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The International Employer’s Survival Guide to US Payroll Taxes

Posted by Corinne Camara

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Jun 12, 2019 9:00:00 AM

The International Employers Survival Guide to US Payroll TaxesInternational employers have their work cut out for them. Since they employ people in multiple countries, they have to contend with the employment and payroll legislation in not just one, but many different locations.

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Learning the rules and regulations in one market is often more than enough for a payroll team. You may need to bring in outside help or hire specialists to make payroll easier.

If you’re operating in the US, you might feel a little overwhelmed by US payroll taxes. There are many different rules to contend with, and one mistake can lead to a cascade of problems. This guide will help you master the basics, so you can conduct payroll for your American employees with ease.

The Different Levels of US Payroll

The first thing any international employer needs to know about US payroll taxes is that there are a few different levels and types of taxes.

The US has three levels of government. Depending on where you and your employees are based, you may end up having to pay federal, state, and local payroll taxes.

The types of taxes assessed at each level also differ. The federal government and state governments both collect income tax and unemployment taxes. Only the federal government collects FICA taxes.

Local governments may collect taxes for local infrastructure, such as schools or public transit.

Who Pays the Tax

Another key to understanding US payroll taxes is to know who is responsible for paying tax. Some taxes are collected from employees’ earnings. Others require a joint contribution from both the employee and employer. Still other taxes are the responsibility of the employer alone.

Both federal and state unemployment taxes are usually paid by the employer alone. In some states, though, employees share the costs of unemployment programs. FICA taxes, which include Medicare and Social Security, are always a joint payment. Employees and employers each pay half of the 2.9 percent contribution.

Income taxes are withheld from the employees’ earnings. The employer collects and remits the funds to the IRS, but isn’t expected to contribute to the payment.

Collections - Schedules and Payments

For every different tax an employer must collect, there’s a schedule to follow. Your schedule is often set by the size of your company. In general, it’s a good idea to determine which taxes you need to collect and remit. Then you’ll need to find out who the funds are remitted to. Some funds will be sent to the IRS, while others will be sent to the appropriate state or local authority.

Once you’ve determined who is receiving the funds, you’ll be able to read their rules for remittance schedules. The IRS will send you statements with this information.

There are also reports you’ll need to file for the different taxes you collect on your US payroll. Some taxes are reported on a quarterly basis, while others might have an annual reporting period.

Filing a report late and sending in payments after your deadline are some of the most common reasons employers face penalties.

Determining Rates

Most US payroll taxes are based on employee earnings. Federal income tax brackets change as employees earn more. Medicare is capped at 2.9 percent up to $200,000. Employees earning more than this amount have to pay an additional percentage.

Some employers pay just a fraction of the federal unemployment tax rate. If you pay your state unemployment taxes on time, you could qualify for a discount.

Get the Support You Need

Now you know some of the fundamentals of US payroll taxes, which can help you avoid penalties. If you still need help, though, don’t be afraid to call in the experts. A PEO can make paying your US employees easier than ever.

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Topics: Payroll

How a PEO Can Help Global Companies with Employee Management in the United States

Posted by Ray Gonder

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Jun 10, 2019 9:00:00 AM

How a PEO Can Help Global Companies with Employee Management in the United StatesAnyone in HR knows how difficult it can be to provide effective employee management. It’s a challenge even when you’re working in the same office building, in the same country.

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Global companies have an even larger challenge. They could have employees in many different markets, and those employees may have varying expectations about the workplace culture. The legal frameworks and employer responsibilities can also vary drastically. Add in the fact that many of these employees are working remotely or in satellite offices, and you have your work cut out for you.

It’s one of the many reasons global companies often choose to work with a professional employer organization (PEO). Here’s how a PEO could help your global firm manage your US employees more effectively.

The Legal Aspects of Employee Management

One of the most important ways a PEO helps global companies manage employees in the United States is by navigating the legal framework around employment.

The US is a particularly complex situation because there are multiple levels of government. Federal laws, state laws, and even local laws may apply to employment arrangements at your company.

