Can I Pay Employees Without a Paystub in Canada?

Is It Legal to Pay Employees Without a Paystub in Canada?

The short answer is No. Not for employees. Every province and territory requires employers to give employees a written pay statement (paystub) for each pay period. It can be paper or digital, but it has to exist.

A paystub is basically proof of hours, deductions, and tax withheld. It testifies to CRA that you, as the employer, meet all your obligations when you paid the employee. This rule supersedes cases where someone agrees to be paid informally. What’s important here is that there is record of the payment.

The Canada Revenue Agency expects employers to keep payroll records for six full years. Provincial labour ministries also expect employees to receive pay information that explains what they earned and why certain amounts were deducted.

In some cases, employers may hire contractors for short-term contracts or gigs and pay them via e-transfer or cash. These situations usually fall under contractor arrangements, not employment and therefore a paystub is not required. In such cases, employers need to carefully differentiate between a contractor or a employee to determine if a paystub is indeed required.

What this really means is that paying someone without a paystub isn’t just a technical slip. It’s a compliance problem that grows roots fast.

Why Some Employers Try to Pay Without a Paystub

People rarely pay their employees without a paystub intentionally. Most of the time it’s confusion or lack of knowledge. Here are some of the top reasons employers pay employees without a paystub.

1. Maybe the business is new and the owner is juggling a lot of things such as bookkeeping, hiring, sales, and a thousand other things.
2. Perhaps the employer hired someone part-time or seasonal and it feels like a lot of work to set up a full payroll system for short term employment.
3. Sometimes employers assume paystubs are only needed for big companies.
4. Perhaps they underestimate how much structure the law expects even from tiny operations. For example an employer runs a landscaping crew and pay people by e-transfer on Friday afternoon. It feels casual and normal. But legally, the employer has no idea that the workers still need a breakdown of pay regardless or how casual or normal the work is.
5. And of course, there’s the contractor temptation. Many owners think “If I call them a contractor, I don’t need paystubs”. That’s true for genuine contractors. But the CRA has become very strict about worker classification. If someone works set hours, uses your tools, and answers to your instructions (to list a few qualifiers), they’re probably an employee even if you label them as something else.

These misunderstandings are more common than people admit. But once you see the rules clearly, you can make the right adjustment to correct it.

The Consequences of Paying Employees Without Paystubs

This is where things can get messy. If a worker complains to a provincial labour board about unissued paystubs, one of the first questions is why they haven’t received pay statements. If there is no clear answer, the employer is already on the wrong side of the conversation.

Penalties can ensue and vary by province, but the pattern is similar across provinces. Most penalties include fines,  back-pay order adjustments, audits, and/or record-keeping inspections. When the CRA gets involved, things can snowball quickly. Without proper documentation, it becomes harder to prove tax withholdings were handled correctly. That can lead to owed remittances, interest, and penalties.

There’s also the human angle. When employees don’t get paystubs, tension grows. People need pay records for mortgages, car loans, rental applications, EI claims, CPP issues, and income verification. Lawsuits can arise if employees are not able to get their paystubs or are denied services that requires paystubs.

I’ve seen cases where a worker leaves the job on bad terms. Months later, the employer makes a claim that the employer never paid them overtime. Without clear pay records, the employer has no evidence. And at that point, labour boards tend to side with the employee because the employer failed the documentation requirement. It’s messy, and it’s avoidable.

Required Pay Statement Rules Across Provinces

Even though the exact wording differs, every province and territory in Canada requires similar information on paystubs sent to employees.

Ontario

Ontario’s Employment Standards Act requires employers to provide a written statement every pay period that shows pay rate, hours worked, overtime, vacation pay, deductions, net pay, and the pay period covered.

British Columbia

BC’s Employment Standards Act requires detailed payroll statements as well. Digital copies are fine as long as employees can access them as well.

Alberta

Alberta requires similar breakdowns, including wage rate, overtime hours, and all deductions. Employers must also keep payroll records for several years.

Quebec

Quebec requires pay statements and also has language rules. Pay documentation must be available in French.

Other Provinces and Territories

Manitoba, Saskatchewan, Atlantic provinces, and the northern territories all require pay statements that outline gross pay, deductions, net pay, and the pay period. Exact formatting is flexible, but the content is not.

Across Canada the theme stays consistent. Employees must be able to understand how their pay was calculated. CRA has a clever payroll deduction calculator that can be used to calculate all the required paystub elements. Visit Canada.ca to learn more.

Can I Pay Employees in Cash in Canada?

Paying employees in cash is legal in Canada. Not practical, but legal. But here’s the nuance. Cash does not mean off the books. If you pay in cash, you still need to calculate all the required payroll deductions. And you still need to remit CPP, EI, and income tax. Most importantly, you also need to give the worker a pay statement.

Cash payments are only a problem when employers use it to skip payroll deductions or paystubs. That’s tax evasion. The CRA takes it seriously, partly because unpaid remittances are one of the most common red flags during audits.

If you choose cash as your payment method to employees, make sure to document everything. Use the CRA deductions calculator to calculate all your payroll deductions. Have the employee sign a receipt. Record the date, amount, deductions and pay period. Save it for at least six years. Consider it the high-maintenance method of paying someone because all responsibility is on you to get every detail correct.

