Outsourcing Payroll vs. Doing It Yourself – A Complete Guide by a Montreal CPA Firm Near You

Introduction

Payroll is one of the most critical yet time-consuming responsibilities for Canadian businesses. Whether you operate a clinic, a retail store, a construction company, a consulting firm, or an e-commerce business, payroll must be calculated accurately, remitted on time, and reported according to strict CRA and Revenu Québec rules. Many small businesses try to manage payroll themselves, only to encounter errors in CPP/EI/QPP/QPIP deductions, taxable benefits, statutory holiday calculations, overtime rules, or remittance deadlines. These mistakes can lead to penalties, audits, and unhappy employees. Outsourcing payroll can eliminate these risks, but it also comes with cost and setup considerations. This guide helps business owners understand when outsourcing payroll is beneficial, when doing it in-house makes sense, and how to choose the most compliant and efficient system.

Legal and Regulatory Framework

Payroll processing in Canada is governed by multiple federal and provincial laws:

• Income Tax Act — federal income tax withholding
• Canada Pension Plan Act (CPP) — pension contributions
• Employment Insurance Act (EI) — insurance premiums
• Excise Tax Act — payroll remittance obligations
• Quebec Tax Administration Act — QPP, QPIP, RL-1 requirements
• Provincial labour standards — overtime, statutory holidays, vacation pay
• Workers’ compensation legislation — CNESST, WSIB, WCB obligations

Employers must follow these rules whether payroll is done in-house or outsourced.

Key obligations include:

• calculating each deduction correctly
• tracking taxable benefits
• maintaining accurate payroll records
• remitting payroll deductions by CRA/Revenu Québec deadlines
• filing T4 and RL-1 slips by February 28 each year
• issuing ROEs correctly
• applying holiday and overtime rules according to each province

Outsourcing payroll transfers the administrative workload—but not the legal responsibility—to the employer.

Key Court Decisions

Several court cases highlight employer liability even when payroll is outsourced.

1. Soper v. Canada

Directors were personally liable for unpaid payroll deductions. Outsourcing payroll does not eliminate employer liability.

2. Hickey v. Canada

Payroll errors made by a third-party provider did not excuse the employer from penalties.

3. Royal Winnipeg Ballet v. Canada

Incorrect worker classification by a payroll service resulted in major reassessments; employer remained responsible.

4. Caron v. Québec

Inaccurate RL-1 reporting led to penalties despite payroll being outsourced.

These rulings show that outsourcing payroll reduces administrative burden—but the employer remains legally accountable.

Why CRA and Revenu Québec Target This Issue

Payroll audits are common because:
• small employers often miscalculate CPP/EI/QPP/QPIP
• outsourcing companies rely on employer-provided data, which is sometimes incorrect
• taxable benefits are frequently omitted
• ROEs and T4/RL-1 slips often contain errors
• remittance deadlines are missed due to miscommunication
• worker misclassification (contractor vs employee) is widespread

CRA and Revenu Québec use AI-driven analytics to compare:
• payroll remittances
• GST/HST/QST filings
• corporate tax returns
• bank deposits
• WSIB/CNESST/WCB payroll reports
• T4 and RL-1 totals

Any discrepancy triggers a payroll review.

Mackisen Strategy

At Mackisen CPA Montreal, we guide employers through deciding between outsourced and in-house payroll and ensuring full compliance regardless of choice. Our structured approach includes:

1. Payroll Needs Assessment

We evaluate:
• number of employees
• complexity of payroll (benefits, commissions, overtime, multi-province)
• frequency of payments
• experience of internal staff
• cost vs efficiency analysis

2. Outsourcing Payroll (Done for You)

We set up and manage:
• payroll calculations
• CPP/EI/QPP/QPIP deductions
• taxable benefits tracking
• payroll remittances to CRA and Revenu Québec
• T4 and RL-1 slips
• ROEs
• workers’ compensation reporting
• statutory holiday and overtime compliance
• direct deposit management

We use secure professional systems with complete audit trails.

3. In-House Payroll Setup

If the business chooses in-house payroll, we:
• help select payroll software (Wagepoint, QuickBooks, Ceridian, ADP, etc.)
• configure proper settings (deductions, rates, benefit codes)
• train staff on payroll rules
• implement checklists to avoid errors
• provide ongoing support

4. Hybrid Payroll Solutions

For businesses needing partial support:
• payroll review & approval service
• quarterly payroll audits
• taxable benefit management
• year-end slip preparation

5. Audit Protection

Regardless of outsourcing or internal payroll, we:
• prepare full documentation
• defend payroll during CRA or Revenu Québec reviews
• file amended slips when needed
• correct historical payroll errors

This ensures your payroll is compliant, accurate, and protected.

Real Client Experience

A Montreal restaurant attempted in-house payroll using manual spreadsheets. Errors in EI and vacation pay led to CRA penalties. We moved them to an outsourced payroll solution, eliminating future risk.

A clinic outsourced payroll but failed to report taxable benefits accurately. We conducted a full payroll audit, corrected RL-1 and T4 slips, and trained the employer on benefit rules.

A construction company used software but misclassified workers. CRA reclassified them as employees. We implemented a hybrid payroll process with compliance oversight.

A retail boutique used an outsourced provider but provided incomplete data. The payroll service processed errors that resulted in incorrect remittances. We rebuilt payroll records and corrected all filings.

Common Questions

Employers often ask whether outsourcing absolves them of liability. No—employers remain legally responsible.

Others ask whether outsourcing is cheaper. It often is once penalties and administrative time are considered.

Some ask if payroll software is enough. Only if configured correctly and monitored regularly.

Another question: Does Quebec payroll require a Quebec-specific provider? Yes—unless your payroll system fully supports RL-1, QPP, QPIP, CNESST, and HSF rules.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses choose the best payroll method while ensuring complete compliance. Whether you outsource, do it in-house, or use a hybrid system, our experts guarantee accuracy and full protection from CRA and Revenu Québec payroll audits.