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2017 Holiday Preparation: Vacation Policies in Canada

Posted by Corinne Camara


Dec 6, 2017 9:00:00 AM

2017 Holiday Preparation Vacation Policies in Canada--.jpgVacation policies in Canada are not as straightforward as you may think. Each province has different rules and regulations regarding how much vacation time and pay each employee is permitted to take and when they can take it. With dozens of regulations, it’s only fair that companies find themselves a little confused, especially companies that are based in the United States.

To prepare for upcoming vacation requests, brush up on vacation policies in Canada. Keep reading to see some of the more common vacation policy questions and their simplified answers.

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How Much Vacation Time Are Employees Entitled To?

Starting with the basics—every employee in Canada is entitled to vacation time after working for a company for 12 consecutive months. After one year, employers must grant employees two weeks’ vacation, apart from Saskatchewan, which offers three weeks, and Quebec, which offers one day per month.

This, however, is the minimum amount as described in the employment standards legislation of each province. Companies can offer employees more if they wish.

There are exceptions for students in work-experience programs, federal employees, and some other employees.

Can You Relinquish Vacation Time?

Employers have the right to schedule vacation time according to an employee’s entitlement year or stub period. This ensures all employees are given the appropriate amount of vacation time. 

However, employees can give up vacation time with the employer’s agreement and the Director of Employment Standards written approval. It’s important to note that while employees can give up vacation time, employers are still obligated to pay the employee vacation pay.

How Much Vacation Pay Are Employees Entitled To?

When it comes to vacation policies in Canada, employees are to be given at least four percent of the gross wages earned in the 12-month vacation entitlement year. 

For example, if you earned gross wages of $16,000, you are entitled to $640 as your vacation pay. However, some companies offer competitive vacation benefits at a higher percentage than the minimum four percent.

What Happens to Vacation Pay after Employment Ends?

If an employee quits or is terminated, they are still entitled to be paid vacation pay. The employee must be paid any vacation pay that has not yet been paid out, including pay from the previous vacation entitlement year. This unpaid vacation pay must be paid to the employee within seven days of the employment ending or on the employee’s final pay stub—whichever is later. 

Outsourcing payroll and HR services is a great way to ensure your vacation pay is tracked, reducing the amount of risk your company faces regarding vacation policies in Canada.

Why Should Employees Use Their Vacation Time?

Recent studies suggest that more than 41 million vacation days are left unused by Canadians each year. Fiscally, that adds up to approximately $6.3 billion in unused paid time off. In the US, the number jumps to a whopping $52.4 billion. Many employees don’t understand the benefits of taking time off, leaving it up to employers to ensure their employees understand what it means for them and why it’s important. 

A study suggests that employees who leave 11 to 15 PTO days unused are 6.5 percent less likely to receive a raise or bonus than those who used their time off. On the other hand, taking even two days off can leave the mind and body refreshed, creating a more positive mindset and increasing productivity. 

For both employers and staff, vacation days are important. Keeping track of vacation policies in Canada can make a huge difference in the well-being of your employees and the quality of work they bring to the office every day.

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

Topics: Compliance

A Guide to Understanding Canadian Payroll Tax Regulations

Posted by Ray Gonder


Dec 4, 2017 9:00:00 AM

A Guide to Understanding Canadian Payroll Tax Regulations--.jpgUnderstanding Canadian payroll tax regulations can be tricky. Whether you’re operating a small business, expanding your operations into another province, or expanding into Canada from another country, you need to understand the nuance of these regulations. 

The good news is it doesn’t need to be difficult to understand the tax regulations around payroll in Canada. This guide is here to help.

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The Legal Framework

The first key to understanding Canadian payroll tax regulations is to understand the legal framework around the regulations. 

In Canada, two separate levels of government deal with payroll. The federal government legislates on national taxation levels and employment standards for federal employees. The federal government also governs social programs like the Canada Pension Plan and Employment Insurance. 

