Tips and best practices for a smooth payroll year-end

Oh, year-end. On one hand, it’s a great time to wrap up your organization’s calendar year and start fresh. On the other hand, it can be a long list of to-dos, tight deadlines, regulatory updates, employee questions, and the inevitable “wait, did we do everything?” moment.

If you’re responsible for closing out the year for your payroll, HR, or people ops team, the key to success is both preparation and self-care. Because yes, you can arrive at January feeling ready, not frazzled. And with a few practical steps, you’ll give yourself a smoother transition into 2026. We’re here to help you get there.

1. Plan ahead

The best way to avoid last-minute scrambling? A plan. Spending a little time now will save you a lot of stress in the long run. Think of it like prepping to paint a room: the cleaning, the taping, the drop cloths—all upfront effort that makes painting (or in your case, year-end close) go more easily.

What to include:

• A timeline of key payroll and HR deadlines (tax-slips, benefit reconciliations, final runs, system cut-offs).
• A checklist of tasks (employee record updates, system settings review, deduction reviews).
• Assigning clear owners and dates so nothing falls into the “someone-should-have-done-it” gap.
• Buffer time built in for last-minute issues like unexpected terminations, retroactive changes, or system concerns.

This way, when something pops up (and something will), you’re not improvising—you’re responding.

2. Verify your facts (and tidy your data)

Year-end isn’t just about running reports; it’s about running reports you can trust. Data accuracy matters.

• Employee records: Check that the employee list is complete. Was anyone terminated late in the year? Are all social insurance numbers and addresses correct? Have you captured all bonuses, commissions, and taxable benefits?
• System configuration: Are your deduction tables, tax tables, and benefit plans all up to date? Did any regulations change in 2025 that your system must account for?
• Accruals and balances: Do you have outstanding holiday, PTO, or sick time balances that should be addressed? Are there retroactive adjustments still to be processed?
• Documentation: Make sure you’ve captured documentation for taxable benefits, expense reimbursements, and any off-cycle payrolls.

Taking the time now to review and clean up your payroll and HR data means fewer surprises when you generate those year-end tax slips or process your final pay of the year.

3. Reconcile payroll early (and often)

Even if you reconcile payroll every cycle, you’ll still need to do a more thorough audit at the end of the year. Small mistakes in one pay period can quickly snowball and become bigger issues when it comes to year-end.

• Compare totals: Year-to-date earnings, taxes withheld, deductions, benefit contributions—do the numbers align with your expectations?
• Look for anomalies: Large commissions, payouts, bonus runs, off-cycle payrolls—these often trigger tax or deduction quirks.
• Validate against third-party data: Benefit providers, pension carriers, government filings—do your records match theirs?
• Use reporting tools: If your payroll software has advanced reporting, take full advantage of it.

By catching issues early, you’ll avoid any unpleasant surprises when your tax slips hit employees’ inboxes or filing payroll tax documents to the CRA.

4. Review your payroll processes & reports

It’s helpful—and mindful—to review not just what you’re doing, but how you’re doing it. Year-end is the perfect time to take a look at your processes and reports to ensure you have everything you need to process that final pay of 2025 and set yourself up for success in 2026.

• System configuration: Are your processes automated where they can be? Are there manual workarounds you keep using because “that’s always how we’ve done it”? Are your employees’ earnings, taxable benefits, and payroll deductions set up correctly?
• Reporting library: Do you have access to standard reports, and can you build/adapt custom reports? If not, consider it a sign it’s time for a review.
• Access and audit trails: Who has access to edit employee data? Who approves changes? Are there controls and logs in place?
• Team readiness: Is your team briefed on year-end payroll changes? Do they know where to direct employee questions?

A smooth year-end process doesn’t just consist of completing your checklist, but doing it confidently and with a system you trust.

5. Get your employees set up (communication is key)

Year-end often means more questions from employees: “When will I get my T4?”, “How do I read it?”, “What about my remote work form or benefits?” If you get ahead of this, you lighten your load and provide employees with a better experience.

