Talent recruitment, engagement, and retention have remained core challenges for organizations of all sizes throughout the pandemic, leaving no sector unscathed. Traditionally all businesses are likely to experience staff turnover at some stage, but for small and growing businesses, the last two and a half years have seen a drastic change.
For some SMEs, growth has been unprecedented during the pandemic, resulting in the need to scale operations and bring new hires on board. For many others, the pandemic has meant scaling down their employee count to reduce costs. In fact, according to research from Innovation, Science and Economic Development Canada, SMEs were responsible for 92.1 percent of net employment change in 2020. This represents a massive shift in the labor market, as small businesses employ 67.7 percent (7.7 million) of working Canadians, compared with 20.6 percent (2.3 million) for medium-sized businesses and 11.7 percent (1.3 million) for large businesses.
Hiring and firing are a necessary part of all business operations but can be particularly tricky for SMEs to navigate without the proper knowledge and resources.
The various legal, operational and financial implications of employee changes are critical to understanding – chief among them is payroll.
The essential role of payroll
Payroll professionals are a critical resource for employees because they deal with one of the most sensitive aspects of work: compensation. From navigating the complexities of compliance to being a source of trust and knowledge for employees, and even leveraging data to support business operations, payroll entails more than most expect.
For these reasons and many more, the role of payroll cannot be understated. It has significant impacts on overall business performance, productivity, and efficiency as well as employee engagement. To ensure you have the compliance and legislative expertise you need to manage your payroll during these times of transition, here are some payroll best practices that you can apply during the hiring or firing process.
Starting a new chapter
As your business grows, so do your responsibilities as an employer. When it comes to managing your staff’s money, having a seamless payroll setup avoids potential conflicts and enables you to focus on other areas of your business.
The following steps can be taken to make this process as streamlined as possible:
- Determine each worker’s status, as either self-employed or employed. This is important as incorrectly assessing a worker’s status can lead to costly repercussions or penalties.
- Create a clear employment contract, outlining salary rate, overtime rate, commission, bonus, stocks, vacation, statutory holidays, personal days, hours of work, overtime, summer hours, and more.
- Validate the employee’s Social Insurance Number (SIN) within three days of the start date. Employers should adhere to best practices surrounding the collection, usage, storage, and destruction of an individual’s SIN to ensure legislative compliance and avoid the risk of identity theft.
- Ensure the employee completes all payroll forms to determine income tax withholdings.
- Receive a void cheque(s) and/or authorize electronic pay statements and tax forms.
- Establish a payroll account, begin withholding payroll taxes, and remit and report to various levels of government.
Turning the page
Closing a payroll as an individual’s employment ends can be complicated, especially when considering the additional sensitivities that come with it.
It can be navigated by maintaining transparency throughout the process and following the steps below.
The first step is giving notice. When termination of employment has been initiated by the employer, the employee must either be given legislated working notice or receive a payment in lieu of this notice. However, the amount of notice varies by jurisdiction as well as the employee’s length of service.
Following notice, employers need to crunch the numbers on any final payments owing. This includes vacation pay, banked overtime, substitute holidays, legislated severance, and retiring allowance. Final payments must be paid within a specific time period.
Lastly, a Record of Employment must be completed and filed. This will allow the employee to apply for unemployment insurance benefits if needed.
No need to read the fine print – enlist the help of the experts
The National Payroll Institute is your go-to payroll team before you even have a payroll team. To learn more about how payroll best practices can support your business’s health, you can download a full e-book, Payroll Wellness Checkup for Small and Growing Businesses, from the National Payroll Institute at payroll.ca/payrollcheckup.
