News and Insights

Payroll Insights: Avoiding Payroll Pitfalls at Year-End

October 1, 2025

Sector:

As 2025 winds down, Canadian employers are turning their attention to T4s, bonuses, and benefits reporting. While payroll may feel routine during the year, year-end is where small mistakes can snowball into costly compliance issues, CRA penalties, or frustrated employees.

Below are the most common payroll pitfalls businesses face — and how to avoid them.

 

1. Missing Taxable Benefits

Not all compensation comes as a salary. Employers often overlook:

  • Group health and dental premiums paid by the company
  • Personal use of a company vehicle
  • Cell phone or internet allowances
  • Gift cards or bonuses outside payroll

Why It Matters

These taxable benefits must be included on T4 slips. Missing them can trigger CRA inquiries and employee reassessments.

2. Incorrect Vacation and Statutory Pay

Vacation pay and statutory holiday pay rules vary by province and are often misapplied when:

  • Employees take vacation as time off vs. payout
  • Hourly vs. salaried staff are treated the same
  • Terminated employees don’t receive final vacation entitlements

Pro Tip

Keep vacation and stat pay accruals updated monthly so year-end isn’t a scramble.

3. Late or Incorrect CRA Remittances

Payroll remittances (CPP, EI, and income tax) must be accurate and on time. Common errors include:

  • Missing a remittance deadline due to holidays
  • Incorrect calculation of bonus withholdings
  • Not adjusting when CRA updates deduction tables mid-year

Penalty Alert

CRA penalties can reach 20% for repeated lateness — a costly mistake for any business.

4. Forgetting Retroactive Adjustments

Raises or wage increases announced mid-year sometimes aren’t applied retroactively. At year-end, this creates:

  • Employee complaints about underpaid amounts
  • Adjustments needed on T4s
  • Messy journal entries to reconcile payroll with bookkeeping

5. Rushing Year-End Prep

Year-end payroll prep isn’t just about slips — it’s about clean data. Employers often rush and miss:

  • Confirming employee names, SINs, and addresses
  • Cross-checking taxable benefit totals
  • Reviewing reconciliations between payroll and general ledger

Start Early

Starting now (October) gives your business time to resolve discrepancies before February deadlines.

Final Thoughts on Payroll Compliance

Payroll is one of the most scrutinized areas of compliance — and mistakes are costly. By tackling benefits, remittances, and vacation accruals now, you’ll save yourself the stress of last-minute corrections.

At Kreston GTA, we help Canadian businesses prepare for payroll year-end with accuracy and peace of mind.

Need Help With Year-End Payroll?

For more information on payroll year-end compliance — and how we can support your business — explore our payroll services or contact us for a personalized consultation.