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3 Mistakes US Companies Make When Expanding into Canada

Posted by Anna Mastrandrea

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Apr 20, 2018 9:00:00 AM

3-Mistakes-US-Companies-Make-When-Expanding-into-Canada-compressorOne of the most common steps a US business takes when looking to expand is to move into the Canadian market. Many US companies find it’s easier to do business with their neighbours to the north. This is partly legislative as the two countries have made many trade deals designed to increase the ease of doing business with each other. After all, the US is Canada’s largest trading partner

Download our free guide on what US companies need to know about paying  employees in Canada.

It’s also a geographic issue as Canada and the US share the world’s largest unguarded border. Moving people and products into Canada is easier than getting them to the UK or China. Finally, it’s also easy for US businesses to expand into Canada because of the shared culture of the two countries. 

Even if most US companies find it easy to move into Canada, there are also many stumbling blocks. Here are a few of the common mistakes US companies make when expanding into Canada.

1. Choosing the Wrong Business Structure

How are you going to set up your business in Canada? Will you be a branch office or a subsidiary? Are you an unlimited liability corporation (ULC)? Deciding how to structure your business is an important consideration when expanding into Canada. 

Each different structure has its pros and cons. You’ll need to carefully consider which structure fits your business best. Tax implications are just one of the considerations when expanding into Canada. Others include the structure of your board of directors and more. 

Choosing the wrong business structure can hurt your Canadian operations and your US business too. Select wisely. If you’re not sure, do some research or get advice from the experts.

2. Setting Up in the Wrong Province

Most people think of Canada as a monolithic whole. While the federal government does create country-wide policies, many areas of legislation fall to the provinces. Each has different laws about taxation, business structure, and employment. 

A business in Ontario can’t do business in Alberta without some additional paperwork, so this is another area of consideration for US businesses expanding into Canada. Where are your clients or customers located? Where are your facilities and employees located? 

While you can get around this issue by filing additional paperwork to operate in additional provinces, if you know your operations will be centred in one place, be sure to set up there.

3. Not Partnering with a PEO

You’re probably aware of how complex tax withholdings and regulations can be in the US. You have to deal with the IRS at the federal level, and then there are individual state laws. Employment legislation is another pain point.

Canada’s much the same way. There’s the federal level of taxation and employment legislation, but you’ll also need to pay particular attention to the provincial statutes on these subjects. Your Ontario employees can’t be treated the same was as your Quebec employees, and your Alberta employees are different yet again.

Partnering with a Canadian PEO can untangle the web of employment legislation and taxation in Canada. Unfortunately, it’s a step few American companies consider when they’re expanding into Canada. Whether they believe they can handle it on their own or they don’t realize the intricacies, they wait until the first CRA penalty arrives.

Save yourself the trouble and partner with a Canadian PEO from the beginning.

Expansion Can Be Easier

These are just a few of the major stumbling blocks American firms encounter when they come north of the border. If you’re thinking about expanding into Canada, you can make it easier. Talk to the experts, do your research, and carefully consider every aspect of your Canadian operations. Once you’re set up correctly, you’ll find it’s smooth sailing.

Canadian Payroll Tax Deduction Calculator

Topics: Business Expansion

5 Reasons It’s Easier Than You Thought to Expand to Canada

Posted by Karen McMullen

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Apr 18, 2018 9:00:00 AM

5-Reasons-Its-Easier-Than-You-Thought-to-Expand-to-Canada-compressorExpanding into Canada is a fairly common step for American companies. After all, Canada is the USA’s closest neighbour. The two share the world’s longest land border, and they’re close in culture.

12 Things an American Company Looking to Pay a Worker In Canada Needs to Know 

Nonetheless, it can still be difficult to expand to Canada, just as it is to move operations to any foreign country. You’ll need to carefully consider things like business structure and employment legislation. 

It’s probably easier than you think to expand into Canada, however. Here are just a few of the reasons why.

1. Geographic Proximity

As mentioned, Canada and the US share the world’s longest land border. The two are literally next-door neighbours. This geographic proximity has long been both a source of tension and a source of strength for both nations. 

