Owner pay first: salary, dividends or the blend
Salary is deductible to the corporation, creates RRSP room at 18% of the amount, and buys CPP entitlement at the cost of both halves of the contribution. Dividends skip CPP entirely but build no RRSP room and are paid out of after-tax corporate profit. Neither answer is universally right; the blend depends on what you spend, what you want saved and how you want retirement funded.
The corporate rate frames the choice. Active cleaning profit up to $500,000 is taxed around 12.2% combined in Ontario, while top personal rates run above 53%. Profit you do not need personally is cheapest left inside the company, funding the next van or a reserve against a slow-paying commercial book; profit you live on has to come out and be taxed once, in the least expensive form. A salary large enough to maximize RRSP room is a common anchor point, with the rest of the draw flexing as dividends; we model the split every year rather than setting it once and letting it fossilize.
WSIB is a payroll tax; plan it like one
WSIB premiums are charged as a rate per $100 of insurable earnings, so every payroll decision changes the premium base. Three things belong in the plan. First, reporting insurable earnings accurately on the schedule WSIB assigns, monthly, quarterly or annual. Second, keeping clearance certificates current, because property managers check them before releasing payment. Third, knowing who counts as a worker: WSIB runs its own test, and a cleaner paid as a subcontractor can still be your worker in WSIB's eyes, with retroactive premiums to match. The classification file we build on the tax side does double duty here.
The owner is a separate decision. Outside construction, sole proprietors, partners and corporate officers are not automatically covered; optional insurance is available, with a premium attached. It deserves an actual yes-or-no on the record, not a default nobody remembers choosing.
The payroll taxes you grow into
Every dollar of cleaning payroll carries passengers, and a plan should price all of them before a bid goes out, not after the year closes.
| Layer | What drives it | Planning angle |
|---|---|---|
| CPP and EI | Wages, employer and employee shares | Owner dividends avoid CPP; crew wages never do |
| WSIB premiums | Rate per $100 of insurable earnings | Clean classification and accurate earnings reporting |
| Employer Health Tax | Ontario payroll above the $1,000,000 exemption | See the crossing coming before the hiring wave |
| Income tax | How profit leaves the corporation | Salary-dividend blend reset annually |
The layer that surprises owners is the Employer Health Tax. Ontario exempts the first $1,000,000 of payroll for eligible private employers, then charges up to 1.95%. A cleaning company is payroll almost by definition, and a crew of roughly twenty-five full-timers already sits near the line, so one large contract win can push you over. Crossing it is fine; discovering it after year-end is not. We flag the approach, register on time and build the cost into the next round of bids.
Family pay and TOSI, done honestly
Paying a spouse or a teenager for real work, office administration, weekend crew shifts, supply runs, at a wage you would pay a stranger is deductible to the company and splits income legitimately. Dividends are the harder route: TOSI generally taxes dividends to family members at the top rate unless an exception applies, the practical one being family who average roughly 20 hours a week in the business. The wage route needs timesheets and genuine duties, because the CRA asks for both. Done properly, family payroll is one of the few clean planning wins available at typical cleaning-company scale.
Instalments, timing and the year-end sit-down
Corporate tax instalments begin once tax owing passes $3,000, and annual HST filers owe quarterly instalments past a similar threshold, so a first profitable year often creates four new payment dates nobody budgeted for. The planning meeting belongs before the fiscal year closes, while salary declarations, dividend timing and equipment purchases can still change the answer. The corporation also chooses its own fiscal year-end, and setting it just after your busiest billing season gives every plan a full year of room to time bonuses and purchases. That standing conversation is Tax Planning and Advisory, and it works best on current books of the kind End-to-End Accounting produces monthly. Plans are scoped and quoted in writing after a free 15-minute discovery call.