The provinces also get in on legislating employment, payroll, and taxation. Each province has its own rules covering minimum wages, vacation time, and more. They also differ in terms of income tax. In the case of Quebec, the province manages its own pension plan, the Quebec Pension Plan (QPP).

The Governing Body

Although the provinces have their own legislation regarding payroll tax regulations, the national Canada Revenue Agency (CRA) is responsible for administrating the regulations. The CRA collects all tax returns, assesses them, conducts audits, and penalizes those who have submitted erroneous or fraudulent returns. 

The CRA has the power to initiate an audit if it suspects your payroll practices aren’t on par. It can also fine you for violating the payroll tax regulations.

What Kinds of Regulations?

Understanding Canadian payroll tax regulations also entails understanding what kinds of regulations there are.

For the most part, the regulations declare how you should calculate your tax withholdings and returns to the CRA. For example, the CRA publishes handy tables to calculate CPP withholdings from an employee’s pay. The tables are based on current rates and take into consideration where the employee works, their status as part time or full time, and the industry and type of work.

The regulations also discuss the penalties for violating the regulations. In most cases, the penalty for breaking a rule is a fine. The fines can get quite hefty, so it’s best to avoid them.


Understanding Canadian payroll tax regulations is easier than ever. There are many helpful internet resources you can use to further your knowledge and understanding on this subject.

The CRA’s own website is one of the most important and best resources available. The website contains plenty of explanatory information about what you need to collect, how to calculate and submit your return, and even information about what might happen if you break the rules.

Legal documents, such as the text of laws themselves, are freely available. They can be difficult to read, so you also might look for interpretations offered by qualified and expert legal teams.

Your Canadian payroll services provider is another reliable source of information. Many providers offer helpful tools, such as blogs and whitepapers, which are chockfull of great information. If you need more help or have another question, you can always talk to them too!

Summing Up

Understanding Canadian payroll tax regulations doesn’t need to be difficult. In fact, with great resources from the CRA and your Canadian payroll services provider, it’s quite easy!

Always be sure to check the regulations pertaining to the provinces and territories you’re operating in. Doing so will tell you which laws you need to pay attention to. The legal framework governs what employers need to do when it comes to payroll.

Remember about the CPP and EI, as well as taxable benefits. If you’re not sure, look something up. There are many calculator tools available to help. Your payroll services provider may provide one. Its experts are ready to help you better understand Canadian payroll and the tax regulations surrounding it.

7 Signs It's Time to Outsource Payroll

Topics: Compliance

Make Sure You Know These 5 Audit Issues

Posted by Stacey Duggan


Oct 6, 2017 9:00:00 AM

Make Sure You Know These 5 Audit Issues--.jpgWhether you’re managing it in-house or working with a PEO company, the importance of managing payroll correctly isn’t lost on you. 

Yet many companies still struggle. This is especially apparent when tax time comes along and the CRA selects you for a payroll audit. Keep these five issues in mind during the entire payroll process to help prevent an audit.

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1. Salary Expenses

Salary expenses are among the most common infractions the CRA looks for when it conducts an audit. You might think this is the easiest factor to get right, yet many businesses get nailed on it. 

Why? It seems simple enough: You pay your employees, you note it down on their T4s, and you call it a day. But some businesses forget about bonuses, commissions, and cash payments made to employees, so they don’t go through payroll properly. Other businesses purposely leave these items off the payroll, in effect paying employees “under the table.” 

The CRA is very concerned with the underground labour market in Canada, so you can bet it’ll be watching for irregularities relating to payments.

2. Shareholder Benefits

Shareholder benefits are often incorrectly reported or calculated. Part of the problem is the misunderstanding between accounts payable and human capital managers. They might be on different pages about how shareholder benefits should be handled! 

The best thing you can do to avoid audit issues related to the calculation of shareholder benefits is to check out the CRA’s website. The agency provides exact guidelines about when to report shareholder benefits and how to calculate them. 

Of course, if you don’t follow the CRA’s guidelines, they’re going to find out when they audit you. It’s better to play it safe.