It makes it particularly easy to ship products or people to Canada. You can pick a water route, such as through the Great Lakes, or an overland route into Alberta or BC. Sending someone to Vancouver for a business meeting or to oversee operations at your facility in Quebec isn’t difficult. Similarly, getting products back to the US isn’t difficult either.

2. Shared Culture

One of the reasons Canada is the first stop for expanding US businesses is because of the geographic proximity. It’s easy to expand into Canada. The logistics of getting things to and from is much easier than shipping to and from Australia or China. 

Canadians and Americans also have something of a shared culture. While both are quite unique and distinctive, they have more in common than Canadians and Brazilians or Americans and Kenyans. 

This shared culture often makes it simple for American companies to expand into Canada. Sometimes, there’s already Canadian demand for the products or services your business offers. It also means doing business with Canadian firms is a little easier. American employees often have to be reminded of the cultural norms of others, such as Japanese business people. You’re less likely to run into trouble when dealing with Canadians.

3. Trade Legislation

NAFTA has been on everyone’s minds as the three signatories attempt to revise and rework the deal. The proceedings have been contentious and full of plenty of stops and starts. What befalls the free trade agreement between the US, Canada, and Mexico remains to be seen.

NAFTA creates free trade between the US and Canada, lowering or eliminating tariffs on many products. It also eases the immigration of certain classes of professional employees. Other trade agreements are designed to bolster relations between Canada and the US. The US is Canada’s largest trading partner after all.

Other agreements include taxation treaties to avoid double-taxing citizens of either nation who earn income in the other. The advantages of expanding to Canada are numerous.

4. Incentives for Foreign Business

Another reason it can be easier than you thought to expand to Canada is that there are actually incentives for foreign investment. While Canadians are still concerned about their homegrown business, they also look to the world stage to find partners and investors. Very often, they find those partners among US businesses.

Incentives can include favourable taxation arrangements and business structures designed to help US companies succeed in Canada.

5. Help from Canadian PEOs

As easy as it can be to expand into Canada, there are still going to be challenges for any business deciding to move over the border. Navigating legislation around taxation and employment can be tricky.

You can make it easier by getting help from a knowledgeable Canadian PEO. Their expert advice can help you administer payroll to your Canadian employees and even get you started on the path to picking the right business structure for your business operations.

If expanding into Canada is your next move, discover just how easy it can be.

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: Business Expansion

4 Types of Business Structures to Consider When Expanding into Canada

Posted by Corinne Camara

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Apr 16, 2018 9:00:00 AM

4-Types-of-Business-Structures-to-Consider-When-Expanding-into-Canada-compressorYou’re growing yet again, and this time you’re moving across borders. Your business is expanding into Canada. 

12 Things an American Company Looking to Pay a Worker In Canada Needs to Know

Before you move north of the border, however, you’ll need to carefully consider the structure you should give your Canadian operations. Fortunately, there are a number of different ways to structure a business expanding into Canada. Unfortunately, so much choice makes it more difficult to choose a structure. 

All business structures come with pros and cons. You’ll need to do some research, talk to the experts, and determine which structure really suits the needs of your business. Here are a few types of business structures you should consider when you’re expanding into Canada.

1. Branch Office

A branch office is one of the structures a business expanding into Canada needs to consider. This structure is often one of the easier ones to set up, but it has its drawbacks. 

Setting up as a branch office means you continue to operate as a foreign firm within Canada. Your Canadian operations are taxed differently, although not always advantageously. Why would anyone set up as a branch office in Canada, especially if there are other, better options available

The answer lies in the idea that the branch office remains closer to the parent company. It is not independent, so all income flows back to head office. This can create an advantageous tax situation in some cases. It also provides other benefits, such as not needing to place a certain number of Canadians on the board of directors.

2. Subsidiary

A subsidiary is another popular business structure for businesses expanding into Canada. In fact, the subsidiary is the most common way for foreign firms to structure their Canadian operations. Why? 

