Although the United States and Canada have much in common, there are some significant differences in the ways the two countries handle business and labour. This is especially important for American companies to consider when they think about carrying on business north of the border. U.S.-based businesses operating in Canada soon find, for instance, that they can't use their accustomed methods of hiring, managing, and terminating employees.
Minimum Standards and Entitlements for Employees
Canadian federal and provincial governments have enacted laws regarding minimum standards and entitlements for employees, and as an employer, you need to comply with these standards. If you fail to comply, you could face personal penalties and sanctions, even if you're not a Canadian citizen.
Some of these minimum standards and entitlements include minimum wages, work hours, overtime pay, statutory holidays, guidelines regarding vacation and vacation pay, pregnancy and parental leave, notice of termination of employment, and severance pay. In the U.S., hourly workers are normally exempt from some of these standards and entitlements, but this is not necessarily the case in Canada.
One marked business difference between the United States and Canada is that Canada is much more union-friendly. About 30% of Canadian employees belong to unions, compared with about 13% of American employees.
Therefore, American companies need to be aware of policies and guidelines involving unions. One such guideline that may surprise U.S. employers is that in Canada, when a business is sold or transferred, the union has the right to carry over the bargaining rights and collective agreement to the acquiring employers.
Termination of Employees
The American concept of "employment at will" does not exist in Canada, and understanding the process of terminating employees is extremely important for American companies operating in Canada. Every Canadian jurisdiction provides for minimum termination notice periods or pay-in-lieu of such notice. Depending on various factors, termination notice periods could be as long as 24 months, so it's imperative that employers understand the laws before terminating an employee.
These and other differences between the United States and Canada can prove challenging to American businesses operating in Canada. One of the best ways to overcome these challenges is to have a partner north of the border who can steer you through the legal and business world so your business can thrive in its new locale.
With a Canadian payroll partner, or Employer of Record (EOR), like The Payroll Edge, you don’t need to worry about establishing a Canadian administrative presence, registering and maintaining accounts with any of the Canadian governmental authorities, nor will you need to establish a Canadian banking, financial, and insurance infrastructure, or make filings and remittances to Canadian tax authorities.
A Canadian Employer of Record stays on top of Canadian employment regulations and protocols, so you can focus on operating and expanding your business.
To learn more about Employer of Record services and operating your American business in Canada, contact The Payroll Edge. Our knowledgeable staff can answer your questions and help you to reach your goals.