3. Director Fees

Another sticking point is director fees. There’s often confusion about when and how to calculate director fees. Most of the time, these fees aren’t insurable, but in some circumstances, they are taxable and pensionable.

Much of it depends on how directors are selected in your company and the benefits bestowed on them. Some directors are elected while others are appointed. Some are entitled to a stipend. Different situations mean different rules when it comes to paying and reporting these fees.

Again, the CRA’s website lays down the law, so use its guidance to avoid audit issues later on.

4. Parking

Did you know parking is a taxable benefit? Many employers don’t! While there are exceptions, you should treat parking you offer to your employees as a taxable benefit. Doing so will help you avoid audit issues if the CRA decides to investigate your books.

Parking isn’t always a taxable benefit. For example, providing parking for a disabled employee is non-taxable. The same is true of parking situations where there are fewer spaces than employees. In most other situations, however, the CRA considers the provision of parking as a taxable benefit, whether or not you own the lot.

You should report the fair market value of this benefit, less any cost your employee bears. If you pay for your employees’ parking, talk to your payroll provider about how to report this benefit.

5. Automobile Operating Expenses

Do your employees often drive for work? If they do, you’ll need to keep accurate logs about who is driving, when, where, and how far. If you have fleet vehicles—company-provided cars, trucks, or vans—you must keep logs. 

Employees who use personal vehicles for company purposes should also keep a log. You’re not necessarily required to, but it’s a good idea for both you and the employee. Employees often report inaccurately, which leads to you having incorrect data for your books. Use an app to cut down on incorrect reporting.

If you keep an eye on these five audit issues, audit time will be much less stressful!

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

Topics: Compliance

5 Audit Issues You Can't Ignore

Posted by Ray Gonder


Oct 4, 2017 12:45:00 PM

5 Audit Issues You Cant Ignore.jpgSometimes, it’s easy to turn a blind eye to potential issues with payroll. After all, you’re not planning on being audited any time soon.

Unfortunately, who and when the CRA decides to audit isn’t up to you, so you may find yourself facing an audit sooner than you’d like. While it’s an unpleasant situation to find yourself in, you won’t have much to fear if you’ve kept payroll on the up and up.

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With that in mind, here are five common audit issues you can’t afford to ignore.

1. Unreported Payments to Independents

Businesses hire independent contractors for any number of different services these days. You might have a contractor deliver services on an ongoing basis or you might decide to contract out a one-time project or job. Services rendered range from HR functions to maintenance jobs around the office.

You must report every payment you make to your independent contractors. Many business owners don’t, instead paying by cash or otherwise leaving the payment off the books. This is especially the case for services such as office maintenance, but it happens with other contractors as well.

If you’re audited, however, the CRA will notice gaps in your accounting and question where the funds went. Since it is trying to crack down on the underground labour market, you could find yourself facing legal trouble.

2. Reclassifying Employees

Another issue the CRA watches for is the reclassification and misclassification of employees. Some unscrupulous employers might “reclassify” employees in order to reap particular benefits, such as lower overheads or tax write-offs.

One particular way of doing this is letting an employee go, then re-hiring the same person, sometimes as an independent contract, to do the same or similar work. The CRA frowns on this practice in particular.

If this happens, make sure you have a written agreement with the contractor laying out the facts. It’s best to have your bases covered.

3. Reimbursement of Personal Expenses

Do you offer your employees perks, such as a subsidized living expense? If you have a travelling sales team, you might reimburse them for their travel time and costs through an expense account.

If you do offer anything of the sort, the CRA is likely to consider it taxable, pensionable, and insurable. Do yourself a favour and ensure reimbursement payments of all personal expenses are reported. It’ll save you a lot of trouble at audit time!

4. Vehicle Allowances

If you offer your employees a flat-rate allowance to drive for work-related reasons, you’ve provided them with a taxable, insurable, and pensionable benefit. This kind of benefit is not reliant on the number of kilometres driven but is instead a flat-fee you pay your employees if they have to drive on your behalf.