How to Pay Employees Without a Traditional Paper Paystub

Let’s be clear. You can avoid paper, but you cannot avoid pay details. Digital paystubs are totally acceptable across Canada. In fact, most companies now use electronic records.

Here are options that work well:

• Email a PDF or simple text document
• Give employees access to a payroll portal
• Use accounting software that generates downloadable pay records
• Create your own spreadsheet layout and send it each payday

As long as the statement includes required details, the medium doesn’t matter. The idea that a paystub must be some carbon-copy, perforated slip from the 1990s is outdated. Digital is easier for everyone.

The main thing employees need is clarity. If they look at their pay statement and can understand why they received the amount they did, you’ve done your job.

Paying Independent Contractors Without Paystubs

Contractors don’t need paystubs. They invoice you, then you pay the invoice. End of story. But the tricky part is making sure that they really are contractors.

The CRA looks at control, tools, financial risk, opportunity for profit, and integration with your business. If someone is working like an employee but being treated as a contractor, the CRA can reclassify them. Suddenly you owe back CPP, EI, and maybe penalties. And yes, pay records become an issue retroactively.

When the worker is a true contractor, your only obligations are to keep the invoices and pay them on time. No paystub and no tax withholdings is required. It is a much simpler process.

How Small Businesses Can Stay Compliant Without a Big Payroll System

What intimidates employers is the system they require to stay compliant with payroll. You don’t need a giant HR department to stay compliant. You just need a consistent workflow that works.

Here are few practical approaches that might work for small businesses:

• Use free or low cost payroll software. There are several Canadian tools built specifically for small businesses.
• Use online calculators for CPP, EI, and income tax.
• Store pay records  by employee and year in a single folder.
• Send digital paystubs with each payment.
• Make remittances biweekly, or monthly depending on your schedule.

Some owners still feel intimidated by the idea of payroll software. But rest assured they save time, reduce error, and keeps everything organized. Best of all, most platforms let employees log in to see their own pay records so you don’t have to send them manually.

What Information Must Be Included In a Pay Statement in Canada

Different provinces phrase the rules differently, but the content is mostly identical. A proper pay statement needs:

• Employee name
• Employer name
• Pay period and payday
• Hours worked
• Wage rate
• Overtime hours and overtime rate
• Gross earnings
• Vacation pay
• All deductions
• Net pay

Think of the pay statement as a financial story for the employee. It explains what happened between punch-in and payday. If an employee can look at the document and understand how their pay was calculated, you’ve achieved the goal.

If this list looks long, remember that you already calculate most of these numbers to figure out what to pay the worker. The pay statement is just writing it down in one place.

How to Create a Pay Statement Manually

If you’re olds school and don’t have time for digital paystubs and you want something simple, you can build a pay statement manually yourself. What matters is the accuracy of the paystub in this case.

Here are the steps to do so:

1. Start with a template. A spreadsheet works well.
2. Put the employee’s name and the pay period at the top. Enter their hourly rate. Add their hours. Multiply. Add overtime if applicable. Add vacation pay either as a separate line or inside the hourly rate depending on your province.
3. Then calculate deductions. Use a trusted payroll calculator. There are reliable tools online that update yearly with new tax brackets. Subtract CPP, EI, and income tax. Add any other deductions like benefits or uniform costs.
4. Once you have net pay, save the document. Email it to the employee.
5. Save a copy in your records. It may feel repetitive at first, but once you do it a few times, the process becomes mechanical. You can automate pieces later if you want.

Recommended Payroll Tools For Small Canadian Businesses

Most small companies eventually switch to payroll software because it saves hours. There are plenty of platforms in Canada that are inexpensive and handle tax updates automatically. Some tie directly into your bank account. Others include scheduling, time tracking, and direct deposit.

Some banks also offer payroll addons. They’re usually comfortable for owners who already use online banking daily.

If you want something extremely lightweight, accounting software like Quickbooks often has payroll add-ons that generate paystubs without forcing you to use every other feature of the system.

The best approach is the one you’ll actually stick with. Fancy systems don’t matter if you avoid using them. Pick a tool that feels natural to you.

Frequently Asked Questions

Can I pay an employee by e-transfer without a paystub?
You can pay by e-transfer, but you still need to send a pay statement for each pay period.

Can an employer refuse to give paystubs?
No. Employees have a right to pay information. Refusing creates legal risk.

Are digital paystubs allowed?
Yes. Every Canadian province accepts electronic pay statements.

How long must payroll records be kept?
At least six years for CRA purposes. Some provinces have additional rules.

Do contractors need paystubs?
No. Contractors invoice you and do not require paystubs. In some cases, a T4A is required but this is not the same as a paystub.

Can I pay someone in cash or e-transfer without deductions?
Not if they’re an employee. Cash wage payments still require CPP, EI, and income tax deductions.

Conclusion

Paying employees without a paystub in Canada isn’t a shortcut. It’s a risk. But once you understand the rules, the whole thing becomes much easier to handle. The law doesn’t demand fancy software or complicated paperwork. It just wants clarity, consistency, and accurate record keeping.

If you stick to those principles, payroll becomes a routine part of running your business instead of a source of stress. And employees trust employers who handle pay properly. It’s one of those quiet foundations of a workplace that people rarely notice, at least until something goes wrong.

Sort the basics out now. Make payroll clean, simple, and transparent. Your business and employees will be grateful.