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A Canadian Payroll Class May Not be The Right Choice

Posted by Stacey Duggan

|

Jul 29, 2014 8:30:00 AM

Canadian Payroll Class FrustrationWhen it comes to understanding Canadian payroll, your first instinct may be to enrol in a payroll class to help your payroll and HR department learn the specifics.  For those companies outside of Canada, this search is in effort to understand foreign payroll compliance and is often handed over to someone hesitant to learn a new set of laws when they are already comfortable with their own. 

Canadian rules and regulations when it comes to paying an employee can be vastly different, especially when compared to a country such as the United States.  These differences can exert a level of frustration on the payroll or HR person who is already schooled in one set of legislative compliance.

When it comes to choosing a Canadian payroll class ensure that part of the curriculum covers the following:

  • Federal payroll taxes including the Canada Pension Plan, Employment Insurance and Worker’s Compensation.
  • The additional provincial payroll taxes as they vary from province to province (ensure the class covers the province that most interests you as many payroll classes will avoid Quebec due to its complicated nature)
  • Employee and Employer deductions and the remittance schedules assigned to each tax account.
  • Employment standards when it comes to overtime, statutory holiday pay and vacation pay and a section on how these vary from province to province as well.

Not only should the above information be covered in a Canadian payroll class but the payroll and HR department need to be aware of the over 1700 rules and regulations when it comes to the Employment Standards Act which also varies from province to province.

Ensure that the Canadian payroll class you register your in house payroll person includes information on:

  • Health & Safety and a Return to Work program should your worker be injured.
  • Termination and pay in lieu of notice.  Note: there is no ‘At Will’ employment in Canada.
  • How to properly compose an employment contract ensuring that all clauses meet employment minimums.

What are the chances that not only will the Canadian payroll class offer all of the above, but that your payroll and HR person taking the class will retain all of the information?  How will they keep up to date on the ever-evolving employment regulations and changes to tax law?  Most likely the Canadian payroll class will offer nothing more than an overview of the functions and processes of paying an employee

What outsourcing your Canadian payroll to The Payroll Edge will bring:

  • Complete compliance when it comes to calculating payroll taxation.
  • Correct, on time remittances with all government bodies in every province.
  • Employment standards expertise ensuring you meet your due diligence.
  • Certified experts who understand the law and keep up to date on its changes.
  • The freedom to focus on your business.

Canadian payroll processing doesn’t have to be complicated and you don’t have to take a new field of study to get it done. The Payroll Edge is a Canadian based payroll processing company specializing in helping American and foreign companies expand their workforce into Canada by acting as the employer of record (EOR), a similar service to a PEO in the U.S.  We also take care of small businesses in Canada who don’t have the time or expertise for payroll.

The Payroll Edge offers seamless workforce expansion into Canada without the daunting task of understanding foreign employment compliance. Contact us today for more information on how we can help your business.

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: Canadian Payroll Deductions, Employee Payroll Deductions, Payroll Tax Tips, U.S. Business operating in Canada, Paying a Canadian, Calculating Taxes in Canada, Canadian payroll class

Use it or Lose Vacation Policies: Not in Canada!

Posted by Stacey Duggan

|

May 29, 2014 8:30:00 AM

If you’re an American or foreign employer hiring Canadian employees, you may or may not have heard employee vacation policies are “use it or lose it”. Can it be true? Well, partially.

In Ontario, the Employment Standard Act or ESA for short, states that:

“Most Employees earn at least 2 weeks of vacation time after every 12 months. Employees are entitled to be paid at least 4 per cent of total wages earned as vacation pay.”

Employers are not required to let the worker carry vacation credits forward from one year to the next if they went unused. However, the employer is required to pay the Canadian worker their accumulated vacation pay whether the vacation time was taken off or not. There you go, the “use it or lose it” policy does apply –to vacation time NOT vacation pay!