A PEO could help in this arena due to their experience and expertise with US laws. They might be able to give you expert advice and help you ensure compliance.

Help Finding the Right People

Another advantage of the PEO’s experience is their knowledge of the labour market. While you’ll remain in control of hiring decisions, the PEO can offer you tips and advice on every aspect of the hiring process.

This could include information about job hot spots and areas with talent shortages. They may be able to advise you on legal aspects of the hiring process, such as how to avoid discrimination in interview questions. New York City, for example, has banned questions about past salary.

Handling Payroll Is Easier with a PEO

One of the toughest parts of employee management is handling payroll. The US payroll framework isn’t an easy one to master either. There are multiple levels of government, all of them expecting different tax withholdings.

You’ll need to withhold both federal and state taxes, as well as FICA funds for Medicare and Social Security. Even local governments may require you to pay taxes to support schools, public transit, and other local infrastructure.

There are other aspects of payroll to consider as well. Overtime pay is one of them. Minimum wage might be another.

If you’re not familiar with the rules, then collecting the right amounts and remitting them on the right schedule can be difficult. Mistakes in payroll add up, resulting in penalties and additional expenses for global companies.

A PEO can help. By providing payroll services, they’ll ensure you’re following the rules and remitting all your withholdings on time.

Other Areas of Compliance

There are many other areas of employment where compliance is important. Record-keeping is a big one. How long do you need to keep employee information on file? Which records do you need to keep? You must also evaluate how your record-keeping aligns with data and data security regulations.

Another concern might be workers’ compensation and other forms of insurance, which you may be required to have. Different states have different regulations.

Even employee classification is a growing area of concern for global companies looking to employ people in the United States.

An experienced PEO can help you navigate all of these ins and outs.

Get the Helping Hand You Need

As demonstrated, a PEO can assist global companies with US employee management in a number of different ways. If you need help managing this aspect of your US operations, don’t hesitate to reach out to The Payroll Edge.

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Topics: Professional Employer Organization

Canadian vs US Employment Laws: What International Employers Need to Know

Posted by Karen McMullen

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Jun 5, 2019 9:00:00 AM

foreign-vs-us-employment-laws-what-international-employers-need-to-knowInternational employment laws pose a challenge for almost any employer who looks to move beyond their national borders. For American companies moving to Canada, the differences between US employment laws and the rules in the new market can be confusing. Similarly, Canadian employers may have plenty of questions about the US laws.

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If you’re crossing the Canada–US border in any capacity, here are some of the most pertinent points you’ll want to keep in mind.

US Employment Laws and Human Rights

One of the biggest points of departure between Canadian and US employment laws is around human rights.

In Canada, the federal Charter of Rights and Freedoms grants Canadians the right to live free of discrimination. The Charter outlines many prohibited grounds of discrimination, such as gender, race, sexual orientation, age, and more. In some cases, Canadian courts have added prohibited grounds to the Charter by “reading in.”

The provinces have also created human rights legislation, which sometimes goes further than the federal Charter. Most provinces use this legislation to help protect Canadian workers and end discrimination in employment.

One example demonstrates how this can impact international employers. Some interview questions, such as those about marital status, are considered discriminatory in most provinces. Asking about religion, family status, or health could also be considered discrimination.

Canadian employees can start proceedings against their employers by complaining to their provincial Human Rights Commission. In the US, by contrast, employees would usually sue their employer independently.

Background Checks and Drug Testing

In the US, it’s very common for employers to require a background check. Some may also require a drug test as part of the hiring process.

In Canada, these checks are rare. Much like certain interview questions, background checks and drug tests could be considered discriminatory. Drug testing is allowed very rarely, and it’s usually not worth the risk of having a Human Rights Commission investigate.

Background checks in Canada are becoming more common, especially for certain professions, such as working with children and other vulnerable persons. If an employee handles money, merchandise, or sensitive information, a background check may be recommended.

