When it comes to payroll, keeping accurate and organized records isn’t just good business practice, it’s the law.
In Canada, both the Canada Revenue Agency (CRA) and Employment Standards legislation require employers to retain payroll documents for a specific period. But what exactly are you required to keep and for how long?
At Navy & Sage Benefits, we’re going to tell you everything to ensure you’re prepared.
Why does recordkeeping matter?
Payroll records are essential for verifying employee pay, benefits and deductions. You need to have proper paperwork to respond to CRA audits, resolve employee disputes and meet legal and tax obligations.
Failing to retain payroll records for the required time could lead to penalties, fines, or compliance issues if your business is ever audited.
CRA requirements: Keep records for 6 years.
The CRA says that employers must keep all payroll records for a minimum of six years from the end of the last tax year to which they relate. This includes:
- T4 slips and summaries
- Records of remuneration (salaries, wages, bonuses)
- Deductions (income tax, CPP, EI)
- Vacation pay
- Employer contributions to Retirement Savings Plans
- Timesheets and hours worked
- Any other documentation related to payroll
Provincial employment standards requirements.
In addition to the CRA, provincial employment standards also have rules around record retention. In British Columbia, employers must keep payroll records for 4 years after the employment ends.
Each province has different requirements, so be sure to check your province’s specific legislation to ensure you’re meeting both federal and provincial requirements.
What about electronic records?
The CRA permits electronic record-keeping, provided the records are accurate and legible. You must also have a backup system in place, and you must be able to provide access to CRA auditors if requested.
Whether physical or digital, your records must be stored securely and be easily retrievable.
What if you sell your business?
Even if your business closes or changes ownership, you’re still responsible for maintaining your records for the required time unless you get written permission from the CRA to destroy them early.
Good housekeeping is good business.
Payroll compliance may not be the most glamorous part of running a business, but it’s a foundational piece of protecting both your employees and your company. Make it a habit to organize and back up payroll records.
If you’d like help reviewing your payroll processes or understanding your obligations as an employer, consider reaching out to Navy & Sage Benefits today. Our advisors specialize in HR services and can help your business streamline all procedures and requirements.
