If you hire an individual for your home care, you legally become an employer. You become a part of the "small business" category in official terms. Therefore, as a small business, you need to account for your employee's proper salary payment and file your taxes correctly.
Understandably, becoming an employer can be a bit daunting at first. The multiple financial obligations involved can make you nervous. However, the process is not as complicated as it may seem.
To keep your house running smoothly and save yourself from any future legal penalties, it is best to follow the specified nanny or caregiver payroll procedures put forth by your provincial government. This means that, in addition to your nanny’s salary, you will have to pay income tax, make Canada Pension Plan (CPP) and Employment Insurance (EI) contributions, and pay workplace insurance.
Below is a breakdown of the entire process:
Step 1
Register with the Canadian Revenue Agency (CRA) as an employer and apply for a business number. This process takes anywhere from four to six weeks.
Step 2
Provide your nanny with a Social Insurance Number (SIN) and list them as your employee.
Step 3
Compute the amount you would need to remit for taxes. This can be done by going to CRA's payroll calculator and entering the amount you have paid to the nanny. The calculator will then show you the amount required for EI, CPP, and tax remittance.
Step 4
Fill out the remittance form on Revenue Canada’s website and remit your income tax. You can pay the remittance by either mailing in a cheque or through your bank.
Step 5
Keep your records, including the remittance form and any invoices, in a file. This information will be needed during the filing of your yearly personal taxes.
Step 6
Fill a T4 tax form for your employee. This will allow your nanny to file their taxes accurately for the year prior. This form can be accessed and completed on CRA's online portal.
Hiring a Part-time Nanny or Caregiver
If you hire a nanny as a part-time worker, you still need to comply with the CRA rules. Similar to the regulations for a full-time caregiver, your responsibilities would constitute paying for the employee and workplace insurances along with deducting and remitting provincial and federal taxes.
As an employer, you will also be responsible for providing your employee with paid sick leave and paid vacation days (minimum two weeks). Generally, part-time nannies are paid higher salaries than full-time ones.
The Bottom Line
Complying with the rights issued for nannies and caregivers forms an essential part of our responsibility as hirers. Owing to this, the strict payroll and tax regulations detailed by Canadian governmental bodies should always be followed.
It is important to remember that your nanny is dependent on you for their financial and professional well-being. Following the required legalities and treating them well can go a long way in maintaining good relations with them. This would also avoid landing you or your employee in any legal trouble in the future while also allowing for fair worker compensation.