A US Company looking to make a mark on the Canadian market needs to keep in mind that, for all the similarities Canada and the US share culturally and economically, there are significant differences, too. One of these differences is between the ways that US employees are paid versus Canadian employees. Labour codes, registering with the CRA, and Canadian compliance can be challenging and time consuming endeavors when trying to smoothly transition your business from national to international. Ultimately, it might be worth it to look into partnering with a Canadian Employer of Record, as they will streamline the payroll process and make sure that paying your Canadian employees properly is the least of your concerns. Read on to get some of the most salient points when it comes to securing means of paying a valuable Canadian team.
Legal and Tax Regulations
When conducting business in a foreign market, it's essential for a US company to observe the legal compliance of the nation they plan on expanding in, alongside the complexities of tax regulations.
What may seem common sense to an US employer, may in fact be a legal misstep if not careful, and it makes sense for a US business to obtain Canadian legal counsel. Canada has different regulations regarding benefits, sick leave, vacation time as well as union regulations. Non-compete agreements that would be kosher in the states are illegal in Canada, and if you're a small-to-medium business, you may find unfamiliar regulations regarding small business administration, as well as untapped opportunities such as the Canadian Small Business Financing Program. It's important to look into the avenues that will insure that your employee insurance is compliant with Canadian labour codes, and it will be worth it if by carefully researching the necessary legal policies you will save yourself from fines or other penalties.
When it comes to paying Canadian employees it's necessary to look into the challenges that arise with the fluctuating exchange rate. There are a number of complex factors involved regardless of which route you take—whether it be watching the exchange rate on a regular basis or keeping an account with Canadian currency and paying your employees from there. Another option for paying Canadian employees is to pay them in American dollars, though that comes with it's own difficulties and policies as well—it’s also more expensive with the exchange rate.
Partner with a PEO
An alternative to handling the payroll internally is to partner with a Canadian Employer of Record (or PEO). There are a number of benefits to this approach, such as the time that it will save for you to focus on your own business, while the PEO takes care of the tedious HR that is involved. If you're still in the recruiting process, a Canadian Employer of Record will be able to hire Canadian employees on your behalf, and will have the resources to find top quality staff. You will be able to delegate all of the legal and financial matters to the EOR and they will have already been registered with the CRA and have the infrastructure in place to streamline the process for your business. Best of all, the Employer of Record will continue to manage all of the HR and payroll tasks, and all you have to do is pay a flat fee. You may eventually find that an EOR will even free up some resources so you can improve the infrastructure that you already have set for your employees back home. There is nothing quite like increasing the morale of your troops with state-of-the-art equipment, when your budget allows for it.