Vacation Entitlement & Pay by Province The Payroll Edge resized 600

Fast Facts on Canadian Vacation Policies

  • Minimum vacation pay across Canada (excluding Saskatchewan) is 4 per cent of total wages
  • Minimum vacation pay in Saskatchewan is the highest in the country at 6 per cent of total wages
  • Minimum vacation time across the country (excluding Saskatchewan) is 2 weeks after 12 months
  • Minimum vacation time in Saskatchewan is the most generous at 3 weeks after 12 months
  • Quebec is the only Canadian province that includes tips and gratuities’ as part of total wages when calculating vacation pay
  • New Brunswick is the only Canadian province that includes only regular earnings when calculating vacation pay

Save our Canadian Vacation Pay and Entitlement Chart or bookmark this page to track your Canadian workers vacation entitlement and figure out based on province what earned wages includes when calculating the 4 per cent (or more) of vacation pay.

The Payroll Edge answers question like these on a daily basis for our American and foreign clients who employ Canadian workers. We are their Employer of Record (EOR) service provider or Professional Employer Organization (PEO) as it’s called in the United States. 

As specialists in Canadian employment law and compliance, we offer a complete HR management solution that takes the pain out of learning a whole new set of rules and regulations in another country.  

7 Signs It's Time to Outsource Payroll

Topics: US Firms Expanding into Canada, U.S. Business operating in Canada, Ontario, Canadian Employment Laws, vacation policy Canada

5 Reasons Why US Firms are Hesitant to Expand into Canada

Posted by Stacey Duggan

|

May 23, 2014 10:52:00 AM

5 reasons why us firms are hesitant to expand into canadaUS companies do more business with Canada than with any other foreign country. US firms expanding into Canada can find thriving markets that make the expansion well worth the effort. So, why aren’t more US firms expanding into Canada? Like any major business decision, there are many factors to consider prior to an expansion. When looking into those factors, some US businesses may become hesitant. However, thousands of US businesses have successfully overcome those factors, and gone on to successful expansion. While all of these reasons are worthy of careful consideration, they alone shouldn’t derail an otherwise lucrative expansion.

Cost

For US firms expanding into Canada, cost is often the leading reason for hesitancy. Setting up the accounts and infrastructure necessary for a successful expansion can be considerable. There are legal costs, administrative costs, logistical expenses, and more. However, with the proper organization and approach, these costs can be minimized. And, in the long run, they pale in comparison to the profits that a successful expansion can generate.

Complications

Moving a US business into Canada isn’t as simple as renting a building and opening your doors. You’ll need to deal with multiple bureaucracies while setting up your Canadian presence. The Canadian government has strict rules about everything from employee classifications to product labels. Learning to navigate all of the bureaucracies, while still running your US business, can be time consuming and difficult.

Legalities

US firms expanding into Canada are entering a completely different legal system. There are different laws governing employee retirement funds, employee termination, pre-employment drug screening, and much more. It’s a convoluted and complicated legal code that has a different foundation and direction than what US employers are accustomed to. It can take years to learn the ins and outs of Canadian employment and business law, and then it requires constant vigilance to keep up with changes to those laws.

Stretched too Thin

US firms expanding into Canada may be hesitant due to fears of stretching their existing staff to thin. If you’re using your current US staff to manage your Canadian expansion, you may be putting too much on their plate. While you want your Canadian expansion to be successful, you don’t want that success to come at the cost of damaging your US base. Asking your current personnel to learn a new legal, administrative, and payroll system, while still managing your US business, can be problematic.

At Arm’s Length

Most business owners like to manage their own business. They enjoy being involved in the day to day activities, and like keeping an eye on the business they’ve worked so hard to build. US firms expanding into Canada don’t always enjoy this luxury. Unless your US business is right across the border, you probably won’t be able to visit your Canadian site every day. This means handing the reins over to another person, and trusting them to do the job to your satisfaction.

An Easy Solution

Registering a business in Canada just to hire staff to represent your product or service may seem like more trouble than it’s worth. An Employer of Record solution, similar to a PEO in the U.S., may be able to take that trouble off your hands and allow you to stay where in you are. They can assess whether registering a business in Canada is a necessary step to your expansion or if they can employ your workforce from a legal and legislative compliance perspective in Canada allowing you representation without the hassle of understanding foreign employment compliance.

