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How International Companies Can Deal with Canadian Payroll

Posted by Stacey Duggan

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Jul 13, 2015 9:00:00 AM

How_International_Companies_Can_Deal_with_Canadian_PayrollInternational companies can build brand awareness and increase sales by expanding their business operations in Canada. Canadian consumers want more buying options, and international companies tend to do well here.

However, expanding into Canada isn’t an easy task. The logistics alone can be incredibly time-consuming and tedious—like getting a Canadian resident on the board of directors, applying for a business number, deciding on the most advantageous jurisdiction to incorporate in, learning new labour laws, and setting up banking and insurance infrastructure. Your to-do list just to be settled in Canada will be incredible long.

However, once the start-up administrative headaches have been dealt with and you can start doing business, it’ll all be worth it. But the hard work won’t be over yet—far from it. You’ll still have to learn how to process Canadian payroll—and the payroll regulations in the country are complex and stringent, so you have to do it right. And this isn’t a one-time responsibility; it’s an ongoing process, it’s going to change, and you’re going to have to keep up.

International companies have two options when it comes to dealing with Canadian payroll: manage it internally or outsource the responsibility. Let’s take a closer look at both options.

Deal with It Internally

Your natural inclination might be to deal with Canadian payroll in-house. This way, you have full control of the process, and you might think it’s the most cost-effective option. If you’re dedicated to learning the ins and outs of the local payroll regulations and have the time to spend processing payroll every pay period, this could work out in your benefit.

Unfortunately, that’s not usually the case. You’re busy on core business activities and probably won’t have the time it takes to handle it properly; you might rush the process and make mistakes. And if you’re not learning the payroll regulations—how to set up the right government accounts, which mandatory and voluntary withholdings to deduct, what remittance deadlines apply to you, what forms to fill out, and so much more—you risk damaging your company’s image by improperly paying your Canadian workers and getting hit with interest charges, penalties, and fines. 

Some international companies think the process is simple: just classify all your Canadian workers as independent contractors, convert some funds, and cut some cheques in order to avoid complying with tax regulations. But the government is wise to this deception, and it will cost you far more in the end than if you were to comply with the regulations in the first place.

Outsource Canadian Payroll to an EOR

An employer of record, or EOR, can take the burden of processing Canadian payroll off your hands. This can be beneficial for several reasons. If you’re not ready to establish a Canadian presence yet, if you don’t have the time to process payroll, or if the payroll regulations are just too complex and stringent for you to comply with on your own, then partnering up with an EOR is a great idea.

This is how it works: the EOR will become the legal employer of your Canadian workers so it will take on all of the responsibilities and liabilities that come with it.

Your EOR will send out pay stubs and pay cheques, fill out all of the correct paperwork, work with the government, ensure full compliance with Canadian law, send remittances, and file the necessary forms on your behalf. It will deal with tax deductions, CPP and EI contributions, allowances, expenses, benefits, vacations and holidays, and everything else that’s required.

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

Topics: Canadian Payroll, International Companies

How Does an International Company Pay Employees in Canada

Posted by Stacey Duggan

|

Jun 22, 2015 9:00:00 AM

How_Does_an_International_Company_Pay_Employees_in_CanadaExpanding business into Canada or simply using Canadian workers due to their skill sets can be highly beneficial for an international company. However, paying them isn’t as simple as it might seem. There are strict laws to follow when it comes to processing payroll in the Great White North.

If you’re doing business here, you must learn how to properly pay employees in Canada or risk getting on the government’s bad side, having to deal with audits, labour issues, and legal entanglements, getting hit with heavy fines and penalties, and getting a bad reputation. You must follow the appropriate Canadian payroll and tax laws—including deductions and deadlines—not those that you’re used to following in your home country.

When it comes to paying workers in Canada, an international company can choose between three options.

