Payroll Recordkeeping: What to Keep and for How Long?

Key Takeaways:

• Employers in Canada must retain payroll records for at least six years, with additional or differing requirements in certain provinces
  
• Records must be complete, accessible, and provided upon request during audits or employee inquiries
  
• Failure to comply with recordkeeping requirements can result in fines, penalties, and interest charges
  
• Proper payroll recordkeeping helps ensure legal compliance, supports audits, and reduces administrative risk
  

Why Payroll Recordkeeping Matters

Accurate payroll recordkeeping is not only a best practice but a legal obligation for every employer in Canada. Whether managing a single employee or a large workforce, keeping comprehensive payroll documentation protects both the business and its employees.

Well-maintained payroll records serve several key purposes:

• Ensure compliance with federal and provincial employment laws.
  
• Support transparency and trust between employers and employees.
  
• Provide evidence during audits or disputes.
  
• Facilitate the calculation of taxes, deductions, and remittances accurately.
  
• Strengthen internal controls and reduce administrative risk.
  

Inaccurate or incomplete records can lead to penalties, reassessments, or delayed filings. The Canada Revenue Agency (CRA) and provincial employment regulators both have strict requirements that all employers must meet.

Federal Payroll Recordkeeping Requirements (CRA)

The Canada Revenue Agency mandates that all payroll-related records be kept for six years from the end of the last tax year they apply to. These records must be available for inspection upon request. Employers may store them in paper or digital format as long as they remain accessible and printable.

Required Federal Record Types

Employers choosing electronic storage must use systems that meet CRA’s imaging and retention standards.

For further reference, see IC78-10R5: Books and Records Retention/Destruction and RC4409: Keeping Records on the CRA website.

 
Provincial Payroll Recordkeeping Requirements

Each province in Canada enforces its own employment standards for payroll record retention. Employers must comply with both federal and provincial requirements and always follow the stricter standard when in doubt.

Minimum Provincial Retention Periods

Businesses operating in multiple provinces should adopt the longest applicable retention period to ensure compliance across jurisdictions.

 
What Payroll Records Must Be Kept

Regardless of location or company size, employers must maintain a consistent set of payroll records that document employee identity, earnings, deductions, and benefits.

1. Employee Identification Records

• Legal name and home address
  
• Social Insurance Number (SIN)
  
• Employment start and end dates
  
• Employment type (full-time, part-time, seasonal)
  
• Date of birth, if relevant

2. Wage and Pay Records

• Hourly wage or annual salary rate
  
• Hours worked per day and per week
  
• Overtime hours and corresponding rate
  
• Gross and net earnings
  
• Pay frequency and payment method
  

3. Statutory Deductions and Remittances

• Canada Pension Plan (CPP) contributions
  
• Employment Insurance (EI) premiums
  
• Federal and provincial income tax deductions
  
• Employer contributions for CPP and EI
  
• Dates and confirmation of CRA remittances
  

4. Non-Statutory Payments and Benefits

• Bonuses, commissions, and tips
  
• Employer contributions to insurance or pension plans
  
• Taxable benefits (e.g., housing allowance, company car)
  
• Expense reimbursements and allowances

5. Time Off and Leave Records

• Vacation earned and taken
  
• Vacation pay accrued and paid
  
• Public holiday pay and substitute days
  
• Sick, parental, and personal leaves
  
• Unpaid leave documentation
  

6. Year-End and Termination Records

• T4s and T4 Summaries
  
• Records of Employment (ROEs)
  
• Termination or severance pay calculations
  
• Final vacation or statutory pay settlements
  

  How to Store Payroll Records

Proper storage is key to ensuring payroll data is both secure and accessible.

Acceptable storage methods include:

• Physical storage: Locked cabinets, secured archives, or on-site storage rooms.
• Digital storage: Payroll software, encrypted cloud storage, or internal secure servers.

Best practices for digital recordkeeping:

• Use clear, standardized file naming and folder structures.
  
• Schedule automated backups weekly.
  
• Maintain system access logs for audit trails.
  
• Restrict access to authorized HR and finance personnel only.
  

Records must remain readable, retrievable, and printable upon request by the CRA, Revenu Québec, or employment standards officers.

Who Has the Right to Access Payroll Records

Several parties are legally entitled to access payroll records:

• Government auditors: CRA and Revenu Québec officials can inspect records during tax or payroll audits.
  
• Provincial employment standards officers: May request payroll data during workplace inspections or investigations.
  
• Employees: Have the right to review their own pay statements, vacation balances, and other employment-related records.
  

Employers must respond to requests promptly. Failing to provide timely access can result in financial penalties or adverse findings in labour disputes.

Consequences of Poor Payroll Recordkeeping

Ignoring payroll recordkeeping responsibilities can lead to costly repercussions, including:

• CRA reassessment of prior tax obligations.
  
• Retroactive payroll tax liabilities and interest charges.
  
• Fines under provincial employment laws.
  
• Inability to defend against wage or termination claims.
  
• Damaged business reputation and credibility.
  

Potential Impacts by Category

Best Practices for Payroll Recordkeeping

Consistent payroll management practices make compliance easier and audits less stressful.

Conclusion

Payroll recordkeeping is more than an administrative requirement—it is the foundation of compliance and financial accuracy. Employers that maintain organized and up-to-date records reduce their exposure to audits, penalties, and disputes.

By understanding both federal and provincial retention standards, businesses can confidently manage their payroll documentation while ensuring employee trust and operational integrity.

Need Help Managing Payroll Records?

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• Secure, compliant payroll recordkeeping
  
• Automated reporting and CRA-ready documentation
  
• Year-end preparation and audit support
  

Let us handle the complexity so you can focus on growing your business.

Visit www.payrollsolution.ca to learn how we can simplify your payroll and compliance processes.