By Bronte Bay CPA Professional Corporation · 10 min read
Short answer: Businesses outsource payroll in Canada to avoid CRA late-remittance penalties, save time, pay staff accurately and on time, and stay current with changing CPP, CPP2 and EI rates. The CRA charges penalties from 3% to 10% for late remittances — and up to 20% for repeat failures — so the cost of getting it wrong is usually far higher than the cost of outsourcing.
When you run a small or medium-sized business, plenty of tasks need your expertise: strategy, sales, and managing your team. Payroll usually isn’t one of them. Most owners aren’t payroll experts, and doing it in-house is where many hit expensive, avoidable potholes.
The good news: you have options. An accounting firm can run your payroll on automated software such as Xero-integrated payroll tools, or you can use one of the payroll outsourcing companies in Canada. Here are the six biggest reasons it makes sense to hand payroll off.
1. Avoid CRA Penalties with Automated Payroll
When you run payroll yourself, you must comply with several CRA rules — deducting the correct income tax, CPP, CPP2 and EI from each employee’s pay, remitting the combined amount (plus the employer’s share) on time, and issuing T4 slips with a T4 summary by the last day of February each year.
Miss a remittance deadline — even by one day — and the penalties add up fast. Here is the CRA’s current late-remittance penalty schedule:
| How late the payroll remittance is | CRA penalty |
|---|---|
| 1 to 3 days late | 3% |
| 4 to 5 days late | 5% |
| 6 to 7 days late | 7% |
| More than 7 days late, or not remitted | 10% |
| Repeated failure or gross negligence | 20% |
On top of the penalty, the CRA charges compound daily interest at its prescribed rate. Each late remittance is penalized separately — so a business that misses four deadlines gets four penalties, not one. A single missed remittance on an $18,000 monthly liability can cost $540 to $1,800 in penalties alone.
When you outsource payroll, your provider ensures remittances are accurate and submitted on time — every time. You can confirm current penalty details on the CRA’s interest and penalties page.
2. Save Time and Money by Outsourcing and Automating Payroll
As an owner or manager, you already have plenty on your plate — building revenue, developing your online strategy, hiring. Payroll is routine, time-consuming, and one of the easiest tasks to remove from it.
You could hire an employee to run payroll, but that usually costs more than outsourcing — and you’d need to keep that person busy the rest of the time. For most businesses, the cost of outsourcing payroll in Canada is far less than doing it in-house, especially once you factor in penalty risk. See our monthly bookkeeping packages for how this fits alongside your other finance tasks.
3. Keep Your Employees Happy with Accurate, On-Time Pay
Retaining good people starts with paying them correctly and on time. Nothing erodes trust faster than an employee who can’t cover rent because of a payroll error. Automated, outsourced payroll removes that risk by calculating pay and deductions consistently, every single pay run.
4. Let Employees Track Their Own Time from Any Device
Modern payroll software lets staff clock in and out on a laptop, tablet, or smartphone, and notifies managers when timesheets are ready for approval. The system then calculates pay and deductions automatically and integrates with accounting software like Xero, so wage payments reconcile against your bank transactions with no manual effort. It’s quick, accurate, and low cost.
5. Online Payroll Software is Always Up to Date
You can run payroll from desktop accounting software — but the federal government adjusts EI, CPP and income tax rates regularly, and you have to download every update before calculating deductions. The 2024 introduction of CPP2 (a second contribution tier on earnings between the YMPE and YAMPE) is exactly the kind of change that breaks in-house payroll: systems that treat it as a simple rate increase rather than a separate calculation get every affected employee’s deductions wrong.
When you outsource, your provider applies the latest rates automatically. A good payroll service also handles these critical tasks:
- Tracking time and attendance
- Issuing Records of Employment (ROEs) when an employee leaves
- Recording statutory holiday and vacation pay
- Calculating and paying workers’ compensation premiums
- Remitting Employer Health Tax (EHT), where applicable
- Issuing T4 slips and the T4 summary at year-end
- Handling other deductions such as retirement contributions or charitable donations
6. Direct Deposit Your Employees Will Love
Some businesses still cut paper cheques, leaving staff to deposit them manually. With an online payroll provider, funds flow straight into each employee’s account by direct deposit, and everyone receives a statement showing their pay and deductions. It’s simpler for you — and the money just shows up for them, no extra effort required.
How to Outsource Payroll in Canada: Your Two Main Options
Ready to reduce the headaches? You generally have two routes:
✅ Option 1 — Work with an Accounting Firm
An accounting firm like Bronte Bay runs payroll on a fully automated online platform. This works well even for small companies with a handful of employees, and your payroll data stays secured — critical, since no business wants its employees’ personal information leaked.
Best for: Small and medium-sized businesses in Canada. Most cost-effective, lowest risk.
⚙️ Option 2 — Use a Large Payroll Processor
Providers like ADP or Ceridian (Dayforce) are powerful platforms — but for a small business, this is often like buying a $500 nail gun to tap in a single nail. More firepower and cost than most SMEs actually need.
Best for: Large organizations with complex, high-volume payroll needs.
For most small and medium-sized businesses in Canada, outsourcing payroll to an accounting firm is the simplest, lowest-risk solution. At Bronte Bay, we’d love to talk through your payroll needs. Book a consultation or email us at info@brontebay.com.
Bronte Bay CPA Professional Corporation
Frequently Asked Questions About Outsourcing Payroll in Canada
Ready to Hand Off Payroll for Good?
Bronte Bay’s CPAs handle payroll accurately, on time, every pay run — so you never face a CRA penalty again. We’d love to talk through your payroll needs and show you how simple it can be.
Related reading from Bronte Bay: Small Business Accounting Services · Business Tax Planning · Monthly Bookkeeping Packages · Xero Accounting