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American Employers: Canada's Worker's Comp is Government Run

Posted by Stacey Duggan

|

May 1, 2014 10:12:00 AM

Unlike the U.S., the workers compensation program in Canada is government run. Every Employer in Canada must register for a worker’s compensation account in every province that they have employees working in. 

Workers Compensation Form brought to you by The Payroll Edge

Each province has different rules as far as the registration process.

For example, in Ontario you cannot apply for a workers compensation account until you actually have an employee start date, in Nova Scotia you don’t register for an account until you have 2 workers and in Alberta you can pre-register regardless of whether you have employees or not.

Each province also has different registration fees and some may even ask for a pre-payment for new registrants. As an employer, you pay a certain percentage in payroll taxes to the provincial workers compensation board based on the wages of your workers and the risk associated with the type of work your employees are performing.

The bigger the risk of injury to workers, the larger the percentage used when calculating what is due, for example currently in Ontario a worker in a clerical role would cost an employer 0.22% of the worker’s wage in workers comp taxes. However a worker on a construction site in Ontario would mean the employer is taxed at 5.05%. 

If a worker is injured on the job, the workers compensation board will assign a claim adjuster who will investigate and make recommendations. The workers compensation boards in every province are in place to protect the worker and ensure employers meet health and safety standards. They can be a daunting authority to a U.S. company unfamiliar with the rules and regulations associated with the Canadian Ministry of Labour.

Many U.S. companies don’t realize that when their Canadian workers are injured, that they should complete their own investigation and that they have the right to appeal the board’s decision. They also tend to rely on their own legal counsel in the States to advise them on best practises across the border instead of engaging with a professional employment organization in Canada.

Lack of experience in Canada can lead to hefty fines for non-compliance so it’s important that U.S. companies engage in Canadian expertise, or rely on an experienced Employer of Record, when expanding their workforce to the great white north. 

Topics: Professional Employer Organizations, Worker's Compensation, Canada Revenue Agency, Canadian Employer of Record, American PEO

Canadian Worker's Compensation: What U.S. Companies Need to Know

Posted by Stacey Duggan

|

Mar 17, 2014 9:05:00 AM

Workers Compensation Board in Canada is Government run

Unlike the U.S., the workers compensation program in Canada is government run. Every Employer in Canada must register for a worker’s compensation account in every province that they have employees working in and each province has different rules as far as the registration process.

For example, in Ontario you cannot apply for a workers compensation account until you actually have an employee start date, in Nova Scotia you don’t register for an account until you have 3 workers and in Alberta you can pre-register regardless of whether you have employees or not.

Each province also has different registration fees and some may even ask for a pre-payment for new registrants. As an employer, you pay a certain percentage in taxes to the provincial workers compensation board based on the wages of your workers and the risk associated with the type of work your employees are performing.

The bigger the risk of injury to workers, the larger the percentage used when calculating what is due

For example currently in Ontario a worker in a clerical role would cost an employer 0.22% in workers comp taxes. However a worker on a construction site in Ontario would be taxed at 5.05%.

If a worker is injured on the job, a workers compensation board will assign a claim adjuster who will investigate and make recommendations. The workers compensation boards in every province are in place to protect the worker and ensure employers meet health and safety standards. They can be a daunting authority to a U.S. company unfamiliar with the rules and regulations associated with the Canadian Ministry of Labour.

Many U.S. companies don’t realize that they should complete their own investigations and they have the right to appeal the board’s decision.

They also tend to rely on their own legal counsel in the States to advise them on best practices across the border.

Lack of experience in Canada can lead to hefty fines for non-compliance so it’s important that U.S. companies engage in Canadian expertise, or rely on an experienced Employer of Record, when expanding their workforce to the great white north. 

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

Topics: Ministry of Labour, Payroll Tax in Canada, Employer of Record, U.S. Companies operating in Canada, MOL, Worker's Compensation, Canada Revenue Agency, Canadian Employer of Record, Paying Canadian Workers, Canadian-Based EOR, Canadian EOR

The Danger of Hiring Nothing But Independent Contractors

Posted by Stacey Duggan

|

Aug 20, 2013 11:45:00 AM

Independent ContractorBoth employers and employees can benefit from independent contractor arrangements. Employers like working with independent contractors because they don't have to pay CPP, EI, income tax, pensions, and benefits. The contractors themselves also appreciate the arrangement because they can write off reasonable business expenses and avoid the bureaucratic hassles that accompany working within a business.

Working in an independent contractor framework seems like a win-win situation for both employer and employee, so what's the catch?