Paying Them Yourself

If you run a relatively small international company and you wear many hats, you might consider it to be more cost efficient and easy to pay employees in Canada on your own. If you go with this option, you’ll have to create the right accounts, get the right government bodies in the loop, ensure that you’re paying your remittances on time, ensure that you follow the correct payroll and tax laws, and make sure that your calculations are correct each and every time, while keeping up with changing legislature. This can get incredibly time consuming.

Many international businesses try to find loop holes to avoid dealing with government bureaucracy—they simply classify their employees as independent contractors so they can cut and mail cheques without having to worry about Employment Insurance, Canada Pension Plan, taxes, remittances, researching legislature, and other legal issues. But the government is wise to this kind of fraud—it will be looking closely, and when you get caught, you’ll have more legal headaches to deal with than if you would have just followed the letter of the law to begin with. If you’re not well-versed in Canadian payroll law, you shouldn’t risk taking on payroll processing on your own. 

Hire an In-House Payroll Clerk

You could also consider hiring a payroll clerk to pay employees in Canada. Though this is better than trying to handle the responsibility on your own, it’s still risky and not entirely cost efficient. You’ll have many expenses related to this hire—from the clerk’s salary and benefits to training, equipment, and supplies—the money you’ll be spending to process payroll in-house will quickly add up. Plus, if this clerk doesn’t fully understand the nuances and intricacies of payroll law in Canada, you still risk the chance of errors being made and getting hit with fines and penalties that you’ll be liable for as the owner of the international company.

Use an Employer of Record

You can pay employees in Canada faster, more accurately, and more efficiently if you use an employer of record (EOR). Your EOR will be the legal employer of your Canadian workers so all of the work associated with paying them will be left with them.

You won’t have to worry about calculations, deadlines, classifications, paperwork, or anything else. Your EOR will have you covered. Your workers will always be paid according to the appropriate laws. Plus, you can even hand over your human resources responsibilities to your EOR, too, so you’re left with very little administrative work to handle. You’ll have peace of mind knowing that all of the work in Canada is being handled and you’ll have more time on your hands to focus on the core business activities that should have your full attention.

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

Topics: Paying Canadian Employees, International Companies

How International Companies Legally Pay Their Canadian Employees

Posted by Stacey Duggan

|

May 11, 2015 9:00:00 AM

How-International-Companies-Legally-Pay-Their-Canadian-EmployeesAlthough you may think you’re paying your Canadian employees legally—you could be wrong. International companies often believe their payroll practices are on the up and up, but without proper experience and expertise in Canadian payroll legislature, they could be partaking in illegal activities. It’s not so easy to pay Canadian workers—you can’t just convert funds to Canadian dollars and mail out cheques every couple of weeks. There are laws to follow, employee classification to figure out, and taxes and other deductions to consider.

To ensure you are paying your Canadian employees legally, check out your three options below.

Learning the Ropes

International companies can choose to take on the responsibility to pay Canadian workers on their own. Though this is a fair option to choose, it takes considerable time and effort and is usually the reason that workers aren’t paid legally—either because of a lack of knowledge or because employees want to ignore the law.

If you are serious about paying your workers legally, you’ll have to learn the ropes. The Canadian legal system related to payroll is complex, ever changing, and often confusing. Not every law applies to all international companies so you’ll have to be able to decipher each law and understand whether or not it applies to your type of business. Additionally, the legislature changes depending on where your Canadian employees are working—each province has its own regulations.

If you want to learn the ropes and get the experience and knowledge you need to legally pay your workers in Canada, it’s quite admirable, but it’s going to be more difficult than you think. The legislature, taxes, deductions, remittances, and deadline all differ from those in your home country. Miss even one vital piece of the puzzle and you could be setting yourself up for fines and penalties—not to mention a bad reputation.

In short, there’s a lot to learn, and you’ll have to learn it quickly—before you hire and pay your first employee. Additionally, if you’re going to handle this administrative work internally, you’ll have to establish a presence in the country, and set up the appropriate government accounts and infrastructure before you even get started. This can delay your expansion efforts considerably.

