Learning how to navigate the payroll process in a foreign country can be a real challenge, even when that country is your neighbour to the north. While the United States and Canada share many business practices, there are some distinct differences in terms of how they regulate payroll management. In order to effectively, and legally, extend your business within Canada, it is essential that you become familiar with some of the unique challenges posed by the Canadian payroll system.
In order to better equip you with the information you need to successfully implement an effective payroll system, here are five Canadian payroll mistakes that US companies make all the time.
1. Not Consulting Best Practices
Canadian payroll Best Practices guidelines are an excellent way to familiarize yourself with the standard procedures for payroll within Canada, giving you a sense of what to expect and what to watch out for as you proceed. The guidelines give you the information you need to make sure you are complying with Canadian regulations, while also giving you the tools necessary to streamline your business by simplifying the transition from US practices to Canadian ones. Having access to the necessary information early on can save you a lot of grief down the road, not to mention time and money.
2. Lack of Familiarity with Canadian Payroll Regulations
The Canada Revenue Agency (CRA) has strict policies and strict deadlines that are unique to Canada, and it is imperative you follow precisely, in order to avoid costly fines and legal problems in the future. Taking the time to research Canadian payroll regulations, and how they differ from those in the United States, is an essential part of establishing a solid Canadian payroll system. That means becoming familiar with tax codes, relevant maximums, exceptions and deductions, and their associated deadlines. The CRA takes violations very seriously, and a lack of familiarity with the appropriate regulations could have serious consequences for your business.
3. Keeping Up with Changing Regulations
In an ideal world, you would be able to familiarize yourself with Canadian payroll regulations and be set for the future, but in Canada, regulations change regularly, and ignorance of those changes does not fly with the CRA. It is expected that if you are conducting business in Canada, you will keep up to date with all relevant changes, and make sure to comply. It is imperative that US companies operating in Canada routinely follow up on CRA regulations, and make sure that they are acting in accordance with the latest information. Failure to do so could lead to serious fines that could hurt your operations in Canada.
4. Correctly Classifying Employees
Making sure that you have given your employees the correct classification, be it permanent employee or independent contractor, is an important part of establishing proper payroll practices in Canada. The CRA monitors employee classification carefully, and misclassification is taken very seriously. Whether you deliberately misclassify a worker, or make an honest mistake due to unfamiliarity with classifications, the financial cost is hefty, with penalties, fines, and interest fees as a consequence.
5. Disorganized Data
While it may seem trivial, making sure that you have all of the proper paperwork in order is an essential part of a smooth transition to conducting business in Canada. Expanding north means new employees, new records, and new data to collect and input. Having your employees fill out the proper paperwork, provincial and federal, in a timely fashion, and making sure you establish an organized system for record keeping, will save you a lot of anxiety in the future. Disorganized records can lead to a host of problems in the future, such as over or under paying employees, which means unnecessary financial burden.