The CRA is strict about the definition of an independent contractor because they know that some people use independent contractors to avoid paying taxes and benefits. To draw a clear line on the issue, the CRA has formulated a four-point test to determine whether or not someone is an employee or an independent contractor.

Abiding by this four-point test is critical to you as an employer. If the CRA finds that you're not following the regulations governing independent contractors, you could be subject to back taxes, CPP contributions, and EI deductions for the time spanning your employee's involvement with your company. This is not just an issue for large corporations. Any business, large or small, could find itself facing huge financial penalties if the CRA finds that it hasn't followed its guidelines regarding independent contractors.

The guidelines specifically examine control, ownership of tools, profit/risk, and integration.

1. Control

Essentially, the CRA wants to know who is in control of the work done.  If the employer specifies how the job will be done and directs the worker's daily activities, the worker is an employee, not an independent contractor.

This doesn't mean that the employer doesn't have any say in a project. Of course, the employer can impose reasonable limits. For example, the employer can say, "The brochure needs to be printed by March 22nd," but the independent contractor should be in charge of how the project is accomplished.

2. Ownership of Tools

In most cases, independent contractors must own and maintain their own tools and equipment. If a worker reports to work at a business and uses the business' equipment, that person is an employee. If, on the other hand, the work is done at the independent contractor's office or home on the worker's own equipment, it's much more likely that the CRA will consider this worker an independent contractor.

3. Profit/Risk

Employees don't have many opportunities to take risks or incur profits outside of their agreed-upon wages. Yes, employees incur losses when they travel to work and pay parking fees, but these do not classify as risks in the eyes of the CRA. Also, employees may earn bonuses, but again, this is not what the CRA has in mind when discussing risks.

Profits and risks come into play when an independent contractor can turn down work or choose to take a loss for various reasons such as doing work for charity, trying to secure better contracts, or obtaining a client at a loss to secure future business or gain prestige. Also, independent contractors can set their own rates, even varying their rates for certain projects, which is not a privilege employees usually enjoy.

4. Integration

How integrated is the worker into the company? This can be difficult to determine and quantify, but the CRA uses it as one of their criteria for determining a worker's status. Contractors are less integrated than employees in the company's day-to-day affairs. They often come in only occasionally, or they work at the office when handling specific projects.

The Rules Are a Grey Area

It can be difficult to know if you're compliant, as each situation is gauged on a case-by-case basis, based on the personal interpretation of circumstances by the specific CRA Auditor you are dealing with. Rather than running the risk of having independent contractors be assessed as employees, it can be well worthwhile to seek professional advice before getting into any trouble.

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

Topics: Payroll Tax, Payroll Service Provider, Canadian Payroll, Canadian Payroll Deductions, CRA Audit, CRA, Remitting Taxes, Canada Revenue Agency, Independent Contractor, CRA Compliant, CPP, EI

Don't Make a Mistake by Hiring the Wrong Payroll Clerk

Posted by Ray Gonder

|

Aug 19, 2013 9:00:00 AM

Hiring Payroll ClerkOn the surface, your payroll clerk may not seem to be one of the most important players in your company. The payroll clerk doesn't make big decisions, doesn't interact with clients, and doesn't tangibly affect your bottom line. But hiring the wrong payroll clerk can have a huge impact on the way your company runs. Whether you realize it or not, your payroll clerk has great responsibility when it comes to keeping you compliant with government agencies. Therefore, your company's legal status and reputation are in the hands of your payroll clerk.

But how do you know if you've hired the right payroll clerk? What kinds of questions do you need to ask to ensure that you're putting your trust in the right person?

Questions to Ask a Potential Payroll Clerk

When interviewing candidates or payroll processing firms to handle your payroll, ask open-ended questions that will allow them to elaborate on their experience. This helps you to get a better grasp on their capabilities, education, and experience.

1. How do you ensure that payroll is completed on time?

A good payroll clerk is organized enough to have tried-and-true systems in place to ensure that each payroll step is completed in a timely manner. The detail in the candidate's description to this answer will help you to understand his or her depth of experience.

2. Do you have experience with submitting payroll deductions to the government?

This question is very important because proper deduction remittance is key to your company's compliance and legal standing. The candidate should mention federal withholding, Employment Insurance, CPP, workers’ compensation, and, in Ontario, EHT.

3. Tell me how you handle payroll year-end requirements.

Not only must payroll clerks handle the paycheque-to-paycheque clerical work, but they also must handle year-end governmental requirements like T-4 slips and direct reporting of filings to authorities.