Some employers administer a vehicle allowance instead of reimbursing by the kilometre because their employees have to drive often. Yet a surprising number of employers fail to report this benefit, which spells trouble when the CRA audits payroll.

Be sure to report vehicle allowances and collect the appropriate CPP and EI amounts. A good plan of action is to use payroll software to automate this or hire a PEO to help.

5. Security and Stock Options

Do you report your employees’ securities and stock options? You probably should since this can be classed as a taxable benefit. If you fail to report, the CRA may consider it hidden remuneration.

The situation is tricky since securities and stock options only become taxable when employees actually exercise or dispose of their options. In theory, if none of your employees took advantage of the option, there would be no need to report.

Your employees are likely to exercise or dispose of their stock options, however, so it’s just as easy to keep tabs on them and report them.

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

Topics: Compliance

How to Avoid Payroll Fraud When Expanding into Canada

Posted by Stacey Duggan


Sep 27, 2017 9:00:00 AM

How to Avoid Payroll Fraud When Expanding into Canada---1.jpgWhether it’s done unintentionally by a business, or intentionally by its employees, payroll fraud is a lot more common than you think. In fact, payroll fraud happens in 27 percent of all American businesses and occurs nearly twice as often in small organizations with less than 100 employees than in large ones. If your business is expanding into Canada, committing payroll fraud can be done unintentionally and it’s a lot easier to do than you think.

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Avoiding payroll fraud is an absolute must for expanding businesses. Expansion should start on the right foot—not with a lawsuit. In order to ensure your business is in compliance with Canadian payroll laws and avoids internal payroll fraud, here are some things you need to consider.

The Types of Payroll Fraud

In most cases, there are two major ways payroll fraud can occur: at the fault of employees or at the fault of a business. Employees can embezzle money from the business they work for, while businesses can curve taxes from the government. Whether it’s intentional or not, in the eyes of the law, payroll fraud is always a crime. If you don’t take the necessary precautions, you can be prosecuted.

First and foremost, your employees can commit payroll fraud. If your payroll system isn’t closely monitored or handled by a trusted professional, it can actually be quite easy. Ghost employees are one of the most common types of payroll fraud. This involves a payroll manager or staff member creating fake employees or failing to remove terminated employees from the payroll system. Funds are then diverted to these ghost employees and a payroll staff member claims the money. Timesheet fraud is also a major concern, as more than just payroll staff can commit this type of fraud. Timesheet fraud involves employees incorrectly documenting the .

00number of hours they’ve worked, leading to a higher paycheck, for hours that aren’t actually real.

On the other end of the spectrum, employers are also capable of committing payroll fraud, and the Canadian Revenue Agency often isn’t very forgiving. Worker misclassification for example, can be committed intentionally or due to a misunderstanding of the rules: a mistakes that’s easy to make for businesses expanding into Canada.

The CRA requires businesses to classify each and every employee as full-time employees or independent contractors, depending on the type of work, benefits, and pay the employee receives. However, to avoid paying health insurance premiums, sick pay, payroll taxes, and other fees, some employers will intentionally classify workers as independent contractors, when they’re not. Whether it’s done on purpose or on accident, worker misclassification leaves your business responsible for paying up to $25,000 per instance, and in some cases, you can even face jail time.

For businesses expanding into Canada, it’s easy to overlook the important of regulated payroll, inner-business audits, and a thorough understanding of Canada’s payroll rules.

How to Avoid Payroll Fraud

Now that you know how payroll fraud can occur, it’s time to figure out how to avoid it.

For many businesses, solutions are as simple as introducing regular payroll audits, advanced punch-in systems, and payroll staff the company can trust. However, for businesses that are expanding into Canada, these tips aren’t enough. The greatest solution involves outsourcing payroll.

When you outsource payroll, not only is a trusted and professional business monitoring your payroll functions, you can also rest easy knowing all Canadian laws are being abided by. This leaves you in a safer situation to focus on other aspects of business, without neglecting the importance of payroll.

