In recent years, a lot of US based companies have been expanding their operations into Canada, a landscape well known for its high standard of education and hard working populace. It's a no-brainer for some, because despite some of the difficulties involved in establishing a business there, the rewards far outweigh the efforts required.
What many US businesses don't consider, however, is all the differences between Canadian and US law, subtle or not. While many laws seem incredibly familiar, others are quite different and like the states, they can vary province to province or territory to territory. It's important to learn the differences and ensure you remain compliant in order to avoid fines and penalties that are otherwise avoidable and that goes extra for paying workers in Canada.
The Canadian Revenue Agency (CRA) is the federal authority when it comes to tax laws in Canada, and that extends into how you pay your workers. As a foreign employer, it's critical to do the required research to ensure you understand these laws and how you're meant to process payroll and taxes. Paying workers in Canada as an American business can be rather challenging in this regard, because you often have to abide by Canadian law and also American law and that's why so many businesses have begun turning to employers of record (EORs) for assistance, especially in terms of legal compliance.
Without an EOR to help you out, paying workers in Canada is a delicate task and you need to ensure that their payroll reflects all the taxes they need to pay, as well as any deductions to retirement or pension plans, unemployment insurance and more are done to satisfaction with the law.
Worker classification is a big issue and is actually intrinsically linked to paying workers in Canada as well. Workers classified as independent contractors have different employment, legal and payroll standards than traditional employees do and that reflects when it comes time to deal with payroll, largely in the tax department.
It can be especially tempting for some companies paying workers in Canada to classify their workers incorrectly, whether intentionally or not. While there are less taxes associated with independent contractors, if you're dealing with employees, they need to be classified appropriately in compliance with the Canadian Revenue Agency and their laws. While in the short-term, it appears to be a quick way to save some money, it can actually end up costing you a great deal more in terms of penalties, levies and fines so it's best to ensure you've done it right the first time to avoid any of that unpleasantness.
Consider an EOR
It's clear to see why so many can get frustrated with the amount of difficulty that can be involved with what seems to be such a cut and dry operation. It leaves a great deal of businesses wondering how to legally, efficiently and easily manage their Canadian workers in a way that doesn't break their budget or take up valuable time and resources in heavy research.
EORs actually owe a lot of their popularity to US companies looking for easy methods when it comes to paying workers in Canada and it's no wonder. When they act as the legal employer of your workers, it's their job to sort of all this out – the classification, the legal compliance, all tax filings and insurance – and best of all, they're already established within Canada which means you can actually skirt the hardest part, which is business registration. They would pay those employees on your behalf, manage them, hire and fire them – everything. That way, you can maintain full control without worrying about breaking the law, or hurting your employees.