<span id="hs_cos_wrapper_name" class="hs_cos_wrapper hs_cos_wrapper_meta_field hs_cos_wrapper_type_text" style="" data-hs-cos-general-type="meta_field" data-hs-cos-type="text" >5 Tips for US Companies Processing Canadian Payroll (Updated 2020)</span>

Whenever a US company makes the decision to take on Canadian employees, there will always be logistical issues that must be resolved. One of the main factors is payroll processing. While it may seem like a simple, straightforward task, when put into practice, many US business owners and HR managers soon discover there are several bumps along the way.

These five tips for US companies processing Canadian payroll will help smooth out those bumpy transitions.

1. Learn About Canadian Tax Laws

If there’s one thing you know about Canada, it’s likely that the Great White North has a robust welfare state. That means there are social programs operated at the government level, which most Canadian workers pay into.


As a result, there are several tax considerations that don’t come up when paying American employees. You’ll need to pay attention to income tax at both the provincial and federal levels, along with the Canadian Pension Plan and Employment Insurance. Some provinces even ask for deductions to help fund healthcare systems.

2. Vacation, Stat Holidays and Overtime

In most Canadian provinces, employees are entitled vacation pay, usually amounting to four to eight percent of their annual salary. They also receive holiday pay for statutory holidays, such as Christmas, Easter, Labour Day, and Canada Day. Not every province in Canada has the same stat holidays, so any US companies processing Canadian payroll will have to check the calendar to see which holidays must be paid in the provinces they operate in.


For overtime hours, employers are required to pay a certain amount above an employee’s regular wage. Overtime usually applies after an employee works more than 40 hours in a week, but provincial rules make exceptions for some occupations. Be sure to check these rules.

3. Is the Independent Contractor Really Independent?

As the gig economy has grown in Canada, more Canadians have turned to freelance work. As a result, you can now hire independent contractors for almost any position in your business.


This situation has raised some questions for governments, Canadian workers, and the businesses that employ them. How do you know someone is truly an independent contractor? At what point are they considered an employee?


The rules are a little less clear-cut in Canada than in the US, where the IRS outlines both classifications. You’ll still need to pay attention and make sure your Canadian workers are classified correctly.

4. Navigating the Worker’s Compensation Program

Any US companies processing Canadian payroll need to be aware of the differences in how workers’ compensation insurance works north of the border. Canadian workers’ compensation differs from the US, as it’s run by the provincial government. If you have employees in multiple provinces, you’ll have to register with each provincial program.


Also, the registration process differs from province to province, so it’s important to have the correct information. Noncompliance could lead to significant fines. If an employee is injured, the process can be lengthy and complex, especially if the employer is unsure of the rules.

5. Take the Time to Find a Reliable Partner

Naturally, the best way to ensure a smooth transition into the Canadian marketplace is to enlist the help of a partner that has experience in all the complexities of the Canadian payroll process, as it pertains to American employers. With the right partner on board, everything moves seamlessly and you’ll never have to wonder if you’re making a payroll mistake.


When you have a trusted partner working on your behalf, you can focus on your core business and leave the legalities and tax issues to their expert team. Ready to get the process started? Get in touch and discover what a difference expertise and experience can make.


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