Hire and Pay in Canada (A Guide for International Success)

As companies grow and expand their workforce, many wonder how to hire and pay in Canada. International hiring comes with a unique set of challenges and complexities, from constantly evolving employment laws to arduous local compliance regulations. For companies looking to grow and expand into North America, Canada is an ideal location – especially for U.S.-based companies. Not only do these neighboring countries share a border, they also share common interests and mutually beneficial economic relationships. For companies looking to do business in Canada, the first question they’ll have is how to hire and pay a Canadian workforce.

When a business decides to hire and pay in Canada, they’ll need to be aware of the federal and provincial laws governing the Canadian workforce. Failure to comply with these laws and regulations could result in significant fines, penalties, and even reputational damage.

To ensure international success when it comes to hiring and paying employees in Canada, we’ve put together the following guide which covers all the basics you need to know about hiring and paying employees there.

When it comes to hiring a Canadian workforce, organizations have the option to hire an independent contractor or to hire an individual as an employee. In some cases, it may not be up to your discretion as to how Canadian workers are classified. And depending on the work being performed, some Canadians cannot be legally hired as independent contractors.

To hire and pay in Canada businesses have two options: do it themselves, or outsource these responsibilities to a Professional Employer Organization (PEO). In this section, we’ll discuss the steps you need to take for both options.

Do it Yourself

If you are hiring an independent contractor, you’ll need to make sure the worker meets the proper classifications for that employment type. Generally speaking, contractors must fit within the following guidelines:

• The individual can work for many companies at the same time
• The individual gets to control and manage their working status and schedule
• The individual is typically required to work for shorter periods of time with any single company, or else risk being classified as an employee

Contractors can be paid though an international wire transfer, digital payment networks like PayPal, through a service provider like Upwork or Fiverr. As a contractor, they are responsible for reporting their earnings for their taxes. Keep in mind that if you opt to hire full- or part-time employees in Canada, you will need to have some sort of legal entity, which can take three to six months to complete. This requires in-country expertise to ensure the structure is efficient and not costly to maintain. It’s also important to remember that correctly establishing an entity also impacts several functions within the business, including finance, accounting, IT, and more.

There are three primary components to incorporating in Canada: incorporation and registration, post incorporation, and corporate annual compliance. Here, we break down each of the three components into actionable steps you can take throughout the process:

Incorporation and Registration

• Prepare entity registration documents
• Prepare local entity articles of incorporation
• Advise on corporate governance structure – local director/shareholders requirements
• Apply for and obtain business license and entity registration approval
• Apply for and obtain tax ID
• Register the newly incorporated entity to be a local employee

Post Incorporation

• Payroll setup
• Statutory benefits and social security registration
• Data protection registration
• Accounting setup, including bookkeeping and reporting
• Local bank account setup
• Local indirect tax – VAT | GST | HST

Corporate Annual Compliance

• Preparation of group consolidated accounts and financial statements under IFRS, US GAAP, or other local GAAP and statutory audit support
• Tax, payroll, and statutory returns
• Handling of correspondence and other administrative duties

Outsource to a PEO Provider

If a DIY approach seems like too much of a headache, you might want to consider outsourcing to a Professional Employer Organization (PEO) or Employer of Record (EOR) provider. A PEO or EOR provider is an organization that enters a joint-employment relationship with an employer by “leasing” employees to the employer. This allows the PEO to share and manage many employee-related responsibilities and liabilities, including HR, payroll, and accounting. Companies that want to hire and pay in Canada should quickly pursue this option.

Put another way, a PEO handles the administrative burden related to employee and payroll management, allowing your business to focus on growth. One of the primary benefits of engaging with a PEO is that they will likely already have a legal entity established in Canada, allowing you to hire fast while still maintaining compliance. Here are a few of the services offered by a PEO or EOR provider:

• Global payroll administration
• In-country compliance management
• Reduced risks with international contractors
• Global talent acquisition
• Advanced HR technology for international workforces
• Canadian employment contracts (some provinces require the contract to be in French and English)

Canada can be a little tricky when it comes to employment laws. This is because the regulations are split between the federal government and individual provincial governments. Each province has unique laws regarding:

• Minimum age of employment
• Hours of work per week and overtime pay
• Minimum wage and equal pay
• Weekly rest days
• General holidays with pay
• Annual vacations with pay
• Parental leave
• Individual and group terminations of employment

To be safe, it’s important to refer to the Canadian Labor Relations, which offers a directory of employment regulations by province. As you hire and pay in Canada, pay attention to the provinces where each of your employees are located. If you have multiple Canadian employees that live in different regions, such as Quebec and Ontario, you’ll need to be aware of the different requirements for each item listed above.

Global PEO Services has worked with hundreds of companies expanding into Canada, and we’ve used our collective knowledge to compile a list of frequently asked questions regarding payroll and hiring.

What are the different types of employment?

• Permanent Employment – Under the permanent employment designation, the Canadian Labor Code specifies four major categories of employment: full-time, part-time, casual, and managerial/professional. Even though all of these are covered by the Labor Code, there is no statutory distinction between them.
• Fixed-Term Contracts – Per the Labor Force Survey of Canada, contract jobs are positions defined by the employer before hiring and are meant to end on a certain date or once a specific task or project is completed.
• Temporary Employment – The Labor Code of Canada does not distinguish between permanent and temporary employees. Under the law, all employees are protected.

What are the retirement requirements for employees?

The two kinds of retirement benefit systems for employees in Canada are contribution-based and government sponsored. The former is a Canada Pension Plan, while the latter is an Old Age Security Plan. Social insurance, often known as social welfare, is a government-mandated insurance program that provides financial help to the elderly, the disabled and injured, and the unemployed.

What are the employee data privacy requirements?

When it comes to doing business in Canada, the legal measures governing employee data privacy are different per jurisdiction. Generally speaking, personal data must be collected with consent and only used for the purposes for which it was collected. In most jurisdictions, where notice has been given through clear employer policies, email and internet use may be monitored.