The answer is easy to see. Subsidiaries create a wholly Canadian entity operating in Canada. This has two major advantages. The first is favourable taxation. The Canadian subsidiary is treated as a Canadian business and so it’s taxed like one. 

The other major advantage is that this type of business structure insulates the parent company. If you’re unsure about your Canadian operation’s profitability, it might be better to structure as a subsidiary. This way, your company is insulated from debts and losses the Canadian subsidiary incurs. 

The major drawback of this structure consists of the rules around the structure of your board of directors. You must place so many Canadians on your board to qualify as a subsidiary.

3. ULC

An unlimited liability corporation is a specific type of subsidiary available for businesses setting up in BC, Alberta, and Nova Scotia.

Not only does this structure do away with the “Canadian content” requirements for your board of directors, but it also has additional tax advantages. It allows flow-through of both profit and loss from the Canadian subsidiary, something most subsidiary structures don’t allow. This gives you the same advantages of the branch office while also securing the benefits of a subsidiary.

If you’re setting up shop in BC, Alberta, or Nova Scotia, you may want to consider a ULC for your business structure.

4. Limited Partnership

This structure option is best if you have a Canadian partner already waiting in the wings. Instead of going it alone, you can create a limited partnership with a Canadian business and merge your operations to expand your business into the Canadian market. This is a tax-friendly option, which is one reason it’s favoured by American firms.

If you’re still not sure, get some advice from the experts. Choosing how to structure your operations in Canada isn’t a decision to be made lightly. Consider these four options and do more research before you make your move.

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: Business Expansion

Who Qualifies for a TN 1 Visa?

Posted by Shannon Dowdall

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Apr 13, 2018 9:00:00 AM

Who-Qualifies-for-a-TN-1-Visa-compressor.jpgAre you a Canadian professional hoping to get a job in the US with an American company? Maybe you work for an American firm looking to hire top talent, no matter where those people currently reside. If so, you may be wondering about the visas available for people to come and work in the United States. 

12 Things an American Company Looking to Pay a Worker In Canada Needs to Know

One of those visas is the TN 1 visa, which can be used to get foreign professionals working in the US.

The TN 1 Program

The TN 1 visa program was created under the North American Free Trade Act (NAFTA) in 1994. This trade agreement allows free trade between Canada, the United States, and Mexico. Free trade agreements often include provisions for workers as well, opening up opportunities for citizens of the signing countries to work in the other countries. 

The TN 1 visa is designed to help professionals in certain areas move between the three countries. This allows companies to hire the very best of the best.

Who Qualifies?

Generally speaking, you must be a citizen of Canada or Mexico to qualify for a TN 1 visa. This is a non-immigration visa that allows people to go work in the United States. Canadian citizens usually face fewer restrictions than those applying from Mexico on account of closer ties between Canada and the US. 

Of course, not just anyone can apply to get a TN 1 visa. If you could, it would be much more difficult to get one. As it stands, the TN 1 visa is one of the easier visas to get provided you meet certain criteria.

Qualified Professionals Only

The TN 1 visa is not for everyone. The program is designed to facilitate the movement of highly trained and talented professionals between Canada and Mexico, and the United States. Some educators and engineers are welcome to apply under the provisions of the TN 1 program.

A list of the qualifying professions is available online. If your profession isn’t listed, you won’t qualify for the TN 1 visa program.

Another issue is ensuring the people who apply are actually qualified in their fields. To that end, you’ll need to prove you have education and work experience in the area you’re applying in. Someone who is a computer engineer can’t apply to the TN 1 visa program as a mechanical engineer. An educator can’t apply as a physicist.

You may have to prove your qualifications before you’ll be approved for the TN 1 visa.

You Must Have a Job Offer

Another restriction on the TN 1 visa program is that those who apply must have a job waiting for them in the United States. This visa does not allow you to enter the US and then look for work. It’s awarded to people who have already secured employment in their fields and now need a visa in order to legally work in the US for a particular US employer.

