/tax credits if needed
  • Setting up benefits and deductions
  • Inputting employee income types and pay rates
  • Setting up income types and allowances
  • Determining the company's pay schedule and remittance schedule
  • Calculating, reporting, and remitting payroll source deductions
  • Calculating and remitting Employer Payroll Tax amounts
  • Calculating vacation and holiday pay
  • If applicable, calculating  and remitting Workers' Compensation Insurance
  • If applicable, providing benefits to employees in the form of contributions or deductions

Employers don't technically have to adhere to any set intervals for which they pay their employees, but they do have to meet a minimum pay frequency specified by the jurisdiction they pay employees in. 


The post-payroll process is just as important as pre-payroll. It’s essential that you keep records of all payroll processes for at least 6 years, as the CRA may ask to see them during this time. These records help to ensure that your employees are paid accurately and that taxes are properly remitted to the CRA. It’s always good practice to continuously check your accounts and keep detailed records in preparation for tax season. 

Keeping payroll information organized and being proactive in your approach will help you avoid last-minute confusion when it comes time to submit year-end information. For help with year-end processes, check out our comprehensive guide to completing your year-end payroll.

What does software do?

You’ve made it this far, so you’ve probably got the idea that running payroll can be very time-consuming. That’s where software comes in; payroll software exists to alleviate the workload of this long process. Software, like Humi Payroll, automates a lot of the work to help you save time and increase accuracy. It can gather employee information necessary for payroll, issue pay stubs, and even pay direct deposits. And best of all, when you buy payroll software, it typically includes access to a team of skilled Client Support Specialists that you can turn to whenever you need help and/or guidance. 

To make things even sweeter, all-in-one HR software products, such as Humi, are also available. Connect different tasks that are typically housed in separate systems, and create a smooth flow of information in one place. All-in-one, ensuite software is the best way to keep things organized and seamless: time off is attached to payroll, payroll to benefits, and so on! 

Should I use software to do payroll?

As your business grows, more employees are hired, more paperwork piles up, and doing payroll manually can become cumbersome. Thankfully, payroll software is specifically designed to make the job easier. Payroll software not only helps your business, but employees as well, by ensuring their pay is always accurate and on time. 

Humi Payroll is focused on moving away from paperwork and spreadsheets, while still making it easy to abide by government regulations and tax laws. We make life easier for your team by automatically generating paystubs to include the necessary deductions, every pay cycle. We’ll also keep record of your full payroll history for as long as you need it, so you won’t have to worry about security or amassing huge piles of paperwork. And as a CRA approved payroll provider, we take on the burden of law and regulation compliance and accuracy.

Get started with Humi

Humi Payroll makes every pay cycle an easy, seamless process, ensuring your employees are paid on time, while giving you peace of mind. We also offer managed payroll if you’re in need of full-service help. Discover more about Humi Payroll here.

Our payroll module includes:

  • CRA remittances
  • Automatic T4s and ROEs
  • EHT calculations
  • Payroll history
  • Records and reporting
  • Electronic paystubs
  • Direct deposit 

If you’re looking for a tool that does more, our all-in-one HR system helps you keep track of not only payroll, but benefits, recruiting, onboarding, and performance management. Our platform is designed to integrate your payroll with your HRIS, so you’ll never have to enter information into multiple, separate platforms again. 

Ultimately, we’ll help you take care of your employees. To learn more, speak with our team today

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