Picture this, you’ve just been offered an amazing business venture in Canada. The offer is a great opportunity to generate revenue for your business and establish meaningful relationships with Canadian clients. One problem, your company is located in the United States and you don’t currently have an employment presence in Canada. What do you do? Can you even do this—can a US employer hire Canadian employees?
Many businesses face this challenge regularly, but the answer is actually more simple than you might think. The question, can a US employer hire Canadian employees can be answered with a simple yes… with some restrictions. To make sure you’re conducting business correctly in Canada, you’ll need to approach the employment and payroll process in the proper manner.
Know the CRA Regulations
The Canadian Revenue Agency is the Canadian equivalent of the IRS. This bureau oversees all taxes relating to payroll and withholdings. Perhaps their most relevant regulation applicable to your situation is employee misclassification.
Many businesses try to get around paying for Employment Insurance and other deductibles by classifying employees as independent contractors. There’s a great difference between employees and independent contractors under federal law, and if you’re caught by the CRA misclassifying your Canadian employees, this can have serious repercussions.
As an American business, you will still be liable for serious fines and potentially a criminal sentence from the CRA. It won’t just be you getting into trouble, but also your Canadian employee. They will have to pay out of pocket expenses and penalties, which will seriously harm the relationship between the two of you.
Employee misclassification is too risky. There are many other ways to employ Canadians without breaking the law.
While classifying employees as independent contractors can be dangerous, actual independent contractors can be great for your business. You won’t have to worry about paying any Canadian employment taxes, and the job will still get done by the contractor or contractors of your choosing.
While the idea of an independent contractor sounds great, many employers don’t go this route because they like to exercise their control. With an independent contractor, you have to be willing to step back from the project and let them do their work on their own schedule with their own materials. Your control will have to be limited or you risk venturing into employee territory.
If you’re able to step back from the project and let your independent contractor take the reins, they are a great option for international companies looking to get work in Canada. If you don’t think this is feasible for your company, hiring a Canadian Employer of Record is the next best thing.
Employers of Record
Most American companies that get work in Canada don’t actually want to set up a physical presence in the country. That means if they’re not hiring people as independent contractors, they’re better off hiring someone in Canada to do their taxes and payroll for them.
This is where a Canadian employer of record can come in very useful. When you hire an employer of record, you hire a temporary legal employer to conduct your human resources and payroll services. An employer of record will help your company abide by all Canadian legalities and teach you everything you need to know about Canadian payroll regulations.
How can a US employer hire Canadian employees through an employer of record? It’s simple really. First you’ll need to find a reliable employer of record to help provide you with payroll and back office solutions. Once you’ve found the right fit, your employer of record takes over from there. They manage all payroll, support, clearances, screenings and compliance services. It’s that easy.
Get started today and see how an employer of record can change your over-the-border business ventures for the best.