This report investigates three areas where policy changes could lower the cost of compliance, increasing Canada’s attractiveness to investment in an increasingly competitive global market. One way to achieve this is moving to a digital payroll system.

An effective digital payroll system would modernize the operation of the government, deliver programs more effectively, reduce the cost of compliance across the country and decrease the administrative burden on employers, employees and the government itself.

Under a digital payroll solution, information about salaries and wages, tax deductions, and social program contributions applied within the payroll system could be accessed by relevant government agencies and departments as needed for specific purposes.

Digital payroll would allow the government to:

• Ensure the collection of the right amount of tax deductions and social program contributions during the year (instead of only at year-end)
• Improve the accuracy of earnings-based benefit payments
• Deliver social programs based on payroll information more effectively
• Allow for the successful implementation of new tax legislation tied to payroll reporting

In additional to significantly enhancing transparency, access and the integrity of data in Canada, a digital payroll system would have also expedited the distribution of funds under COVID-19 programs set by Canadian governments. The lack of such a system was a significant hindrance for employers, employees and governments to easily access the critical payroll information to support swift and direct wage subsidy programs.

Reviews conducted in countries that implemented such a system suggest that moving to a digital payroll system can save hundreds of millions of dollars a year in the long term.