A professional payroll service provider, like The Payroll Edge, can help you navigate these issues, and get your Canadian workforce up and running. 

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: US Firms Expanding into Canada, U.S. Companies operating in Canada, U.S. Business operating in Canada

3 Benefits of Employer of Record Services in Canada

Posted by Stacey Duggan

|

May 9, 2014 9:05:00 AM

3 benefits of employer record of service in canadaIf you are a US-based business looking into hiring a Canadian workforce, there are a number of benefits to using an Employer of Record. A Canadian EOR is very similar to a Professional Employer Organization in the United States. An EOR offers a variety of services to streamline your payroll and human resource management processes.

Streamlined Start-up

To hire an employee in Canada you must establish a business presence in order to open the various accounts needed to remit the appropriate employee and employer taxes.  Hiring someone is not as simple as finding the right person; it really does open your company up to administrative hurdles that make you re-think the hire in the first place. Employer of record services can help you bypass some of the more cumbersome hurdles you'll face. An EOR already has an administrative presence in Canada, saving you the expense of registering a business presence if you don’t need to.  They also have the necessary banking and insurance infrastructure already in place allowing you to hire in weeks, not months.

Payroll Support

Employer of record services also include payroll management. This can be one of the more cumbersome aspects of employing Canadian workers. Canada has complex payroll laws, and requirements can change depending on employee classifications. There are also remittances and contributions to government programs that have to be taken into consideration.

With the help of an EOR, you don't have to worry about learning an entirely new set of payroll laws. They can handle day-to-day payments, remittances, and contributions for you. With their help, you can rest assured that your employees will be paid correctly, and legally.

Continuing Compliance

Violations of Canadian payroll and employment laws can result in enormous expenses. Not only are there fines to consider, there can also be back payments and retroactive contributions. Mistakes in holiday payments, employee remittances, or employer contributions can cause you to face huge penalties. And, given the convoluted nature of Canadian laws, these mistakes are all too easy to make.

An EOR also acts as your HR department in Canada ensuring that you are in complete compliance when it comes to employment standards. Should a claim arise, the employer of record will deal with the issue in accordance with Canadian law which can differ greatly from an employment law suit typically seen in the U.S. An EOR is familiar with the nuances of Canadian employment therefore can act quickly and efficiently ensuring that all parties’ best interests are met.

Using a Canadian Employer of Record service is an excellent way to expand your business offering across the border without the complication of having to register a business presence and having to understand a set of employment regulations in a foreign country.

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: EOR, Employer of Record Services, U.S. Business operating in Canada

U.S. Employers: Navigate Canada’s Employment Standards Carefully

Posted by Ray Gonder

|

Apr 25, 2014 9:39:00 AM

Ontario's Employment Standards Poster is required to be displayed in Canadian workplaces. Call The Payroll Edge to get employer of record services

 

 

As seen on First Reference Talks “Navigating Ontario’s Employment Standards Act” by Doug Macleod

Did you know as an employer you are required by Canadian Law to post a “What you should know about the Employment Standards Act” in your workplace for your employees to see? The Employment Standards Act is in place to set minimum standards for workplaces in Ontario. Most Canadian workers living in Ontario are covered by the act whether they are employed by an American employer or a Canadian company. 