A Payroll Service Provider Can Help

Your second option is to outsource your payroll needs to a payroll service provider. When you take this route, you don’t have to worry about learning the Canadian laws or ensuring that you’re complying with them. The payroll provider can do this for you. Not to mention, the company can do this at a fraction of the time and cost that it would take you to manage payroll, because it already has a team of experts on staff that knows the ins and outs of the business. You won’t have to worry about deducting taxes, remitting payments, filing annual tax returns, mailing pay stubs, or keeping track of benefits, contributions, or vacation and sick days. Choose the right service provider and you can also outsource your human resources administration as well, so your entire business can be more streamlined in the back office.

Partner Up with an Employer of Record (EOR)

The last and most beneficial option for international companies is to partner up with an employer of record in order to pay Canadian workers legally. The employer of record in Canada legally acts as the employer to your workers in the country. The EOR takes over the responsibility of dealing with all aspects of your Canadian workforce, including payroll and human resources and all other administrative roadblocks.

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

Topics: Canadian Employer of Record, International Companies

International Companies: 5 Easy Steps to Calculating Taxes in Canada

Posted by Karen McMullen

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Feb 20, 2015 9:00:00 AM

International_Companies-_5_Easy_Steps_to_Calculating_Taxes_in_CanadaCalculating taxes in Canada is a requirement for international companies hiring Canadian workers. Regardless of where your company is based or whether or not you’re expanding operations into Canada, the fact is, paying Canadian workers properly means calculating taxes, and it must be done if you use the services of Canadian employees. Skipping on tax deductions can create real headaches for your business—from fines to serious penalties.

Although there are many regulations to know, and the process can change based on several different factors;

Gross Income

The first step to calculating taxes is to add up the gross income for each of your employees. You’ll have to have a record of their taxable earnings, which could include expenses, benefits, tips, holiday pay, and overtime, depending on the worker, the business you run, and which province you’re operating in.

Withholdings

Once you’ve calculated your employees’ gross income, you need to deduct any applicable withholdings. This typically includes Canadian pension plan contributions and employment insurance premium, unless you’re operating in Quebec. These withholdings will vary depending on workers’ age, classification, type of employment, location, and hours worked, and there are maximums that can be withheld. It’s up to you as the employer to ensure you’re deducting the appropriate amounts and that you’re keeping up with any changes that might pop up from year to year. You can use an online payroll calculator to help you with this step.

Calculating Remittances

International companies are required to contribute to government programs like CPP and EI by matching a percentage of the contributions that the employees make to them. Your own annual contributions have maximums as well, so you need to ensure you don’t overpay, since you won’t be able to get that money back. And if you underpay, you could be facing fines, so exact calculations are important.

Remitting Withholdings

Now that you’ve properly calculated the withholdings that you and your employees have to pay each pay period, you have to remit them to the Canada Revenue Agency or other appropriate authorities. The deadlines for these remittances are strict and any late payment can cause you to pay interest on the amount payable. If you’re not diligent, you can be required to give even more money to the Canadian government, regardless of the reason for your tardy payment.

Reporting

Lastly, international companies have to provide the government with yearly tax information slips, like a T4 and T4A. They are generally due at the end of February each year. On these slips, you’ll detail how much your employees have earned and what amount was withheld for taxes. Once you file these reports, your employees can complete their own personal taxes.

Simple? Probably Not

Though there are only five steps to follow for calculating taxes in Canada, each step can require time-consuming paperwork, due diligence, and careful calculations. Many different factors will have to be considered that can change the process, such as your type of business, your area of operation, and your employee classification. It likely won’t be as simple as you hope it will be.