Most of the time, this is facilitated by the potential employer. They’ll write you a letter, outlining the job offer you’re accepting. They’ll even vouch for your qualifications.

If you don’t have a standing job offer, a TN 1 visa is not the visa for you.

Who Doesn’t Qualify?

The list of who doesn’t qualify for a TN 1 visa is a little lengthier. People who aren’t citizens of Mexico or Canada can’t apply. Those who work in areas or have accepted jobs in areas not listed under the terms of the program also don’t qualify. Those who aren’t qualified to work in these areas wouldn’t be eligible for a TN 1 visa.

Finally, those who don’t already have a job on offer don’t qualify.

If you meet the criteria, a TN 1 visa could be right for you!

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: human resources

4 Things American Companies Should Know about Paying Canadian Employees

Posted by Corinne Camara

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Apr 11, 2018 9:00:00 AM

4-Things-American-Companies-Should-Know-about-Paying-Canadian-Employees-compressor.jpgMany American companies have operations in Canada. In this day and age, many have Canadian employees, even if they don’t necessarily have Canadian operations. Whether you’re thinking about expanding into Canada, debating hiring a Canadian as the perfect fit for a new role, or have had a long-standing operation in Canada, you probably still have questions about paying these cross-border employees. 

12 Things an American Company Looking to Pay a Worker In Canada Needs to Know

Paying Canadian employees can be convoluted, but it doesn’t need to be difficult. Here are a few things American companies should keep in mind when it comes to paying their Canadian employees.

1. The Paperwork Might Look Different

For your American employees, you likely issue a W-2. If the person is a contractor, you may need to issue a 1099. There are a number of different forms depending on how the employee is classified, how they’re taxed, what benefits you offer, and so on. 

You shouldn’t be surprised to hear there’s paperwork for your Canadian employees. It also shouldn’t be shocking to discover the paperwork might be different. If you’re hiring the person on as an employee, you’ll still need to issue a W-2. In some cases, such as when the person can claim treaty benefits, you may need to issue different forms. 

You should always check with the IRS or with a knowledgeable employer of record (EOR) to find out what forms you need and when you need to issue them by. Filing the right paperwork to start simplifies the rest of the process.

2. Think about Exchange Rates

Right now, the US dollar is valued higher than the Canadian dollar. You can buy more Canadian dollars with a single US dollar. This might tempt American companies to pay their Canadian employees in Canadian dollars. 

This can lead to complications with the exchange rate as the value of the Canadian dollar goes up and down. Why does it matter? You could end up paying Canadian employees more or less every month. If you pay an employee $3,500 Canadian per month, you’d need to pay them $2,700 in March 2018. In January 2018, this same amount Canadian would have cost you $2,800 US

Many American companies find it easier to pay their Canadian employees in US funds since they don’t need to worry about differences in currency valuation.

3. Proper Withholding Can Be Complicated

Payroll tax withholding can be a bit challenging to figure out for your American employees. For your Canadian employees, it can be a whole other ball game.

Canada and the US have treaty agreements to avoid double-taxation, meaning your Canadian employees will most often pay taxes in Canada and not in the US. Their income is subject to Canadian payroll tax legislation. This can vary by province, so American companies need to pay attention to the rules where they operate or where their employees live and work.

In some cases, employees may be exempt from paying tax. In other cases, they might be required to pay tax in both Canada and the US.

As you can see, payroll withholding and taxation for Canadian employees working for American companies can become quite complicated. If you’re not sure, consult with the experts. They’ll be able to steer you in the right direction.

4. It Can Be Easier

These are just a few of the problems American companies frequently encounter when they need to pay Canadian employees. There are more.

If you’re feeling overwhelmed or unsure about the best way to go about paying your Canadian employees, consider partnering with a Canadian employer of record. They can help you navigate the tricky waters of cross-border payroll and taxation.