Working Hours, Breaks, and Leave Time

Other major differences between Canadian and US employment laws are around working hours, breaks, and leave.

Federal US employment laws are rather sparse on regulations for these areas. There are no maximums on the number of hours employees can work, provided they’re compensated fairly. The US is also one of just three countries that doesn’t have mandated breaks for employees.

Individual states can create their own rules, but only a handful provide paid lunch breaks. Paid leave is also at the employer’s discretion. There’s no need to provide paid vacation, for example, unless you want to.

Canada presents almost the polar opposite situation. Most provinces have legislation requiring employers to offer paid and unpaid breaks, and capping the number of hours employees can work. Most laws lay out the maximum time an employee can work without a break, maximum shift lengths, minimum time between shifts, and maximum number of hours to be worked in a week.

The Canadian provinces also include legislation for paid time off, such as mandatory vacation and paid leave.

You Must Be Compliant

In both the US and Canada, compliance is important. In Canada, however, employers may find the rules are stricter, and there are more of them. There are also more bodies dedicated to ensuring compliance.

A great example is payroll and taxation. You’ll need to keep records in Canada. Not doing so could result in a fine or even a criminal charge. You could be asked to provide evidence of record-keeping to the Canada Revenue Agency or a provincial body.

If you need help staying on top of your compliance, you’re not alone. Get in touch with a PEO. Discover how we can help.

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Topics: Compliance and Legislation

International Employers: 5 Skills to Look for in Remote Workers in Canada

Posted by Corinne Camara

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Jun 3, 2019 9:00:00 AM

international-employers-5-skills-to-look-for-in-remote-workers-in-canadaNo matter where in the world your company is based, you want to hire the best people to work for you. For international employers in today’s globalized world, this means finding talented candidates both at home and abroad.

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Technology has made it possible for people to work remotely. This is often an asset for employers who operate in multiple countries. Even if you don’t have a branch office, though, you may still opt to hire remote workers. One of the places you might decide to look would be Canada, especially if you have Canadian operations.

Interviewing and hiring remote workers can be somewhat trickier than hiring people who will work on site. What skills should you seek in remote workers in Canada? Here are a few you should be on the lookout for.

1. International Employers Want Tech-Savvy Employees

Technology is what enables remote work in most cases, so it only makes sense to look for people with strong technological skills. This is especially important since they’ll likely be working on their own most of the time.

This could mean they’ll need to navigate technological issues on their own. While it’s important to provide training for company-specific software and other applications, remote workers with a background in technology will be more independent.

2. Remote Workers Need Good Communication Skills

Another key trait to look for in your Canadian remote workers is good communication abilities.

Communication skills are invaluable in almost any job, whether on site or remote. Given that most remote workers will be communicating via email and instant messages, communication is even more important.

You’ll want your remote workers to be both familiar with communication technologies and able to communicate clearly and according to policies.

3. Organized Workers Perform Better

Another trait for international employers to look for in their remote workers is organizational skills. Some people are self-starters who can prioritize a list of tasks with ease. They’re also good at managing their time, so you can be sure they’re working in the most efficient way possible.

These people make good remote employees, because they’re motivated and productive. People who are less organized or don’t manage time as well will struggle more with the demands of remote work.

It can be difficult to judge organizational skills in an interview, so be sure to ask some questions about these skills. If you can, talk to other employers or colleagues who have worked with the candidate about their work habits.

4. Look for Someone Who Sets Goals

The best remote workers are self-motivated. If you give them a goal, they’ll work towards it. If you don’t, however, they’ll set goals for themselves and strive to reach them.

This trait is important for Canadian remote workers, because it helps them stay motivated and on track. If someone can’t set their own goals, you’ll need to be sure you set out the agenda.

If a worker isn’t goal-oriented, you may find that they struggle with productivity, even when you do set goals for them.

5. Ask for a Demonstration of Critical-Thinking Skills

Critical thinking and problem-solving skills are some of the most in-demand soft skills today. These skills allow your workers to approach problems from different points of view. It also asks them to apply a bit of creativity and reasoning in finding solutions.