Where to Start

Reaching out to a payroll service provider is an absolute must. All your questions and concerns regarding payroll fraud and expanding into Canada can be addressed online, or through a quick phone call. Don’t leave your business at risk: learn how a payroll provider can help

What US Companies Need to Know about Paying Employees in Canada

Topics: Compliance

5 Things You Need to Know as a Canadian Independent Contractor

Posted by Anna Mastrandrea


Sep 19, 2017 9:00:00 AM

5 Things You Need to Know as a Canadian Independent Contractor--.jpgBeing a Canadian independent contractor has it’s perks: you can work from home, claim business expenses come tax time, and have a lot of freedom over what kind of jobs you’re willing to take on. All in all, you call the shots!

However, there are some things you need to know about being an independent contractor in Canada. From employers improperly classifying your status, to failing to find the right clients, independent contractors face a lot of challenges. From the good, the bad, and the ugly, here are five things you need to know as a Canadian independent contractor.

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1. Employers Love You

This is the good news! For the most part, businesses love working with Canadian independent contractors—a fact that’s solidified when you realize over 2.7 million Canadians are self employed. You offer businesses a whole new set of skills they might not have been able to find anywhere else.

You’re also a valuable asset when it comes to busy periods or big projects, making you one of the most appreciated workers on the lot. For small businesses or start-ups, you’re the person that has answers to all the bosses’ questions. With this in mind, independent contractors need to know employers love them and appreciate their knowledge and hard work.

2. The Risks

For independent contractors, the risks run high. This is one of the downsides of being a Canadian independent contractor: sometimes, work is unpredictable. Unlike full-time employees, contract workers are hired as needed, meaning if your skillset isn’t required, you don’t have a job.

At the same time, contract workers are not covered by employment insurance, so, if your contract ends without warning, you’re put into a difficult situation. On the other hand, because you’re not a full-time employee, the companies you work for aren’t legally obligated to pay you any type of benefits. Unless you negotiate some type of coverage, you won’t receive health benefits, sick pay, or statutory pay. While being your own boss does have benefits, for many of these reasons, it’s sometimes hard to run on your own.

3. You Have Freedom

Independent contractors have a lot more freedom. Because you’re selling yourself on a contract basis, your options are almost endless. From three-month to yearlong contracts, the possibilities for work are much wider and you’re in control of whom you decide to work for.

Working in a number of different environments gives you the opportunity to sharpen your skills, evolve with your industry, and remain competitive over other job candidates. One of the most important points on your resume is your wide breadth of experience, and having the flexibility of an independent contractor lets your hone in on your skills, all while you get paid.

4. Your Employer See The Benefits Too

Independent contractors provide many benefits to many companies. From costs savings to greater experience, it’s important to know that your employer is also benefiting from this unique workplace relationship.

Because your employer isn’t responsible for paying benefits, the cost of training and government required insurance, hiring you is a great way to save money. As a Canadian independent contractor, this is important to know, as although your work is important, it’s also a smart business move.

5. Ask about a PEO

Many small businesses work with a Professional Employer Organization to ensure all of their contract workers are hired ethically and payroll is handled efficiently. Without such an organization, businesses run the risk of misclassifying employees or improperly handling the hiring process. If you’re concerned about these risks, make sure you ask your employer if they work with a PEO: it could make a huge difference in terms of your experience, legal situation, and reputation as a contractor. 

Being an independent contractor in Canada puts you in control, however, it’s important to know the downsides as well. Keep communication open and ask the right questions to ensure your career is a success.

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

Topics: Compliance

Submitted a Remittance Error to the CRA? Learn How to Fix It

Posted by Ray Gonder


Sep 15, 2017 9:00:00 AM

Handling payroll can be complicated and sometimes we make errors. What’s even more confusing is handling mistakes with government regulations in an efficient and error-free way. Sometimes it can seem like handling a remittance error to the Canadian Revenue Agency (CRA) is more complicated than the entire payroll process.

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Don’t be too hard on yourself. We all make mistakes, even with payroll. If you find yourself trying to correct a remittance error to the CRA, here’s how you can fix it.

