Many American business owners see Canada as one of the best places to expand their business, and the same is true of Canadian business owners expanding to the US. Whether you’re operating a branch office in Texas or have an employee or two on the other side of the 49th, you’re probably involved in administering both Canadian and American payroll.
Many employers remain somewhat unsure of the differences between Canadian and U.S. payroll. The two even seem similar at first! There are many differences, though, and knowing them can help you streamline your payroll operations.
Two Different Countries
Canada is governed by its own laws, rules, and regulations when it comes to payroll. The U.S. also has its own system and regulatory framework. While there are similarities between the two, there are also major differences.
The most fundamental difference is currency. U.S. payroll uses the American dollar as its currency, while Canada uses the Canadian dollar. You’ll also deal with separate tax authorities in the two countries.
In the U.S., the Internal Revenue Service (IRS) is responsible for enforcing payroll regulations. In Canada, you’ll deal with the Canada Revenue Agency (CRA).
Multiple Levels of Law
Another similarity between Canada and the U.S. is that they’re federal states. That means they have multiple levels of government.
Canadian payroll is governed by two separate levels of government: federal and provincial. The federal government dictates law across the country.
Most payroll regulations fall under provincial law. Vacation calculations, for example, are governed by the provinces. Quebec calculates vacation pay one way. Saskatchewan has a different set of rules, as does Ontario.
Most employees also fall under provincial rules, rather than federal employment law. You, as the employer, must be aware of both sets of rules and which ones pertain to you. You’ll also need to be aware of differences between provinces.
In the U.S., the situation is similar, although you’ll need to pay attention to laws at the state level. Federal law provides overarching guidelines, but state law almost always supersedes it.
Different Holidays, Different Wages
American employers should also be aware of different holidays in Canada. While you may give your employees the day off for July 4, your Canadian employees are actually entitled to July 1, Canada Day. It’s a statutory holiday, as are Christmas, Easter, New Year’s, and Thanksgiving, which happens earlier in Canada.
Provinces can schedule holidays too, leading to differences between jurisdictions. For example, only some provinces offer a holiday on the first Monday of August. It’s called different things in different provinces: British Columbia Day in BC, Natal Day in Nova Scotia, and Heritage Day in Alberta. Quebec and Yukon don’t offer this holiday. It’s optional in Ontario.
Since minimum wage is provincially legislated, it varies by province as well. Ontario’s minimum wage and Alberta’s minimum wage are different from each other, and they’re both different from Quebec.
Different Social Programs
American employers also need to take note of various Canadian social programs. The most important for payroll are the Canada Pension Plan and Employment Insurance.
Benefits may also be handled differently than they are in the U.S.
For example, the federal government determines what is and isn’t a “taxable benefit.” Taxable benefits in Canada may not be the same as those offered in the U.S., so it’s important to check.
Get the Assistance You Need
Navigating the Canadian payroll system can be complex, even for native Canadian businesses. There are many different factors at play when it comes to calculating Canadian payroll.
American companies may struggle even more with properly calculating Canadian payroll. The different rules can sometimes be confusing. If you don’t know the ins and outs of the system, you might overlook important details.
Get a helping hand by reaching out to the experts at a PEO or other service provider. They know the system and can help guide you through it.