If you’re an American company employing and paying Canadian workers, here are a few regulations from the Employment Standards Act you should follow when hiring and paying Canadians:

 

  • Canada’s Minimum Wage varies by province. In Ontario, minimum wage will be $11.00 per hour beginning in June 2014. Please note the minimum wage for servers, students and nannies varies.
  • Employers are required to pay Canadian employees (including temporary and contract workers.) for statutory holidays –even if they did not work that day. Employees who work on stat holidays are entitled to time and a half (overtime pay).
  • Employers must pay Canadian workers overtime pay after 44 hours in one work week.
  • Canadian workers are entitled to two weeks’ vacation for every 12 month period of work. Most employees are entitled to a minimum of 4% vacation pay.
  • A reasonable notice of termination must be given to Canadian employees who have worked for their employer for longer than 3 months’ time which is considered the “probationary period”.
  • There are different unpaid leaves of absences an employer is required to give their employees; Pregnancy and Parental Leave, Reservist Leave, Organ Donation Leave, Personal Emergency Leave and Family Medical Leave to name a few. Length of time for each unpaid leave of absence varies. During a leave of absence, a Canadian employee’s seniority is not affected by their leave and benefits offered before a leave are still required to be paid by the employer during a leave.

The Employment Standards Act can be examined in further detail here. Please note these ESA regulations can change depending on workplace, industry, age, length of employment and other factors so be sure to use the tools on the Canadian Ministry of Labour website.

Failing to comply with the ESA could result in hefty fines, penalties and in some cases persecution whereby American and foreign employers cannot plead ignorance as an excuse. If you’re doing business in Canada, you must know the rules to protect yourself, your employees and your reputation.

If you’re an American looking to hire and pay a Canadian worker consider an Employer of Record service. An EOR (similar to a PEO in the United States) is a great option for American and foreign employers who aren’t interested in learning a new set of rules in employment law. Contact The Payroll Edge today for more information. 

7 Signs It's Time to Outsource Payroll

Topics: Employment Standards Act, ESA, ESA Violations, ESA Compliant, U.S. Business operating in Canada, American Business in Canada, Compliance, Canadian-Based EOR, Canadian EOR

Tax Considerations for U.S. Companies Doing Business in Canada

Posted by Stacey Duggan

|

Apr 18, 2014 9:05:00 AM

tax considerations for us companies doing business in canadaOne of the principle difficulties in operating a business is dealing with tax considerations. If you're a US-based business operating in Canada, those tax considerations are doubled. You have the tax codes of two countries to deal with, along with multiple provinces, as well as treaties that can affect tax considerations. Trying to sort it all out, and keep it sorted, can consume an inordinate amount of time and energy.

Federal Income Tax

Typically, a US business will owe taxes to the Canada Revenue Agency if they are deemed to be "carrying on business in Canada." The definition of "carrying on business" is not always clear, and can be affected by numerous factors like gross sales, number of days conducting business, office locations, and employees. If you are deemed to be carrying on business in Canada, you will be regarded as a permanent establishment (PE) for tax purposes.

If you are deemed to be a PE, you will owe withholdings on your gross sales, employee withholdings, Canada Pension Plan, Employment Insurance, and Workers Compensation contributions. You will also be required to make regular filings, and may be required to pay a security against future withholdings.

Employee Withholdings

Determining when, and how much, to withhold from employees' paychecks is one of the more cumbersome tax considerations. If you're business is deemed to be a PE, you will be responsible for collecting taxes from resident and non-resident employees. The amount of taxes withheld from each paycheck, as well as yearly maximum withholdings, vary from year to year, and province to province.

Any mistakes made concerning withholdings will largely rest on you. If you withhold too much, you will be responsible for reimbursing the employees, and filing for a refund from the CRA. If you withhold too little, you are responsible for making up the difference. You can then attempt to collect the missed withholdings from the employees' future paychecks. If they are no longer with you, or if it has been longer than a year, you're pretty much stuck with the bill.

Social Safety Net

Canada has a variety of programs designed to ensure the long-term health and safety of employees. The Canada Pension Plan (CPP), Employment Insurance (EI), and Worker's Compensation (WCB) programs are all designed to provide employees with monetary support when they aren't working. The funding for these programs comes from a combination of employee and employer contributions.

As an employer, it's your responsibility to determine whether you need to be making these contributions, and how much you need to be paying. The amounts differ from year to year and, to make things more complicated, Quebec operates under a different system. There is a yearly maximum for withholdings and premiums, and it's up to you to monitor the contributions you've made yourself, and on behalf of your employees.

