Canadian New Hire Paperwork

I. What is new hire paperwork?

New hire paperwork includes all of the documentation that you are legally required under provincial and federal law to obtain from your employee when they begin working for you.

After obtaining a signed letter of offer and employee contract, in Canada, the two most important aspects of new hire paperwork are your new employee’s SIN and TD1.

Read on to find out what a SIN and TD1 are, where to find them, why they are required, and the penalties for not obtaining them.

II. Top 5 do’s and don’ts of new hire paperwork:

III. New hire paperwork and the onboarding process:

New hire paperwork can be one of the most daunting and time consuming aspects of hiring a new employee.

As a job creator and employer, collecting and managing employee records (e.g. performance evaluations, timesheets, and payroll forms such as T4s can take up vital resources.

Part of the onboarding process of integrating a new employee into your organizational structure involves steps such as collecting and reporting payroll deductions such as:

  • Employment Insurance Premiums
  • Canada Pension Plan
  • Contributions Personal Income Tax

After opening a payroll account number, obtaining vital information from new employees such as their SIN and TD1, you will be responsible for calculating and remitting deductions, as well as generally keeping exact and accurate records.

IV. Canadian requirements for new hire paperwork:

Although legal requirements for new hires will differ slightly between provinces, there are two main federal requirements when hiring a new employee.

1. Your employee’s social insurance number (SIN)
2. A completed TD1, Personal Tax Credits Return from your employee

A SIN is required in order to identify your employee within Canada’s tax structure and will be relatively familiar.

You must ask for and record your employee’s SIN within three days of their starting work.

1. If an employee has not passed on their SIN, you are legally obligated to notify Service Canada within six days of their starting work that they have not given you their SIN.

Incorrect SINs can be detrimental for your employee’s Canadian Pension Plan benefits, particularly if you record an incorrect SIN on a T4 that includes pension adjustments which may result in an inaccurate Registered Retirement Savings Plan (RRSP).

If you happen to be hiring a new employee who is not (1) a Canadian citizen or (2) a permanent resident of Canada, then you must ensure that:

The employee’s SIN begins with 9, their SIN has not expired, and they possess a valid work permit.

If an employee refuses your request to obtain their SIN, you must prove that you have made a “reasonable effort” at obtaining it, or else face federal fines of $100 for each number you fail to obtain among other possible fines and financial penalties.

The CRA (Canadian Revenue Agency) defines a “reasonable effort” in this case as proof that you have made a concerted effort, such as writing down the dates when you asked verbally or multiple written or typed requests for their SIN.

2. A TD1, Personal Tax Credits Return is a federal form that is used to calculate the amount of taxes that should be deducted from your employee’s income.

Note: There are separate provincial and federal TD1 forms.

All new employees must complete both provincial and federal TD1 forms if more than the basic personal tax deduction amount is claimed.

Employees should complete this form as soon as possible, and you should keep this form with your employee’s records.

Provincial and federal forms can be found at:

https://www.canada.ca/en/revenue-agency/services/forms-publications/td1-personal-tax-credits-returns/td1-forms-pay-received-on-january-1-later.html

Note: If you hire an employee and cannot obtain their SIN or TD1, you will still be legally liable to begin calculating and withholding any and all payroll deductions.

V. Executive summary of new hire paperwork:

The best time to begin obtaining your new hire paperwork is before your employee is hired or during the first 1-3 days of their employment.

New hire paperwork constitutes one of the most daunting and time consuming areas of the logistical onboarding process for new and small businesses.

By following the steps provided above, and ensuring that you obtain correct and completed new employee SINs and TD1s you will assure that your new employee is in the best possible position to begin working with you and your team or organization.