Luckily, international companies can outsource their Canadian HR and payroll to an Employer of Record service in Canada (similar to a PEO). This service provider will take over the administrative role of handling Canadian taxes so you don’t need to. Outsourcing can save you the time and effort of calculating taxes so you can focus on more important business responsibilities, all the while knowing that you’re complying with Canadian payroll laws.

Canadian Payroll Tax Deduction Calculator

Topics: International Companies

3 Reasons Why an Int'l Company Has Trouble with Canadian Payroll Laws

Posted by Karen McMullen

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Jan 5, 2015 9:00:00 AM

3_Reasons_Why_an_International_Company_Has_Trouble_with_Canadian_Payroll_LawsAn international company venturing into Canadian water with its business operations can get into trouble with Canadian payroll laws. The laws are strict and complex, and it can be easy to make innocent payroll errors when trying to pay Canadian workers. However, innocent or not, these mistakes can lead to heavy penalties and fines, which, naturally, every international company wants to avoid at all costs. Getting into legal trouble when it comes to Canadian payroll laws can cost you an arm and a leg, and make it fiscally impossible to continue to employ workers in Canada.

Here are three reasons why an international company can get into trouble with Canadian payroll laws, so you can take a proactive approach at being compliant and avoid making costly errors.

Unfamiliarity

Often, an international company will think that all it has to do to pay Canadian workers is to convert the funds to Canadian, cut them some cheques, and mail them out. However, misclassifying your employees to save yourself the trouble of dealing with payroll laws can be a fatal mistake. Taking the easy way out is illegal and will lead to costly repercussions by the government if you get audited, even if you simply took this route out of ignorance or unfamiliarity with the foreign legislature. As a business operating in Canada, you’re required to know the ins and outs of the Canadian payroll laws. Ignorance and unfamiliarity are not legitimate reason to make payroll compliance and employment standards errors.

No Experience

So you’ve read the Canadian payroll legislature and you think you have a good grasp on the terms, language, and requirements. This is a great first step to compliance, but you can still run into some trouble from lack of experience. If you’re just starting out in the country, you likely don’t know how each of the laws you’ve read about apply to your specific situation, and even if you do, you might be unsure about how and when to register your accounts, send your remittances, or perform your taxes. The laws vary by province, so it can be difficult to keep up to date with exactly when and where you need to be sending payroll information to the government. If you miss out on a deadline simply because you didn’t realize there was one, you could still get into trouble. Experience with payroll laws takes years to acquire, so it’s natural that an international company won’t have all the experience needed to apply the correct laws to the correct situations right away. 

Vigilance

Keeping up with payroll legislature takes vigilance. The laws change frequently and you need to be on top of the updates to ensure you’re always compliant. What’s more, you need to track and maintain various accounts to stay current. If you’re not working on your payroll attentively, you can easily miss a deadline for an account, lose track of hours or vacation days, or misclassify employees. Attention to detail and careful consideration are vital to your company’s payroll success.

If you’re operating on Canadian soil and using Canadian workers, you need to be intimate with the payroll laws of the country. Not knowing them, understanding them, or implementing them properly within your payroll system can get you into trouble with the government authorities, which can cost you a lot of money in fines. To avoid any legal ramifications due to your payroll processes, make sure you read the appropriate laws for your company, get experience in order to understand the laws better, and vigilantly stay on top of your payroll processes.

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

 

Topics: Canadian Payroll Laws, International Companies

How International Companies Pay Canadian Employees

Posted by Stacey Duggan

|

Dec 24, 2014 9:00:00 AM

How_International_Companies_Pay_Canadian_EmployeesExpanding your business into other countries is a logical way to gain additional revenue and build your brand on an international scale. International companies do it all the time—but it’s not as easy as you might think, especially when we’re talking about expanding into Canada. Canada has stringent and often complicated payroll regulations, which can be challenging to follow properly. Though learning to pay Canadian employees legally and properly takes some time, you can overcome this challenge by learning the ropes or outsourcing.