The Tip of the Iceberg

These are some of the simplest, most basic tax considerations for a US-based business operating in Canada. Even these tax requirements have varying degrees of difficulty and evolving applications. Digging deeper into the tax code reveals a cumbersome, convoluted tax code that can only be understood by experienced professionals.

The payroll professionals at The Payroll Edge have years of experience in navigating Canadian tax laws for US businesses. They provide a wide range of services that help US companies hire workers in Canada without having to try to learn an entirely new tax code. With their help, you can ensure that your US company is in full compliance with all applicable Canadian tax, labor, and payroll regulations.

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: CRA, U.S. Business operating in Canada, Tax Considerations

Employer of Record Service: Your American Business Presence in Canada

Posted by Ray Gonder

|

Mar 26, 2014 10:21:00 AM

American Business Expansion into Canada and when you should contact the Payroll Edge for our Employer of Record Services Great! Your expanding operations north of the border but with your American business expansion into Canada you wonder; How am I going to pay my Canadian employees?

Unless you are using an Employer of Record Service in Canada (similar to a PEO in the U.S.) and want to hire an employee you must register your business with the Canadian government. Federally registering is the first step and then registering a business presence in each province and / or territory (Canada has 13) you are operating in would be the next step. Of course this process can be even more complicated if you are a Limited Liability Company (LLC) in the US as Canada has no similar status and again has different rules depending on the province or territory.

Other Government Accounts U.S. based companies will need to pay Canadian Employees;

Registering your business is not the only registration you will do as a new business in Canada. You must also apply for a payroll tax account number into which you will remit the employer and employee taxes for the Canada Pension Plan and Employment Insurance.

These two taxes are in every province and territory across Canada with the difference being that each province has its own rate in which these taxes are calculated. Keep an eye on the rates as they often change for each province at the beginning of each year and its important to know when paying a Canadian. Some provinces have other payroll taxes such as the Employer Health Tax in Ontario and the Health Services Fund in Quebec so it’s important to know what other type of taxes are associated with the province the work is being done in. It’s worthy to note that as a company in Canada, you will be given a weekly, semi-monthly, monthly or quarterly deadline for these payroll taxes but for those provinces that have extra taxes (like the 4 provinces that have a health care tax) your deadlines might be on a different schedule. The Canadian Government will not hesitate to apply interest and penalties to slow paying accounts.

The best advice an American company should take when hiring workers in Canada is to use a Canadian Based Employer of Record service. Using an EOR like The Payroll Edge enables U.S. based companies to focus on their core business rather than learning a whole new payroll entity. Contact The Payroll Edge today! 

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: Payroll Tax in Canada, Payroll Tips, EOR, Employer of Record, Payroll Tax Tips, U.S. Business operating in Canada, Paying a Canadian, Canadian Employer of Record, American PEO, Payroll Tax Laws in Canada, American Business in Canada, Canadian-Based EOR, Canadian EOR, PEO Services, Canadian Payroll Services

Employment Agreements and What They Need to Include

Posted by Stacey Duggan

|

Mar 24, 2014 9:05:00 AM

Employment Agreements blog article by The Payroll EdgeEvery province and territory in Canada has their own employment standards when it comes to how employers are legally required to engage with their workforce.

Unlike in the U.S., Canadian employees lodge complaints and claims against employers who do not adhere to these standards, through their provincial government. In comparison to disgruntled employees in the U.S., it is very rare to see a lawsuit between these two parties as much of the investigation and adjudication is through this Canadian governing body. With this in mind, employers need to understand that an employment agreement not only outlines the duties and responsibilities of the worker but can also protects them from certain liabilities.

