Managing payroll in a practice involves more than just issuing paychecks. It requires compliance with employment laws, structuring compensation correctly, and implementing clear policies to ensure smooth operations. Whether you’re an experienced practice owner or just starting, understanding payroll best practices can help you avoid compliance issues, improve efficiency, and maintain a satisfied team.

This guide will walk you through everything you need to set up and manage payroll properly, including considerations for compensation models, statutory holiday pay, overtime rules, vacation pay, and the importance of following provincial labor laws.

1. Determining Employee Compensation: Hourly, Salary, or Commission?

Practices typically use a mix of hourly, salaried, and commission-based compensation structures depending on the role. It’s important to clearly define how each team member is paid and ensure your payroll system can handle multiple pay structures.

Hourly Employees (Assistants, Receptionists, Some Providers)

• Paid for actual hours worked
• Overtime applies based on provincial labor laws
• Eligible for statutory holiday pay and vacation pay

Salaried Employees (Office Managers, Full-Time Providers)

• Paid a fixed amount per pay period regardless of hours worked
• Eligible for vacation pay and statutory holidays
• Overtime may still apply depending on provincial regulations

Commission-Based Employees (Hygienists, Associates)

• Pay is based on production or collections

• Must have a clear written agreement outlining:

  • Commission percentage
  • What happens if a patient cancels or doesn’t pay
  • Payment timing (bi-weekly, monthly)

Some practices combine base salary with commission for added stability.

2. Understanding Provincial Labor Laws

Each province has its own employment standards and payroll regulations, so it’s critical to ensure compliance with statutory pay requirements, overtime rules, and vacation policies.

Key Labor Law Considerations

• Minimum Pay Rules – Some provinces require that employees receive a minimum of three hours of pay if they are scheduled but work fewer hours.
• Overtime Rules – Overtime typically applies after a certain number of daily or weekly hours but varies by province.
• Statutory Holiday Pay – Rules for eligibility and calculation of holiday pay differ across provinces.
• Vacation Pay Requirements – The percentage of earnings allocated to vacation pay is defined by provincial law.

Consult your province’s employment standards website to ensure your payroll policies are compliant.

3. Statutory Holidays: Who Gets Paid and How?

Statutory holiday pay is mandatory for eligible employees, but the list of recognized holidays and eligibility rules vary by province.

Common Statutory Holidays Across Canada

• New Year's Day
• Good Friday
• Canada Day
• Labour Day
• Christmas Day

Other holidays, such as Family Day, Remembrance Day, or Thanksgiving, are recognized in some provinces but not others.

Stat Holiday Pay Calculation

• Employees who do not work on a holiday typically receive an average day’s pay.
• Employees who work on a statutory holiday may receive:

1.5x or 2x pay for hours worked A paid day off later or additional compensation Check your province’s employment standards website for the full list of recognized holidays and pay requirements.

4. Vacation Pay and Year-End Policies

Vacation pay is mandatory and must be calculated based on total earnings, but the minimum requirement varies by province. In addition to vacation pay, practice owners should have clear year-end payroll policies to ensure consistency and compliance.

Vacation Pay Accrual Rates

• 4% of wages (2 weeks of vacation) for employees with less than 5 years of service
• 6% of wages (3 weeks of vacation) for employees with 5+ years of service

How to Handle Vacation Pay

• Accrued & Banked – Vacation pay is held and paid when employees take vacation, and they receive regular wages while off.
• Paid Out on Each Paycheque – Employees receive vacation pay with every pay period, and no additional payment is made when they take time off.

Employers must clearly communicate whether vacation is banked or paid out and whether unused vacation carries over or expires at year-end.

Year-End Payroll Considerations

• Unused Vacation Pay – Will employees forfeit unused days, or can they carry them over?
• Banked Overtime – How long can employees hold onto banked hours before it is paid out?
• Bonuses – If offering year-end bonuses, define eligibility and payment timing.

All vacation and year-end payroll policies should be documented in writing and provided to employees during onboarding.

5. Automating Payroll to Reduce Errors

Manually processing payroll increases the risk of errors and compliance issues. Using payroll software can automate calculations, ensure compliance, and save time.

Recommended Payroll Software for Practices

• Wagepoint – Ideal for small clinics, automates tax remittances.
• ADP – Full payroll and HR suite with compliance tracking.
• Payworks – Designed for healthcare businesses with direct deposit and reporting.

Choose a payroll system that integrates with accounting software (e.g., Xero or QuickBooks) to streamline financial management.

6. Final Thoughts: Setting Up Payroll for Success

A structured payroll system ensures your team is paid accurately, complies with labor laws, and operates efficiently. Whether you’re handling payroll yourself or outsourcing, you must:

• Register employees properly for payroll deductions (EI, CPP, income tax)
• Follow minimum pay rules applicable in your province
• Ensure statutory holiday pay is calculated correctly
• Decide if vacation pay is banked or paid out
• Automate payroll where possible to avoid errors

As a practice owner, payroll management is one of many responsibilities that contribute to the overall success of your business. Ensuring employees are paid accurately and on time, complying with labor laws, and maintaining structured payroll policies are essential for fostering a positive work environment and preventing financial or legal complications.

A well-organized payroll system not only supports employee satisfaction but also strengthens the foundation of your practice by promoting operational efficiency and financial stability.

By understanding provincial employment standards, implementing clear payroll policies, and leveraging automation tools, you can focus on what truly matters—providing quality care to your patients while confidently managing the business side of your practice. Always reference your province’s employment standards guide to ensure compliance. By setting up a clear payroll process, you can focus on patient care and practice growth while ensuring compliance and employee satisfaction.