How Mistakes Are Made & How To Fix Them

Payroll can be a huge undertaking for any small business owner and there’s a long list of things you can do wrong when remitting your payments. Regardless of the error, it’s important to work quickly and know how to rectify the situation. Some of the most common remittance errors include:

Under-remittance occurs when the amount you sent to the CRA is less than it should be. This can happen for any number of reasons. If payroll isn’t organized, new employees can sometimes be forgotten or overlooked. It’s also possible that you manage your payroll by hand. This old-school method can leave room for human error and your addition may be off. Whatever the reason, you need to make up for the short payment.

It’s important to correct the remittance error to the CRA as soon as you can. Remit any shortages by either electronic payment, with a remittance error form, or by writing a letter giving your account number and the pay period the shortage applies to. Electronic payments are the fastest and most efficient method. Ensure that you correct any errors and pay it by the 15th of the following month—otherwise the CRA will consider the payment late.

Over-remittance occurs when then amount you sent to the CRA is more than it should be. This can happen for a number of reasons, such as doubling payments or errors in managing payroll by hand. By the way, if you’re still handling your payroll by hand, it might be time to consider outsourcing your payroll. Regardless of the reason, the remittance error to the CRA needs to be corrected.

If you’ve over-remitted in the current year, simply reduce your next possible remittance by the amount you overpaid. If you over-remitted last year, you must request a transfer or refund of the credit online or by mail. Remember, you’ll need to provide an explanation surrounding the reason for the over-remittance. Use your business account to make any corrections online, or make your request by mail by attaching the explanation to your paper information return, or send a letter to your tax centre.

Misapplied Payment
A misapplied payment means you’ve made a payment to the wrong account. A common mistake, however the remittance error to the CRA requires immediate attention.

As with an over-remittance, you can use your business account to transfer payments within your various accounts. You can also contact the CRA directly if you need any help (1-800-959-5525). After the CRA receives your information return, they’ll check to ensure you submitted the correct amount of Canada Pension Plan (CPP) and Employment Insurance (EI). The CRA is more forgiving for this situation and won’t likely penalize you if you can show you made the payment, it just went into the wrong account.

It’s best to try and avoid making any of the errors mentioned above. If you’re finding yourself frequently making mistakes, consider outsourcing your payroll needs to a payroll service provider. Let them handle the hard stuff, so you can rest easy knowing no more remittance errors will occur.

Canadian Payroll Tax Deduction Calculator

Topics: Compliance

The Straightforward Guide to Understanding Quebec Vacation Pay

Posted by Anna Mastrandrea


Sep 13, 2017 11:15:00 AM

Understanding vacation regulations is confusing—especially when you bear in mind the fact that the laws change within every country. As the cherry on top, in Canada, each province has different laws and regulations you need to consider. In Quebec specifically, things can become a little hard to follow. As a small business owner, this can be more than you’re ready to handle. Have no fear—understanding Quebec vacation pay doesn’t have to be as hard as it sounds.

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When it comes to paying Quebec employees vacation pay, there are some key tips for you to follow. While the rules are different, with the right knowledge and help, navigating Quebec regulations becomes a breeze. Here’s your straightforward guide to understanding Quebec vacation pay.

The Facts

Let’s get right to the facts. In Quebec, there are two factors you must consider that determine the amount of vacation time and vacation pay each employee is entitled to:

  1. The reference year (which is a period of 12 consecutive months from May 1 to April 30).
  2. The number of years each employee has worked for your business.

In terms of vacation time, you must consider the situation of each employee as of April 30.
For less than one year of uninterrupted service, the employee is entitled to one day for each month of service, with a maximum of two weeks’ vacation. For more than one year, but less than five years of service, employees are entitled to two weeks’ paid vacation. On top of that, employees can ask for an additional week without pay.

For employees that have worked for your business for more than five years, three weeks’ paid vacation is what they’re entitled to take. While it seems like a lot to follow, you simply have to compare the number of years each employee has worked, starting with April 30 of each year.