Someone who is good at problem solving and critical thinking evaluates an issue from all sides. With all the information in hand, they can recommend a course of action.

This is even more important for remote workers, because they may not be able to ask for guidance or help immediately. Being able to think through an issue and come up with a solution is key.

When international employers look for these five skills in their remote employees, they have a much better chance of hiring the right people.

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Topics: Business Expansion

Bill 66: What International Companies Employing Canadians Need to Know

Posted by Ray Gonder

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May 29, 2019 9:00:00 AM

bill-66-what-international-companies-employing-canadians-need-to-knowInternational companies doing business in Ontario, Canada, have had a lot to keep an eye on recently. The provincial government has been rolling out initiatives to keep Canada’s most populous province “open for business.”

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So far, this has included measures such as putting a freeze on minimum wage increases and revising some policies about paid and unpaid leaves for employees. In April 2019, the government passed Bill 66 into law.

With the passage of the bill, many business owners and managers have asked how their workers will be affected. This quick survey will tell you what you need to know.

International Companies Should Review Revisions to Legislation

Bill 66, known as the Restoring Ontario’s Competitiveness Act, makes revisions to existing Ontario employment legislation.

The Act made immediate changes to the Employment Standards Act, 2000 and the Pension Benefits Act. International companies who employ Ontario workers will need to review the new legislation to make sure their policies are in compliance with the revisions.

Bill 66 also made changes to the Labour Relations Act, 1995. These adjustments will come into effect at a later date.

Effects on the ESA

One of the key areas of change is the overtime requirements in the Employment Standards Act, 2000. The Act originally stated employees could work a maximum of 48 hours per week. If employees were to work more than 48 hours, the employer needed to receive approval from the Director of Employment Standards.

The maximum number of hours of work is still the same, but Bill 66 removes some of the red tape for employers and employees in workplaces where overtime is common. Employers and employees can still enter into an agreement for employees’ hours to exceed the ESA maximum.

The agreement no longer needs approval from the Director of Employment Standards, which makes it easier for employers and employees to implement overtime agreements. In unionized workplaces, bargaining units can enter into these agreements.

Employers can also average the hours an employee works over a specified period in order to limit overtime pay. Bill 66 removes the necessary approval from the Director of Employment Standards for overtime averaging. It does introduce new requirements, such as defining a start and end date for the averaging period. The averaging period also can’t exceed four weeks.

Changes to the LRA and PBA

Bill 66 also made changes to the Labour Relations Act, 1995. The biggest difference here is the new definition of “non-construction employers.” This category now includes hospitals, universities, and many different administrators, among others.

What this does is redefine who is impacted by the LRA and how. The Act treats non-construction employers and construction employers differently. Those who are no longer considered to be part of the construction industry won’t be subject to the industry-specific criteria of the Act.

Bill 66 also made adjustments to the Pensions Benefits Act. The process employers use to convert single-employer pension plans to jointly sponsored plans has changed.

How This Affects International Companies

What does this mean for international companies with Canadian employees living and working in Ontario?

The change that will have the largest effect is the revision to the ESA. With the new overtime requirements, you may have an easier time approving employees’ overtime. You’ll also have more control over how much overtime you pay out.

For international companies that face high rates of overtime, this is welcome news. The overtime averaging allowances make it easier for you to meet staffing needs on a more flexible basis. The removal of the approval from the Director makes implementing agreements faster and easier.

Changes to the LRA will only affect certain employers. If you don’t have a pension plan, the change to the PBA likely won’t affect you.

If you’re concerned about your compliance in light of the changes, get in touch with a PEO. We can help you understand how the changes will affect your business.

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Topics: Compliance and Legislation

6 Simple Steps to Expand Your Business into Canada

Posted by Anna Mastrandrea

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May 27, 2019 9:00:00 AM

6_Simple_Steps_to_Expand_Your_Business_into_CanadaIf your company has been growing for some time or growth has started to slow down, you may be looking for new opportunities. One of those could be expanding your business into Canada.