4. How do you make sure that payroll is in compliance with the Employment Standards Act and the Canada Revenue Agency?

Legislative changes result in policy changes at the Canada Revenue Agency, and it's the responsibility of Canadian employers to keep up with these changes. When you hire a payroll clerk, you expect that person to keep up with these changes for you. If the person you're interviewing can give you specific information about the Employment Standards Act, you're in good hands.

5. What do you do when you need to communicate with someone at the CRA?

It's inevitable: questions will arise from time to time about situations unique to your company that involve the CRA. If your potential payroll clerk doesn't know how to reach someone who can answer questions, you could find yourself in a small crisis. Hiring a payroll clerk with a history of communication with tax authorities puts you in a great position. You'll be able to get questions answered in a timely manner and minimize your chances of non-compliance.

6. How can you help us with other human resource issues?

It never hurts to hire a payroll clerk who understands the ins and outs of human resources. Having an employee on board who can handle Ministry of Labour claims, Workplace Injury Claims Management, standard employment agreements, and employee orientation and training will be a great boon to your company, helping you to navigate some of the trickier employee issues common to Canadian businesses.

Once you find that perfect payroll clerk or outsourced payroll provider, you'll be able to delegate all of your payroll-related tasks, knowing that your company's payroll is on-time, compliant, and properly remitted.

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

Topics: Payroll Service Provider, Outsourced Payroll Service, Employment Standards Act, Government Compliance, Canada Revenue Agency, Payroll Clerk, Hiring a Payroll Clerk

What Are Payroll Taxes in Canada?

Posted by Ray Gonder

|

Aug 1, 2013 9:00:00 AM

Payroll Taxes in CanadaWithout an understanding of payroll tax laws in Canada, you'll have a hard time operating your business. Payroll taxes are one of the most fundamental aspects of legally employing people in Canada. As soon as you hire people to work for you, you have responsibilities to pay them properly, and that includes paying payroll taxes.

Personal income taxes, both at the federal and provincial levels, are the most significant revenue sources for Canadian government. Payroll taxes account for over 40% of Canada's tax revenues, and employers pay an integral part in the government's collection of these taxes.

Canadian employers are required to register an account with the CRA, collect information about their employees, calculate deductions, and then remit various types of payroll taxes applicable for the jurisdiction, or jurisdictions, where the work was done. Here's a basic list of payroll taxes applicable using the example of two of Canada’s largest provinces:

Federal

  • Canada Pension Plan (CPP)
  • Employment Insurance (EI)

Ontario

  • Employer Health Tax

Quebec

  • Quebec Pension Plan (QPP)
  • Health Services Fund
  • Quebec Parental Insurance Plan
  • Compensation Tax
  • Workforce Skills Development and Recognition Fund
  • Commission des nores du travail

Workers' Compensation Premiums

  • All provinces will also have you needing to pay premiums into that province’s Workers’ Compensation program, for example WSIB in Ontario.

For each person in your employ, the proper amounts need to be calculated for each of the above, applicable funds (not all employees will have to pay all of these taxes). These amounts can be found by referring to the published tables for each tax or by using the CRA's online calculator. Then, you must hold the funds in trust until it's time to remit to each of the agencies.

As an employer, you will probably have to answer payroll tax questions, including the question of what all these taxes are for. Let's take a brief look at each one.

Canada Pension Plan.

Established in 1965, this payroll tax funds Canada's social insurance program, which helps to fund Canada's public retirement income system. All Canadian workers who are 18 years of age and over are required to contribute to the CPP. However, there are certain rules around CPP deductions for those workers who have reached retirement age. There is a maximum amount of CPP that each employee pays per year so once that threshold is reached you no longer have to deduct the tax for the remainder of that year. Employers match workers' contributions to increase funding to the pension plan.

Employment Insurance.

Formerly called Unemployment Insurance, this payroll tax provides benefits to workers if they lose their jobs. Canadian employees pay a percentage of their salaries into the insurance fund; the amount they receive if they lose their jobs depends on their previous salaries, the length of their employment, and the unemployment rate in their local jurisdiction.

Workers' Compensation.

Like Employment Insurance, Workers' Compensation is a form of insurance for workers who face unexpected hardship in the form of wage replacement and medical benefits. This was Canada's first social program because both workers' groups and employers hoped it would reduce lawsuits. It's still managed by local jurisdictions, as it has been since the early 20th century, and it's still funded by employers based on their payrolls. Each province has different rate groups based on the risk of the work being done. The bigger the risk, the higher the premiums the employer will pay. These rates have a tendency to change on a yearly basis across each province.