• Send out an email early: Let your team know when they’ll receive their tax slips, other tax forms like T2200s, and where/how they’ll access them.
• Highlight any changes this year: For example, benefit coverage changes, new taxable benefit categories, and remote-work considerations.
• Encourage early review: Ask employees to confirm their personal information (address, social insurance number, etc.) ahead of tax slip season to avoid having to issue corrections.

💡 Tip: Provide employees with a link to a guide explaining how to read their tax slips, what box numbers mean, and where to turn for questions. Check out our tax slip guides for T4s, T4As, and RL-1s.

This kind of transparency fosters trust and makes for a much better employee experience compared to sending tax documents and year-end information with zero context.

6. Remote & hybrid workforce considerations

Since hybrid and remote working are now firmly part of many workplaces, there are a few additional things to keep in mind:

• Did you have employees working from multiple provinces or territories? Cross-border tax considerations may apply.
• Did any taxable benefit arise from home-office reimbursements or equipment allowances? Are they correctly reflected in your payroll?
• Did your system correctly account for any regional tax differences (for example, if someone moved provinces mid-year)?
• If you used flexible workspaces, coworking reimbursements, or stipends for remote working, were these correctly recorded and taxed (if applicable)?

Adding this extra step to your year-end prep will help ensure your year-end reports accurately reflect the reality of remote and hybrid workforces.

7. Technology & security check

Nothing derails year-end quite like a system outage, a forgotten update, or a security gap. So let’s add this:

• Check that your payroll system has been updated for regulatory changes that took effect in 2025.
• Ensure backups and disaster-recovery plans are in place. If something goes wrong, you’ll thank yourself later.
• Verify user access. Confirm who has admin privileges and who can make changes. If you’re using payroll software, confirm whether there are audit trails.
• Consider whether any new systems (e.g., a separate time and attendance solution) need to be included in your year-end payroll process and ensure you have the access and data you need for your final reports.
• Remind your team of any crucial system updates and double-check any scheduled jobs, like reports or exports, are queued and ready.

A secure, well-configured payroll system is your best ally for a smooth, stress-free year-end.

8. Self-care matters

We save this for last, because it’s easy to forget. Though payroll professionals are superheroes in our books, the reality is, you’re only human. Year-end demands a lot of focus, energy, and more often than not, long hours. Here are some self-care methods to help you stay calm, cool, and collected during this time:

• Healthy eating and hydration: When you’re in crunch mode, good habits go out the window. Prep meals ahead of time, keep healthy snacks around, and remember to drink water.
• Get moving: Even a brief walk, a stretch break, or a short workout can help elevate your mood and clear your head.
• Go offline when you can: Step away from screens. Use short breaks to reset, like a short meditation, stepping outside for a few minutes, or getting coffee away from your desk.
• Sleep well: Don’t sacrifice rest. A clear mind makes fewer mistakes. If needed, try implementing a new bedtime routine, turn off screens earlier in the evening, and keep your room dark and cool.
• Celebrate milestones: Finished your prep checklist? Sent out tax slips? Finalized your reports? Reward yourself and your team! Small wins matter.
• Be kind to yourself: If something doesn’t go perfectly, just remind yourself that you prepared and you did your best. It’s okay if everything doesn’t go perfectly; sometimes things fall through the cracks despite our best efforts.

Remember: It’s not selfish to take care of yourself—it’s necessary.

9. Final step: Rock your year-end payroll

You’ve got the tools, you’ve got the plan, you’ve got the mindset. Now it’s about execution. Stay organized, check off your items, and give yourself some room to breathe.

Whether you’re running payroll for a small business or managing a larger HR or people ops team, the process is much the same: plan ahead, verify your data, reconcile carefully, communicate clearly, adapt for modern work arrangements, secure your systems, and take care of yourself along the way.

We’re rooting for you!

Additional Reading Links‍

1. Year-end prep checklist
2. The ultimate guide to Canadian payroll year-end
3. The employee guide to Canadian payroll year-end

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