Manage Payroll Internally

Some companies might think that they can just pay Canadian employees themselves. Though it’s certainly possible, it’s a risky endeavour. Going about it wrong can cost a business a lot of money in fines and penalties. The Canadian government takes payroll regulations seriously, and it won’t make exceptions for new international companies coming into Canada.

If international companies think they can avoid tax regulations by just sending Canadian employees cheques in Canadian funds or setting them up as independent contractors when they don’t actually meet the right criteria for being contractors, they can be in a heap of legal trouble. These two options are illegal and can lead to criminal penalties and large fines.

Rather, to pay Canadian employees, a foreign company will need to establish a presence on Canadian soil, sign up with the CRA, and create and maintain federal and provincial accounts. The company will need to learn about local payroll laws, which change depending on where the Canadian employees will be working, and calculate the proper taxes based on the province or territory they’re in. You’ll also have to classify each employee and base your taxes on this factor, too.

Regular remittances and filings will also need to be provided to the proper government officials and you’ll have to keep up to date with all legislative changes to ensure you’re always compliant. The whole process can be stressful and time consuming, and mistakes can easily be made. You’ll need to get very intimate with the Canada Revenue Agency, which can be a real hassle when you already have so many more expansion responsibilities to deal with.

Use an Employer of Record (EOR)

On the other hand, international companies can use an EOR to pay Canadian employees. This is an excellent alternative when you want to pay Canadian employees to work remotely or you’re just not ready to have a Canadian presence established yet.

When you use an EOR, all of your government filings are done for you. Your EOR already has experience and established procedures to deal with Canadian legislature. The EOR will make sure you’re compliant to Canadian laws and will file all the necessary payroll paperwork on your behalf—including taxes, CPP, EI, worker’s comp, allowances, expenses, and benefits.

Outsourcing your payroll needs to an EOR can save you the hassle and potential fees of learning and using the Canadian payroll system, so you have more time to dedicate to your expansion efforts.

Streamline Operations

International companies expand into the Canadian market all the time. But when they hire and pay Canadian employees, they need to ensure they’re compliant with all federal and provincial payroll laws established in the country or risk being fined. This can be difficult and time consuming. Though a foreign company can handle the burden of paying Canadian employees on its own, it’s often best to go with an Employer on Record for the task to ensure all the paperwork is filed and submitted properly and on time, so the expansion can go as smoothly as possible.

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

Topics: Pay Canadian Employees, International Companies

Payroll Tips for International Companies Expanding to Canada

Posted by Ray Gonder

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Dec 2, 2014 8:05:00 AM

Payroll Tips for International Companies Expanding to CanadaExpanding into Canada may be the next logical move for your international company, but Canadian payroll can be a big hurdle to overcome. Something as technical as payroll shouldn't get in the way of your business operations and future goals. That's why we've put together these payroll tips to help international companies that are ready to move into Canada but need guidance on how to get started.

The simplest way to handle payroll in Canada is to use an Employer of Record service, which already has established procedures and registrations. However, you can manage your own Canadian payroll as well. Here's what you'll need to do.

Register Your Business

If your business is operating in Canada, you'll need to register for a Business Number. You'll also need to register for five program accounts: Import/Export, GST/HST, Corporate income tax, worker’s compensation and payroll. By registering for these accounts, you'll be able to remit payments to the government and stay compliant. You can register for these accounts online, through the mail, or in person.

Manage Federal Payroll Taxes

Some payroll taxes are consistent for employees all over Canada. These payroll taxes include CPP (Canada Pension Plan), EI (Employment Insurance), and Worker's Compensation. Although these taxes must be paid for all employees, the rates may vary from place to place.

Figure Out Local Payroll Taxes

Once you have figured out CPP, EI, and Worker's Compensation for your employees, you'll need to learn about province- and territory-specific payroll taxes. For example, there are three additional payroll taxes in Quebec over and above the previously mentioned payroll taxes. In addition, employers in Ontario must pay EHT (Employer Health Tax) in addition to basic payroll taxes. You can do your investigating into local payroll taxes at the Canada Revenue Agency's website.