Vacation Pay

When it comes to vacation pay, things are a little different than other provinces. However, once again, the main deciding factor is the number of years the employee has worked for the business and their gross earning for that reference year. For employees who have worked less than five years, 4 percent of their gross earnings are required as annual vacation pay. On the other hand, for those who have worked more than five years of uninterrupted service, six percent of the employee’s gross earnings are required as annual vacation pay.

On top of that, it’s important to remember that as the employer, you’re responsible for providing your employees with their vacation pay in one payment before they leave for vacation. For part-time employees, the same rules apply since Quebec vacation pay is calculated based off gross earnings. You also hold the power to determine when your employees take their vacation; however, you must provide your employees with the vacation dates at least four weeks in advance.

Do You Need Help?

There’s a lot to remember when it comes to Quebec vacation pay, especially if you’re a small business owner or your business is new to Canada. While you might think you can handle things on your own, you leave yourself at serious risk if something isn’t handled properly. Not paying full vacation pay or failing to provide the required amount of vacation time puts you at risk of falling into trouble with the Canadian Revenue Agency or the Ministry of Labour.

If you’re feeling nervous about handling payroll on your own, it might be time to consider outsourcing payroll to a company with years of experience in every province of Canada. You can rest easy knowing all payroll and vacation policies are in compliance with Canadian laws, which leaves you more time to focus on business.

What US Companies Need to Know about Paying Employees in Canada

Topics: Compliance

3 Obstacles That Will Slow Your Business Expansion into Canada

Posted by Ray Gonder


Jul 17, 2017 9:00:00 AM

3 Obstacles That Will Slow Your Business Expansion into Canada.jpg

Canada has a steadily growing economy and offers businesses a consumer base that is loyal and true, but before considering expansion into the True North, companies must be able to navigate a different set of employment and import laws, assess the costs of doing business in Canada, and connect with the Canadian consumer.

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1. Lack of an Employer of Record (EOR)

The best way to break into the Canadian market is to reach out to a company that can act as your Employer of Record in Canada. An EOR can be your trusted partner in navigating the legal requirements, tax regulations, and general complexities of a business expansion into Canada. With the help of an EOR, businesses can focus on their core product and provide the best service that they can to the newfound Canadian market.

2. The Unseen Costs of Expansion

Payroll is a basic and necessary function that has slight differences in Canada versus the US. Whether it’s the numerous taxes Canadians pay or navigating vacation pay, the Canadian Revenue Agency is not very forgiving if businesses fail to accurately provide and report their accounting. Moreover, basic minimum wage laws, in general, vary depending on the province, which adds another layer of cost calculation since the amount is higher on average than US-state rates.

Canada, while boasting a population of around 36.6 million, is a large country. Moving goods across the border further increases the cost of expansion. Canada has its own set of customs laws and regulations, all of which require significant time and manpower to navigate.

Population density also widely varies per province, so businesses need to tailor expansion plans to specific areas. These regional differences also impact language, with slight alphabetical variances in accordance to British-English and regulations concerning access to French labelling.

3. Winning the Hearts of Canadian Consumers

At the end of the day, businesses must win over consumers. Despite its close proximity to and intertwined economy with the US, Canada is home to an economic landscape and discerning consumer market that is starkly different from their neighbours to the south. While US companies believe their tried-and-tested aggressive business models will succeed in the north, what they soon discover is that expansion into Canada isn’t a cakewalk.

Canada’s relatively small and dispersed population means that aggressive takeovers, such as Target’s business expansion into former Zellers locations, simply do not work. Target’s downfall was a result of multiple factors, but primarily expansion costs were higher than projected and sales were lower than expected.

Moreover, Target’s existing systems weren’t prepared to handle a new market, the Canadian dollar, and even French language options. Target’s rush to launch meant that staff were stretched thin, stock levels were inconsistent, and customers often encountered barren stores. Simply put, the magic of Target in the US could simply not be replicated in Canada.