What US Companies Need to Know about Paying Employees in Canada

Topics: Payroll Processing

Here’s How to Avoid the 4 Most Common Payroll Mistakes

Posted by Ray Gonder

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Apr 9, 2018 9:00:00 AM

Heres-How-to-Avoid-the-4-Most-Common-Payroll-Mistakes-compressor.jpgPayroll is a fact of life for every business owner and HR manager. You have to pay your people, no matter what industry you’re involved in. Since the activity is so common, mistakes are also fairly common. 

Some payroll mistakes happen more frequently than others. You shouldn’t be too alarmed if you see any of the following. Mistakes happen to even the best professionals from time to time. What you should do is take corrective action. Luckily, it’s easy to avoid all four of these common payroll mistakes.

Download "What Are You Leaving to Chance By Handling Payroll on Your Own" Guide

1. Misclassifying Employees

This payroll mistake often happens at the start of someone’s employment with your company. When you hire them on, you’ll be required to classify the employee for payroll and taxation purposes. Are they a full-time employee, a temporary worker, or an independent contractor? 

Employers frequently make mistakes when it comes to categorizing their employees. The most common error is classifying someone as an independent contractor when they are, in fact, an employee. Some employers may even do this purposefully. 

How can you avoid this common payroll mistake? It’s easy! Make sure you’re classifying your employees correctly from the time they’re hired. Review the terms of their employment and compare the definitions used by the CRA and in provincial legislation. If you’re still unsure, you can ask the experts.

2. Miscalculating Taxable Employment Income

You probably know you need to calculate employment taxes on your employees’ salaries. What about the rest of the compensation you provide? For example, vacation pay is also taxable.

Other benefits become more complex, so you may want to keep a list of what’s considered taxable income and which benefits are taxable. One taxable benefit employers frequently forget is reimbursement for an employee’s personal expenses. Did you help an employee with the costs of relocating? If you provided compensation for work-related travel, it’s considered taxable income. 

How can you avoid making this common payroll mistake? The easy answer is to check out what the CRA classifies as taxable income. It keeps a list on its website. If you’re still not sure, you can always contact your employer of record (EOR). 

Check out the tax implications before you offer any new benefit. Not only will this help you determine the true cost of offering the benefit but it will also help come tax time.

3. Missed Deadlines

The CRA maintains different schedules for different types of remitters. Very few businesses only need to report and remit their taxes once per tax year. While you might still find yourself in a flurry of year-end taxes come April, you should probably keep an eye on additional deadlines the CRA may have set.

Missed deadlines are a common payroll mistake, but they can be costly. How can you avoid them? The best way is to keep the calendar handy. You may program your payroll software to remind you about upcoming deadlines. Don’t forget to schedule extra staff or talk to your payroll provider about your deadlines.

The easiest way to avoid this error is to partner with an employer of record in Canada. They’ll keep your deadline schedule handy and work to ensure all of the due dates are met.

4. Believing You Need to Go It Alone

This particular error isn’t like the other payroll mistakes on this list; the CRA won’t give you a penalty or audit you if you don’t partner with an EOR or get a helping hand with your taxes. That is, so long as you do everything correctly.

Not working with an EOR for payroll often leads to other payroll mistakes. In turn, you may be assessed penalties and audited by the CRA. The easiest thing to do is team up with someone who knows the ropes. You can avoid common mistakes and make administering payroll so much simpler.

What Are You Leaving to Chance by Handling Payroll on Your Own

Topics: Payroll Processing

What International Companies Need to Know about Severance in Canada

Posted by Stacey Duggan

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Apr 6, 2018 9:00:00 AM

What-International-Companies-Need-to-Know-about-Severance-in-Canada-compressor.jpgAs an international company operating in Canada, you’re well aware of the differences in rules. Payroll is most definitely not the same, and the business taxes you face are also quite different. There may be different regulations for the products or services you offer. 

Download our free guide on what US companies need to know about paying  employees in Canada.

This is also true when it comes to employment legislation and the rules around hiring employees, compensating them for vacation time and leaves, and so much more. Letting an employee go might be another issue. While you hoped never to face it, you now need to terminate someone’s employment with your company. 