Ontario Health Tax.

Introduced in the 2004 Ontario Budget, the Ontario Health Premium contributes around $3 billion to the health care system each year. The payroll taxes remitted to the Ontario Health fund are invested directly into the health care system, and only those who are residents of Ontario must pay this tax.

For more information about payroll tax questions, especially how they vary from province to province, contact us at The Payroll Edge. Whether you have difficult questions from your employees that need to be answered or you need help becoming compliant with payroll tax laws and guidelines, we can get you the help you need. A third-party payroll tax expert can make all the difference in the way your company operates.

7 Signs It's Time to Outsource Payroll

Topics: Payroll Tax, Canadian Payroll Deductions, Payroll Tax Calculations, Payroll Tax in Canada, Payroll Tax Tips, Canada Revenue Agency, Payroll Tax Laws in Canada, Payroll Tax Laws

How to Do Small Business Payroll in Canada

Posted by Ray Gonder

|

Jul 26, 2013 10:30:00 AM

Small Business Payroll in CanadaSetting up a small business requires an incredible amount of attention to detail. You need a business development program, a place to work, a marketing strategy, and financing. Each of these tasks will affect the way your business runs and whether or not it will be successful. As soon as you hire employees, you also need to learn how to set up systems and policies for your payroll. Although payroll may seem like a simple, relatively unimportant task in the big picture of your business, it's critical to your business' functionality and compliance with the law.

To break down the intricacies of Canadian payroll, let's take a look at small business payroll in six steps.

1. Opening your CRA payroll account.

One of your first orders of business as a new small business owner is to acquire a Business Number and open an account with the Canada Revenue Agency (CRA). You can open your account by going to CRA's Business Registration Online or by sending an application to the CRA by mail or fax. After you've finished your registration, the CRA will mail you a confirmation letter that contains your business and payroll account number, and you can commence operating your payroll.

2.  Opening up a Worker’s Compensation account.

Different from the US, every Canadian worker is covered under the government worker’s compensation program.  Each province has their own premiums and rules surrounding these accounts as well as different remittance cycles from the schedule set up for your payroll account. What rate group your workers fall into depends on the type of work and province as well. A small business owner should have an understanding of these rules, rate groups and remittance schedules so they can be assured that they are not over or under paying premiums.

3. Calculating Deductions.

One of the more mundane jobs as a small business owner is calculating deductions from your employees' paycheques. Each time you run payroll, you will calculate CPP contributions, EI premiums, and income tax deductions based on the amounts you pay your employees. In addition, you also must calculate your (employer's) share for each of these deductions. As well as the payroll deductions, you must calculate your worker’s comp premiums to be paid based on each employees pay.  To further complicate the calculating of deductions, certain tax groups have minimums and maximums that you must track.  For example in Ontario you do not have to remit Employer Health Tax until you have reached a payroll of $400,000. For the Canada Pension Plan you no longer deduct this tax once the employee has reached the maximum to be deducted.

4. Remitting Payroll Deductions.

Based on the schedule assigned to you by the CRA and the provincial Worker’s Compensation Board, you must remit these taxes on time or face the accrual of interest and fines for late payments. Don’t forget that these schedules can be very different and forgetting a deadline is not an excuse the various government bodies will accept.

5. Providing Employee’s Paystubs.

Each time you pay an employee you must provide them with a paystub outlining the gross amount, deductions taken broken down by tax type, and any other additions or deductions taken from their pay.  Most employers also show the ongoing year to date totals of gross pay, taxes paid and net pay.  As well as all of these, most paystubs will show the employee their vacation accrual as well.

6. Filing Information Returns.

Each February, you have a responsibility as an employer to complete and file T4 Summaries and T4 Employee Slips for income tax purposes. Each of your employees should receive a T4 Slip from you that accurately states the total amount of CPP contributions, EI premiums, and income tax deducted from their paycheques for the entire previous year. The T4 Summary is a total of all the amounts reported on your employees' T4 Slips, and it's submitted either electronically or physically to the CRA.

As you can see, payroll is an important part of any small business' operations. If you're overwhelmed with the meticulous, ongoing nature of payroll, or if you are a US company unfamiliar with Canadian payroll rules and regulations, consider outsourcing payroll processing to a third party to save you time and allow you to focus on other aspects of your business.

7 Signs It's Time to Outsource Payroll

Topics: Outsourced Payroll Service, Canadian Payroll, Canadian Payroll Deductions, Payroll Service, Worker's Compensation, Canada Revenue Agency, Small Business Operations, Small Business Payroll

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