Download "12 Differences to Expect When Expanding into Canada" today!

Why would a company want to expand?

There are many good reasons. Reaching a new market is prime among them. Growing your customer base, improving profits, and even taking on the challenge of a new market may be other reasons to consider.

International expansion can be difficult, though, which might be holding you back. With these six simple steps to expand your business, profits will be booming on both sides of the border in no time.

1. Do Market Research before You Expand Your Business

The first item on your list should be to undertake market research. If you’re planning to expand to Canada, take a look at the existing market for your products or services. Are there many competitors? If so, what do you offer that will help you stand out?

If there aren’t many competitors, ask yourself why. Is this an underserved market or an unrecognized need? Other factors, such as market regulation, could play a role.

2. Consult with the Experts on Legal Matters

The next step in expanding your business to Canada is to make sure you understand the legal framework. Will you need to structure your business as a branch or as a subsidiary? Which offers you the most tax efficiency?

You’ll also want to ask questions about employment law and environmental law. How will you go about hiring employees? What are your options for payroll?

It’s best to consult with the experts on these matters. They can help you understand the steps you’ll need to take, as well as provide insight on how to navigate the Canadian market.

3. Consider Logistics

One of the most important steps you can take as you expand your business into Canada is to give some thought to logistics. How will you get products to your customers? Do you need to purchase real estate or hire employees?

You’ll also need to consider banking logistics. How will you pay the vendors you work with or the employees you hire? This consideration goes beyond policies, but to the infrastructure you'll need.

If you work with a professional employer organization (PEO), you may be able to leverage their infrastructure to solve some of these issues. 

4. Hire Your First Employee

You’ll need to file some paperwork beforehand, but your next step should be to locate the right talent.

Finding the right employees can be difficult enough in your home market, but finding them in an international market could be a struggle.

Ask your PEO for their expert insights on the labour market in Canada. They may be able to tell you about the market and challenges, as well as hiring regulations you’ll want to pay attention to.

5. Adjust Your Marketing Strategy

Think back to the market research you conducted in an earlier step. Canadians have different expectations, so what worked well in the US or even another country might not translate to the Canadian context.

Adjust your marketing accordingly. A campaign that addresses the concerns and needs of your Canadian customers will be much more successful.

6. Monitor Performance

Once you’ve moved across the border and opened your doors to the Canadian market, it’s important to keep tabs on how you’re performing. Are you complying with Canadian laws? Are your people productive? Are your marketing messages resonating with the Canadian populace?

A PEO can help you keep tabs on some of these performance metrics. If you haven’t considered partnering with one yet, you should get in touch with us today. We can help you expand your business with ease.

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Topics: Business Expansion

Why Health Spending Accounts Are a Great Benefits Option for Your Canadian Employees

Posted by Corinne Camara

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May 22, 2019 9:00:00 AM

Why Health Spending Accounts Are a Great Benefits Option for Your Canadian EmployeesWhen you expand your business to Canada, you’re going to hire Canadians to play a role in your workforce. You may need them to work in store or on site. You may also employ them remotely.

Download "12 Differences to Expect When Expanding into Canada" today!

As a new employer in Canada, you’ll need to adjust to the labour market. This can mean ensuring you’re paying competitive wages.

In many cases, it will also mean you need to review your benefits offerings. This is an especially important point for companies from countries such as the US, where healthcare is vastly different.

If you’re wondering how to offer health insurance to your Canadian employees, consider health spending accounts (HSAs).

Leveraging Health Spending Accounts in a Government-Funded System

Canada has a public healthcare system, which is funded by taxation. The system covers basic medical care, such as seeing a doctor or visiting a hospital. Canadian citizens pay no out-of-pocket fees for these services, since they’re covered under provincial health plans.

There are many gaps in the Canadian system, however, and Canadians do rely on their employers to help them bridge the gap. Dental care and prescription drugs are two costs Canadians pay for out of pocket on a regular basis.