Severance may be one thing you’re wondering about. How exactly is it handled in Canada?

When Must You Provide Severance?

The first question you’ll need to ask is when you’ll need to provide severance pay. There are quite a few scenarios. 

If you dismiss or stop employing the person, they may be entitled to severance pay. If you’ve gone bankrupt or declared insolvency, you cease to employ the person and they’ll be entitled to severance. If you give employees an ultimatum and they decide to resign as a result, they’re entitled to severance. 

If you lay off an employee for more than 35 weeks in a 52-week period, their employment is considered terminated. If you decide to close an office or discontinue business at a location, you’re considered to have laid off the employee.

A Mix of Notice and Severance

If you give an employee written notice of their termination and the employee then resigns with two weeks’ notice, you may be required to pay them severance. This situation would come up if the employee was still entitled to termination pay beyond those two weeks.

Other Reasons to Provide Severance

These aren’t the only scenarios when you may be required to or even want to provide severance to employees. If you need to lay off employees, you might offer a severance package immediately. Employees who opted to take it would be free to seek out other employment.

A restructuring activity may also put severance on the table. Some employees may not like the new terms you’re offering them and, since they’re not the terms they were hired under, they have legal grounds to refuse. You can offer these employees severance.

What Are the Rules?

Like virtually everything else in Canada, severance rules differ from province to province. If you operate in Ontario, you’ll need to look at the rules for severance in Ontario. Someone operating in BC will need to look at that province’s legislation.

To fully understand severance pay, you’ll need to look at the employment legislation for each province you operate in.

Compensation for Long Service

Generally speaking, severance pay is awarded to employees who have been with your company for some time. They may be senior employees or they may have a long-service track record. Often, they have seniority in the firm and they may even have specific skill sets and expertise. Severance is designed to compensate them for the loss of employment.

As a result, you may wish to offer severance in other circumstances than those required by law. You’re only bound to provide severance in the cases specified by the law, however.

How Do You Calculate It?

Each province lays out its own rules for calculating severance pay. In Ontario, you add together the number of years of employment plus the number of months of an incomplete year. Take the sum and multiply it by the employee’s regular weekly wages. This will give you their weekly severance pay for a maximum of 26 weeks.

Different provinces use different formulations, of course, so severance pay for an employee in BC can’t be calculated the same way.

If you’re concerned about severance pay or need to calculate what it will cost you, talk to a Canadian EOR and payroll service provider. They can walk you through the steps and help you navigate the nuances.

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: Business Expansion

Everything You Need to Know about a TN 1 Visa

Posted by Ray Gonder

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Apr 4, 2018 9:00:00 AM

Everything-You-Need-to-Know-about-a-TN-1-Visa-compressor.jpgAre you a Canadian who has a job offer in the US or is looking to work in the States? Perhaps you’re an American employer who may need to expand your search for the perfect candidate internationally. Maybe you already have the perfect person lined up! You just need to get the proper paperwork filed. 

12 Things an American Company Looking to Pay a Worker In Canada Needs to Know

No matter your situation, you may be wondering what kind of visa you’ll need to get and how you’d go about obtaining one. Is the TN 1 visa right for you?

What Is a TN1 Visa?

Under the North American Free Trade Agreement (NAFTA), Mexico, Canada, and the US can share employees. Obviously, there are concerns about people moving across borders illegally and working in places they’re not qualified to work. Not only is this problematic for state control of citizenship and citizenship benefits, it also exposes workers to exploitative situations. As a result, it can come with hefty fines for employers. 

NAFTA has provisions to make it easier to share employees, especially highly qualified professionals. NAFTA recognizes the right person to hire may not always live in the US, so companies may need to look beyond borders to find the person they need for the job. If that person is in Mexico or Canada, they may qualify for a TN1 Visa. 

The TN1 Visa is designed to allow a freer flow of highly qualified employees in a number of different areas of employment. Engineers, scientists, and others may qualify.

Who Is Eligible?