Make Your Calculations

It's one thing to know that you have to pay certain payroll taxes, and it's something else entirely to know how much to pay for each employee. One of the most difficult parts of Canadian payroll is knowing how to classify each of your employees. There's a great deal of paperwork that needs to be properly filed for each employee, and then you'll need to classify each employee based on their paperwork. This is not just a one-time task. If circumstances change for an employee--for example, if an employee gets a raise or has a child or gets married--you'll have to reclassify their paperwork, and this affects your payroll taxes.

Keep Up With Canadian Tax Law

Just when you feel that you have everything under control, the laws governing Canadian payroll taxes change. In general, this happens at least once a year. Legal interpretations can bring about sudden changes in the way laws are followed. It's imperative that you keep your ear to the ground and follow changes in Canadian tax law.

Some international companies have the resources and wherewithal to handle Canadian payroll on their own, but if you don't currently have systems in place to manage Canadian payroll, you can still expand into Canadian territory by using an Employer of Record to handle all of the above tasks for you. They already have the experience and systems in place to take care of payroll complexities, leaving you to do what you do best.

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

Topics: Payroll Tips, International Companies

What International Companies Need to Know About Canadian Employment

Posted by Stacey Duggan

|

Nov 25, 2014 8:05:00 AM

What International Companies Need to Know About Canadian EmploymentCanada is a great place for international companies to do business for many reasons, but there are certain things you'll need to know about Canadian employment for your transition to go smoothly. For instance, personal income taxes account for the most significant revenue sources for the Canadian government, and employers play an essential role in the government's collection of personal income tax. There are ways to alleviate this burden on international companies, however; you just have to have a firm understanding of Canadian employment. Here's a primer.

The Canada Revenue Agency's Role

The Canada Revenue Agency (CRA) is responsible for the collection of income taxes, employment insurance premiums, and Canada Pension Plan (CPP) contributions. All employers, including international employers who hire Canadian workers, must register for an account with the CRA. Your CRA account is necessary for collecting information about your employees and remitting various types of payroll taxes.

The CRA provides an online calculator to help employers calculate payroll deductions from employees' paycheques, but it can be difficult to stay on top of all the exceptions, law changes, and changing status of your employees, especially if you're not well-acquainted with Canadian employment regulations.

Provincial Regulations

In addition to federal payroll taxes, you'll need to pay attention to provincial laws as well. For example, in Quebec, employers must make contributions to the Quebec Pension Plan (QPP), the Health Services Fund, Quebec Parental Insurance Plan, Compensation Tax, Workforce Skills Development and Recognition Fund, and Commission des nores du travail. Employers of workers in Ontario must take the Employer Health Tax into account as well.

Physical Presence

If you plan to do transactional business in Canada, you will need to register a business presence and open up all of the pertinent government accounts; payroll tax, worker’s compensation and the applicable provincial sales tax as well as others, before you can pay your first employee and send out your first Canadian invoice.

Do you only want to hire a Canadian to work for you remotely? Do you want to expand your business into Canada but are not ready to take on the complications of a new countries employment standards?

Fortunately, there is a simple solution. Many international companies have found success by hiring a Canadian Employer of Record (EOR). Like Professional Employer Organizations (PEO) in the United States, Employers of Record take care of your Canadian workforce so you rather don’t have to register a business presence in Canada at all or can concentrate on the expansion itself not Canadian employment compliance. You pay the EOR directly, and the EOR manages all aspects of your payroll from onboarding, employment agreements, workplace safety and tax remittances.  This speeds up your expansion immeasurably and shields you from the common mistakes international companies make as they're learning the ropes in a new territory.

To learn more about EOR services, contact us at The Payroll Edge. By working with us, you will save time, money and alleviate your risk.

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

Topics: International Companies

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