You could consider providing a traditional health insurance plan, but a new, more flexible option has been gaining favour. Health spending accounts help your employees navigate the gaps in the public system. They also have benefits for you.

Benefits for Your Employees

Traditional health insurance plans often come with caps. Your plan might include $500 for dental or $200 for vision care.

Once those limits are reached, the employee must pay out of pocket. Some plans also have deductibles or co-pays, which also mean the employee pays. If a service or medical item isn’t covered under the plan, the employee will have to foot the bill.

A health spending account is different. HSAs are employer-funded, which means you pay into accounts for your employees. You can add a set amount to the account, and the employee then has that dollar amount to spend on medical services and items every year.

There’s no deductible or co-pay. The employee can use the funds immediately. They can also use the funds for the services they need to pay for. If someone needs a root canal one year and then needs physiotherapy after a car accident the following year, they can use the funds in their HSA to help.

With a traditional plan, they couldn’t do that. The root canal might cost much more than the dental benefit, and physiotherapy might not be covered at all.

Benefits for Employers

Some of the benefits of offering health spending accounts to your Canadian employees should be clear. With an HSA, they can get the coverage they need, when they need it.

How do health spending accounts benefit you as the employer? For one, they’re typically less expensive than traditional plans. They also offer better tax efficiency. You can write off the amount you contribute to the HSA, along with plan administration fees. Insurance isn’t always tax deductible.

Once you’ve made the initial contribution, you can also “top up” accounts for the following year. If an employee has funds left over, you may not need to contribute the full $2,000 or $5,000 to reset for the next year. HSAs can also add value to the business.

Of course, the biggest benefit of an HSA is that it makes you more attractive as an employer. It gives your employees the flexibility they want and the coverage they need. In turn, you can expect a better reputation, lower turnover, and happier employees.

Offer HSAs to Your Employees the Easy Way

Working with a PEO is one great way to offer a benefit like health spending accounts to your Canadian employees. Getting started can be as easy as reaching out to the experts.

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Topics: Business Expansion

Payrolling US Workers from Abroad? 5 Laws You Need to Know

Posted by Karen McMullen

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May 20, 2019 9:00:00 AM

Payrolling US Workers from Abroad 5 Laws You Need to KnowTalk to almost anyone who employs a worker in the US, and you’ll likely hear about the myriad rules that govern how you pay your team members. Conducting payroll in the US can be a bit intimidating for that reason.

Request a quote for US payroll services today!

It’s imperative for international companies to familiarize themselves with the laws, especially if they want to reduce risks and avoid penalties. Review some of the major federal laws you’ll need to be familiar with if you’re planning to pay US workers from abroad.

1. The Fair Labor Standards Act

The Fair Labor Standards Act, or FLSA, was introduced in the 1930s. It’s been updated periodically since then. It’s designed to cover full-time and part-time workers in both the private sector and at all levels of government.

The FLSA sets a federal minimum wage and also governs overtime. Currently, overtime wages are set at one-and-a-half times an employee’s regular hourly wage. The FLSA also governs the number of hours minors can work.

It’s important to note that the FLSA doesn’t cover all workers in the US. It offers individual coverage and enterprise coverage. Workers in certain industries may be exempt from some of the regulations, such as overtime pay.

It’s also important to note that state law can override the FLSA. Many states, for example, have higher minimum wages than the federal rate. In these cases, employers would need to comply with state law.

2. The Federal Unemployment Tax Act

If you are a private, for-profit enterprise operating in the US and employing American workers, you may need to pay unemployment taxes, as per the Federal Unemployment Tax Act. Also known as FUTA, this Act coordinates with state unemployment systems to provide unemployment compensation for people who lose their jobs.

Employers alone are responsible for FUTA payments. Employees don’t pay a portion of these funds through payroll deductions. Requirements vary from state to state, as each state administers its own unemployment program.

3. The Federal Insurance Contributions Act

If you’ve heard someone talk about FICA payroll deductions, you’ve encountered the Federal Insurance Contributions Act. This is the legislation that provides for programs like Medicaid and Social Security.