To be eligible for a TN1 Visa, the employee must be a citizen of Mexico or Canada. They must also work in one of the specified areas and be able to show their credentials in this area. If the job falls outside of NAFTA’s list or the person doesn’t have the qualifications, they won’t be able to obtain a TN1 visa. 

It’s important to note the TN1 visa is not an immigration visa, meaning the person cannot stay indefinitely in the United States or obtain citizenship. That makes the TN1 a great choice for temporary assignments. A TN1 can be issued for one to three years.

How Do You Get One?

For Canadian citizens, the TN1 visa is relatively easy to obtain. If you have a job offer in one of the qualifying fields and you’re a qualified person, you can bring the required paperwork to the border. You don’t need to visit an embassy first, like you would with other visas.

What paperwork do you need to bring? There’s a form, of course. You’ll also need to bring a letter from your employer, outlining the job offer. You’ll also need proof of your educational background. Your employer’s letter should include some of that proof.

Still Not Sure?

Getting a TN1 visa can seem relatively simple, but you want to be sure you’re doing things correctly.

A great starting place is to look at the many resources online. Start with official governments sites, like the ones offered by the US government. If you’re still having difficulty or you’re still not certain you’re doing things correctly, there are other resources.

You might also want to talk to an immigration lawyer or an employment lawyer, particularly if they have a background in NAFTA professionals or international employment. Another good option is a PEO. Since they deal with cross-border employment situations on a regular basis, they can provide guidance.

Getting a TN1 visa doesn’t need to be stressful. In fact, it can be quite easy! Talk to the professionals today and discover if the TN1 visa is right for your situation.

What US Companies Need to Know about Paying Employees in Canada

Topics: Business Expansion

Expand Your Business with an Employer of Record in Canada

Posted by Karen McMullen

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Apr 2, 2018 9:00:00 AM

Expand-Your-Business-with-an-Employer-of-Record-in-Canada-compressor.jpgHave you been noticing increased demand for your product or service in the Canadian market? Maybe it’s time to expand your business. Becoming a truly international business is a milestone for any company. 

Setting up shop in Canada can be somewhat tricky. You’ll need to decide what business structure to use and you’ll have to consider the tax implications. You’ll also need to look carefully at employment law and payroll taxes. 

12 Things an American Company Looking to Pay a Worker In Canada Needs to Know

You can simplify your Canadian expansion. All you need to do is team up with a Canadian employer of record.

What Does an EOR Do?

You may have heard the term employer of record, or EOR, used before. It’s very common for international businesses to employ their services when it comes to managing the workforce on the other side of the border. 

You’re likely most familiar with the rules and regulations surrounding employment and payroll in your home country. Your HR staff likely feels the same way. They don’t know the ins and outs of the Canadian payroll regimen. They may not be sure how to go about hiring people or letting them go

This can cause all kinds of complications when it comes to managing your business. You may believe you’re in perfect compliance with the law when you’re actually not. 

An employer of record is here to help navigate these trials in your business.

Simplifying Payroll

The employer of record’s primary function is to administer payroll to your Canadian employees and contractors. This can simplify payroll quite significantly, especially in the Canadian context. After all, payroll rules can vary somewhat from province to province. You’ll calculate vacation pay differently in Quebec and Saskatchewan. 

If you’re not familiar with the Canadian rules or the law in the province you’re operating in, you could run into trouble with the Canada Revenue Agency. The EOR helps you avoid penalties and audits by ensuring your compliance.

Managing Your Workforce

Another huge difference between your home country and Canada, or even between various Canadian provinces, is employment legislation. You may want to hire a temporary employee, but your definition varies wildly from the definition under law in Nova Scotia or Alberta.

The EOR ensures your employees are categorized correctly. They’ll also take a look at your hiring practices and align them with the standards of the province(s) you’re operating in. Next, they’ll also help you in the event it’s necessary to let someone go.

Again, the employer of record helps you maintain compliance with the law in all of these activities.

Good Advice

If you’re just thinking about crossing the border into Canada for the first time, you have many decisions to make. How will you pay your employees? Will they be contractors or full-time employees? How will you set up the business? Will you operate as a branch office or a subsidiary? The questions go on and on.