Don’t Fall Behind

The rise and fall of Target in Canada is a prime example of a US-based business failing to gain ground due to an underestimation of the Canadian market. However, US-based retailers such as Home Depot, Staples, Wal-Mart, and Starbucks have all managed to find a home in the Canadian market after a slow testing of the waters, a gradual integration into the Canadian economic landscape, and understanding the preferences of the Canadian consumer.

While Canadian shoppers seem to be no different from their US counterparts on the surface, regional variances, multicultural factors, postcolonial heritage, and even the weather all affect the temperament of the Canadian shopper.

Companies must be willing to adapt, do their research, and make significant changes to their operational models before considering a business expansion into Canada. Canada is a proud country and there are complex economic dynamics that play out across the nation, but if you can win the hearts of Canadian consumers, businesses will find a rewarding market that will truly invest in their company.

What US Companies Need to Know about Paying Employees in Canada

Topics: Compliance

7 Things to Know When Working with Canadian Independent Contractors

Posted by Corinne Camara


Jul 7, 2017 9:00:00 AM

7 Things to Know When Working with Canadian Independent Contractors--.jpgIs your business looking to do work in Canada without actually being in Canada? If so, Canadian independent contractors will help you get the job done. If you’re located out of the country, you may not be under the same jurisdiction as Canadian companies. In this case, it’s important that you know exactly what you’re getting yourself into so you don’t make any staffing mistakes.

Hiring independent contractors is different in Canada compared to the United States, so you’ll need to brush up on your contractor knowledge.

1. The Difference Between an Independent Contractor and an Employee

Employees and independent contractors are considered two very different working entities in Canada. Because employers are not required to pay taxes on independent contractors, the difference is very important in Canadian law. Unfortunately, the lines between employee and contractor aren’t the most definitive.

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

The most fundamental difference between the two types of workers Is the amount of control an employer can exercise. An employee is almost completely controlled by their employer, whereas an independent contractor can work where they want when they want. Employees will also receive Employment Insurance, income tax, and Canadian Pension Plan deduction from their paycheque, whereas independent contractors will not.

2. Employee Misclassification

If you’re looking to maintain good relationships with your Canadian independent contractors, you’ll need to ensure they are classified properly with the CRA. The CRA takes employee misclassification very seriously. The fines for employee misclassification can be grave.

This can also get your Canadian contractor in financial trouble, as the may be classified by the CRA as a personal service business. This means that they cannot write off any business expenses. No business expenses means everything they earn is taxable. They will then have to personally pay payroll taxes and penalties, which should be paid by an employer.    

3. Employer Coverage       

If you’re a foreign business looking to hire Canadian independent contractors, it’s important to keep in mind how you’re covered. When hiring remote workers, you do not have the same intellectual property, non-solicitation, and non-disclosure protection compared to a company that hires Canadian employees.

4. Working Conditions

Based on the differentiation between an employee and an independent contractor, you have no say over how operations are run. You’ll have to step back when it comes to your independent contractor’s schedule and other clients. You contractor could even be working for your direct competitor, but you won’t be able to ask them to cease working for another company. Canadian independent contractors work for themselves above all else, your company is simply a client.

5. Paying Your Independent Contractors     

The best part about working with an independent contractor is that you only have to pay for the services they charge. If you’re charged $5,000 for a project, you pay $5,000. You don’t have to worry about any additional costs or any hidden fees when you partner with Canadian independent contractors.  

6. An Employer of Record Can Help    

It’s important to ensure that you’re completely confident in your understanding of hiring Canadian independent contractors before you proceed with any over-the-border business ventures. You may require assistance navigating your way through the workforce—an Employer of Record can help you manage all your Canadian contracts and payroll.  

7. Separation is Easy         

If you’re not happy with the work an independent contractor has done, you have the ability to completely sever all ties without the potential of a lawsuit. Once you’ve paid your independent contractor for their services, you are not obligated to ever hire or even speak to them again. There is no risk of a wrongful dismissal lawsuit or a required severance payout to no longer use their services in the future. 

What US Companies Need to Know about Paying Employees in Canada 

Topics: Compliance

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