FICA requires employers to make deductions from their employees’ paychecks. These withholdings are then used to pay into social programs. Employers are asked to provide a match for what they withhold from their employees.

You’re expected to withhold 1.45 percent of wages for Medicare and up to 7.65 percent for Social Security. If your employees earn over $200,000, there’s another surtax as well.

4. Employee Retirement Income Security Act

You may not be subject to the Employee Retirement Income Security Act, but it’s a good law to know if you have US employees.

ERISA governs pension plans offered by companies in the US. While it doesn’t require an employer to offer a retirement plan, it does set up standards for pension plans. This includes how to report on plans as well as disclosure and fiduciary requirements.

5. The Family Medical and Family Leave Act

The Family Medical and Family Leave Act may not seem like it will have much of an impact on your US payroll operations at first. It provides only unpaid leave for your employees, which means you don’t need to worry about paying them if they do take leave.

Nonetheless, it’s a good idea to pay attention to the provisions in this law. It requires you to provide workers with up to 12 weeks of leave following the birth or adoption of a child, or for serious illness of the employee, their spouse, a child, or a parent.

This leave is job-protected, so you’ll need to know how to fill the position while the employee is away.

This list provides a good starting point for international employers. There are many other US laws that affect how you’ll handle payroll for your US workers.

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Topics: Payroll

4 Tips for Choosing Partners before You Expand into Canada

Posted by Anna Mastrandrea

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May 15, 2019 9:00:00 AM

4 Tips for Choosing Partners before You Expand into CanadaWhen your business decided to expand into Canada, you knew you had your work cut out for you. You needed to conduct rigorous market research and determine the best business structure for tax efficiency. You needed to think about your workforce and your logistics.

Download "12 Differences to Expect When Expanding into Canada" today!

In many cases, you’ll want to partner with other firms to help your expansion efforts. You may decide to work with a lawyer to ensure you're making the right legal decisions for the business. Partnering with a professional employer organization (PEO) is also a great idea. 

How should you go about choosing your partners? The process should begin before you put the wheels in motion. Here are some tips to get started.

1. Find the Right Legal Advice to Expand into Canada

Before you do anything else, you should partner with a legal partner to consider the legal ins and outs of an expansion to Canada. This might be a lawyer or another legal professional.

This partner can help you assess the current legal climate and make the right decisions for setting up your business. A tax lawyer might be able to inform you about the best way to create tax efficiency. A business lawyer and an employment lawyer can share insights about their fields of expertise.

These partners can help you craft better policies and even structure your business correctly. Without the right legal advice, your expansion may not get off the ground. You could find yourself tied up in red tape.

How do you choose the right legal counsel? A general rule of thumb favours expertise and specialization. Find someone who deals with international businesses entering the Canadian market on a regular basis.

They’re much more likely to have the expertise to make the process quick and easy, even if they do charge a higher per hour rate. With their insights, you’ll be up and running sooner.

2. Choosing a Banking Partner

When you expand into Canada, you’ll need funds to fuel your operations. That means you’ll require the right banking partner to support the financial side of the expansion.

You’ll want to employ the opposite strategy here. Instead of seeking a specialized partner, choose someone with a broad range of expertise.

There are many players in the banking industry, but only some of them will be the right fit. You want a banking partner who can grow with you. If the partner you choose is too niche, they may not be able to support your growth. That could tie you up as you try to unravel the partnership and engage another entity.

Be sure to examine which banking partners best reflect your growth strategy. If their capabilities and values line up, you’ll find a more flexible, supportive partnership ahead.

3. Get On-the-Ground Help with Property

If you need to acquire land or real estate, you should seek out an environmental expert. This specialist will help you understand local rules. They’ll also reduce your risks.

Going in alone could mean you purchase a building that isn’t up to code or land that isn’t zoned for your use. You might also be responsible for maintaining or remediating a property to environmental standards.

The right help here is invaluable.