An employer of record can give you some advice on many of these points. While you may want to consult with others, including legal professionals, before you make the final move, discussing tax implications with an EOR is a good idea.

Where Can You Find One?

Looking for an employer of record in Canada? There are many different ones to choose from. Do some research beforehand and get quotes for services before you decide. Be sure to evaluate each company on their offerings, as well as their customer service. You want to be sure you’re getting the best partner.

An employer of record can make the monumental move of expanding internationally into Canada much easier. If you haven’t considered it yet, talk to an EOR today and discover how they can help.

What US Companies Need to Know about Paying Employees in Canada

Topics: Business Expansion

How to Avoid Employee Misclassification Penalties before They Happen

Posted by Shannon Dowdall

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Mar 30, 2018 9:00:00 AM

How_to_Avoid_Employee_Misclassification_Penalties_before_They_Happen.jpg“Penalties” isn’t a word most employers like to hear. Unfortunately, they’re probably more common than you’d like to think. They’re especially common for international companies with Canadian operations, partially because their staff members are less likely to be familiar with the nuances of Canadian employment legislation and payroll taxes.

Employee misclassification penalties are one particularly common type of problem international employers bump into. The good news is they’re relatively easy to avoid.

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What Are They?

Employee misclassification penalties arise when an employee is judged to have been misclassed for tax purposes. For example, you may have classed an employee as a contractor, but then the CRA reviews their employment and suggests they’re actually a full-time employee instead.

Most often, employee misclassification penalties arise when employers classify their employees using one definition while the CRA decides the employee falls into a different category.


The Linguistic Divide

Most often, employee misclassification happens because of a simple misunderstanding of terminology. It’s particularly common for international employers for this reason. In your home country, an “independent vendor” may be defined one way, and you applied that definition to your Canadian employees. However, in Ontario, an “independent vendor” is defined differently, and your employee doesn’t fall into this category.

Employee misclassification is the result.

Sometimes, employers willfully misclassify employees in an effort to avoid payroll taxes or to gain other benefits. An example would be letting an employee go, then hiring them back to do the same job as a “contract worker.” The CRA would identify this as misclassification because the employer has the employee doing the same job, just with a different classification. The employer appears to be abusing classification categories for their own advantage, to the employee’s disadvantage.


How Can You Avoid Misclassification Penalties?

The answer to this question appears to be quite obvious at first. If you don’t want to face employee misclassification penalties, make sure you classify your employees correctly! Since the cause of employee misclassification penalties is employee misclassification, using the correct categories will prevent penalties.

Of course, this is easier said than done in most cases. Most employers, particularly international employers, just don’t realize they’re misclassifying their employees. The “linguistic divide” issue, where different jurisdictions use different definitions of the same terms, causes confusion. Misclassification is often unintentional.

The remedy for this problem is knowing the definitions of each different employee class in the jurisdiction where you’re operating. Just because you class an employee one way in the United States doesn’t mean it will be the same in any part of Canada.


Work with a PEO

It’s a tall task to ask your HR employees to learn the ins and outs of up to 11 different definitions for one employee. The job might be the same across provinces, but each province may have a slightly different definition or require a slightly different classification.

Working with a professional employer organization (PEO) can help alleviate this stress. The PEO’s staff is familiar with these definitions already. They can help you identify the correct way to classify different employees across different provinces. They can even help you manage the payroll implications of each classification.

The PEO is also familiar with Canadian employment legislation, so they’ll be able to tell you how to go about hiring, letting go of, and rehiring employees in the right way.


You Don’t Need to Pay These Penalties!

Avoiding employee misclassification penalties is relatively simple. Review your employees’ classifications and adjust them if necessary. If you need help or clarification, a PEO is a great resource.

You can avoid these penalties before they even happen. Your business doesn’t need to pay these penalties so long as you avoid them before they occur.


What US Companies Need to Know about Paying Employees in Canada

Topics: Compliance

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