A properly laid out agreement needs to meet with government compliance when it comes to the employment standards of the province the employee is working in. An employment agreement should include but not be limited to:

  1. Vacation, Statutory Holiday and Overtime Pay Entitlement 
    In most provinces employees are entitled to 4% vacation pay and can choose to accumulate it or have it paid out out with each paycheque. The exception would be Saskatchewan where employees receive a minimum of 5.77% of vacation pay 

  2. A Termination and Lay Off Clause 
    There is no at will employment in Canada and the Ministry of Labour has strict rules in regards to notice periods or pay in lieu of notice when terminating or laying off employees

  3. A Disciplinary Policy 
    It is standard practice in Canada to follow four steps when disciplining an employee; verbal warning, written warning, suspension than dismissal. Not following these steps can lead to legal challenges when faced with a wrongful dismissal claim

  4. A Health and Safety Policy
    A health and safety policy should not only talk about the employers responsibilities but the expectation that the employee is committed to following these rules and regulations. Health and Safety is everybody’s responsibilities.

  5. A Workplace Violence and Harassment Policy 
    Each province has their own regulations in regards to this policy, some much more in depth than others

These are only a few of the policies that should be included in an employment agreement and as you can see, are important pieces of ensuring that both parties are on the same page when it comes to rules and regulations. Both the employer and employee need to sign an employment agreement indicating their understanding and acceptance of the information contained within. An Employer of Record can handle all of these details for you. 

 12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: U.S. Business operating in Canada, Canadian Employer of Record, American Business in Canada, Canadian-Based EOR, Canadian EOR, Employment Agreements

Calculating Canadian Payroll Deductions is Only Half the Battle

Posted by Stacey Duggan

|

Mar 3, 2014 9:00:00 AM

Calculating Canadian Payroll Deductions is Only Half the BattleSome businesses are under the impression that Canadian payroll deductions will make up the majority of the red tape they have to deal with. While Canadian payroll deductions can be incredibly complex, they’re still just a drop in the bucket compared to all of the other legal and administrative hoops you’ll have to jump through. Long before you have to worry about Canadian payroll deductions, you’ll have to worry about meeting all of the legal requirements to get your business up and running. Meeting those requirements initially, and continuing to meet them for as long as your business operates, can be far more difficult than worrying about Canadian payroll deductions.

A Daily Struggle

Whether you’re a US or Canadian business, there are certain tasks that you will be expected to perform every day to keep your Canadian operations in compliance. Timekeeping, employee classification, workplace safety, and providing legally required documentation are just a few of the tasks on your agenda. You’ll also be required to provide health and safety training for your employees and deal with any jobsite inspections that different government agencies deem necessary. Once you’ve successfully completed all of those tasks, you can start in on all of the things that actually make your business profitable.

An Added Burden

If you’re a US business operating in Canada, then the legal hurdles become higher and more frequent. Before you ever have to worry about Canadian payroll deductions, you’ll have to establish a business that can legally hire Canadians. That means establishing a physical presence in Canada, setting up banking and government accounts, procuring proper insurance, dealing with inspections and licenses, and meeting any other industry-specific requirements. You’ll spend a lot of time and money, long before you can legally start operating in Canada. If you choose to handle everything on your own, you’ll have to learn an entire foreign legal system in your spare time. If you miss anything or make any mistakes, the time and costs will increase dramatically.

A Single Solution

Fortunately, there’s a single solution for US and Canadian businesses. The Payroll Edge is a payroll service provider that provides all of the administrative and management services a business needs for its day-to-day operations. These services include everything from workplace health and safety compliance, to those Canadian payroll deductions you were so worried about. They can even handle hiring, classification, and management of employees.

If you’re a US business moving into Canada, The Payroll Edge can act as an Employer of Record (EOR) for your expansion. Using their EOR services, you can avoid all of the red tape and legal hurdles involved in setting up shop in Canada. An EOR provides you with everything you need to get up and running in Canada. They have a physical presence, all the necessary government and banking accounts, and the legally required insurance. When you hire an EOR, they can immediately begin hiring and managing Canadian employees on your behalf. You won’t have to spend months setting up shop and learning a new legal system. With the help of an EOR, your Canadian expansion requires little more than a telephone call.

Canadian Payroll Tax Deduction Calculator

Topics: Payroll Service Provider, Canadian Payroll Deductions, U.S. Business operating in Canada

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