4. Partner with the Right PEO

A professional employer organization can help you navigate the details of having a workforce in Canada. Experts at a PEO can assist with payroll, HR, and compliance. They can offer other services too, such as health spending accounts for employees.

The right PEO typically has expertise in helping international businesses as they expand into Canada. They also have a network of other professionals and knowledge they can draw on to make expanding easier than ever. And they'll already have the infrastructure you need to expand. 

Do your research before you begin expanding, and begin building relationships with your Canadian partners as soon as possible. With the right network, it’s easier than ever to expand into Canada.

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Topics: PEO

How Do US Companies Pay Taxes in Canada?

Posted by Ray Gonder

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May 13, 2019 9:00:00 AM

How Do US Companies Pay Taxes in CanadaAs a US business owner, you’re eager to expand to Canada. Like many other American business leaders, you believe the Great White North is the best market for expansion as you continue to grow. After all, both countries have similarities in culture and a strong history of trade.

Download "12 Differences to Expect When Expanding into Canada" today!

That said, you still have to carefully consider every aspect of your Canadian operations. That includes taxation of the business.

How do US companies pay taxes in Canada? The answer depends on different variables.

Determining Residency

Before you know how you’ll pay Canadian taxes, you have to determine residency. Non-resident corporations are treated differently than Canadian corporations.

Generally speaking, if the company was incorporated in Canada and continues to be incorporated in Canada, it is resident. A resident corporation can be deemed non-resident, provided it's being taxed comprehensively in a tax treaty country.

A non-resident company is incorporated outside of Canada. This includes parent companies that operate Canadian branch offices. Subsidiaries are separate legal entities, so they’d be more likely to be incorporated in Canada and considered resident.

The General Rule for Permanent Establishments

If you create a permanent establishment in Canada, you’ll only pay Canadian tax on the income you generate in Canada. This follows the principle of eliminating double taxation for foreign entities.

A permanent establishment includes a branch office, a workshop, or a factory. A permanent establishment can also include employees or agents who may conclude contracts in your name.

Generally speaking, the tax rate is around 25 percent. There are ways to reduce how much tax you pay, such as through tax treaties.

Tax for Subsidiaries and Separate Legal Entities

If you create a separate legal entity for your Canadian expansion, your tax situation will change. How and what you pay depends on the business structure you adopt.

Subsidiaries are considered Canadian operations, and they’re taxed accordingly. If you pay non-residents, including investors, you’ll need to subject those payments to tax withholding.

If the subsidiary does business in other countries, then you can apply for tax relief through treaties in those countries.

Filing for Non-Resident Corporations

If your business is considered a non-resident corporation with a permanent establishment, you’ll need to file and pay taxes in Canada.

You’ll need to file a T2 corporation income tax return, along with Schedule 97 on additional information for non-resident corporations. You’ll also have to submit Schedule 20, Part XIV, Additional Taxes on Non-Resident Corporations.

If you have Canadian employees, you’ll need to register for a payroll deductions account. You must also withhold a percentage of payment for services you render in Canada, as well as withhold on passive income you receive.

Finally, you’ll need to file dispositions of taxable Canadian property if you happen to sell taxable property in Canada.

Payroll withholding will be remitted to your payroll account, and the GST/HST collected will be paid to your business’s GST/HST account. The Canada Revenue Agency (CRA) will collect payments for tax, GST/HST, and payroll withholdings through its different branches.

Filing for Resident Corporations

If you operate a subsidiary or are otherwise determined to be a resident corporation in Canada, you’ll pay tax the same way other Canadian corporations pay it. This means filing a T2, along with other relevant forms and schedules.

Like non-resident corporations, you may need to collect and remit GST/HST. If you have employees, you’ll need a payroll account so you can remit your withholdings to the CRA.

Get Help with Payroll

The best step to take is to consult with the professionals, such as a tax lawyer or a financial professional.

Another option you have to make paying Canadian taxes easier is to partner with a professional employer organization (PEO). We can help you look after payroll, which can make your taxes less confusing at the end of the year.

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Topics: Business Expansion

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