International 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.