When an American business looks to expand, one of the first places considered will be Canada. It’s not uncommon for US businesses to set up shop north of the 49th parallel. Many see the Canadian market as a great first step in global expansion, because the Canadian market shares many similarities to the US market.
Your business still has to adapt to Canadian laws and regulations. That includes differences in the way payroll is handled. These complexities sometimes stop companies from following through on their plans to expand.
Others will dive in before they fully understand the nuances, then get tripped up in the red tape around paying Canadian workers. This can lead to penalties, audits, and more, which harm more than your bottom line.
If you’re pondering a Canadian expansion, then this guide is for you. It will help you understand the ins and outs of Canadian payroll, so you can get started on the right foot.
Check in with the Provincial Employment Standards
Canada has two levels of government that are important for employers. Federal regulations apply across the country, but they often only apply to federal workers.
Instead, you’ll want to examine provincial laws around employment. Each province has its own act regarding employment standards. These acts lay out everything from how many hours your employees can work to how much you need to pay for overtime.
While many provinces have similar rules, the exact details change from province to province. In Quebec, for example, mill workers can work up to 47 hours before overtime kicks in. British Columbia doesn’t make exceptions for mill workers, but they do exempt other occupations.
It’s important to stay up to date on these differences. Many provinces have updated their employment legislation in recent years. British Columbia, for example, is set to raise their minimum wage over the next two years.
Pay Attention to Mandatory Deductions
Another key part of payroll in Canada is mandatory payroll deductions. These include federal income tax, which you deduct and withhold on your employees’ behalf. You’ll also need to check the provincial income tax rates.
Some provinces levy health care charges to help pay for the public healthcare system. At the federal level, you’ll have to make deductions for the Canada Pension Plan and Employment Insurance programs.
These deductions must be remitted to the Canada Revenue Agency (CRA) on a regular basis. The good news is that there are plenty of online tools, like Canadian payroll deduction calculators and income tax tables, which can help you calculate payroll accurately.
Look at Employee Classification
Many American employers will be familiar with the idea of employee misclassification. In the gig economy, it’s been much easier for employers to incorrectly categorize workers as contractors or employees, when they’re the opposite.
Always pay attention to provincial and federal rules about who qualifies as an employee and who is a contractor. You may think you can avoid some of the complexities of payroll by designating all your Canadian workers as freelancers, but you could end up spending more time and money on an audit later on.
Determine Your Schedule
Much like provinces have regulations around how much employees should be paid, they also have rules about how often you must pay your team. Most provinces will leave the number of pay periods up to the business, but they will mandate a minimum once-per-month payment.
There are other deadlines and due dates you must pay attention to as well. You’ll need to stay on top of filing reports, sending remittances, and sending out tax forms.
There’s one final thing to keep in mind about Canadian payroll, and it’s that you don’t need to go it alone. Instead, reach out to the experts for a helping hand. They know the ins and outs of payroll, so they can help you navigate the Canadian payroll system with confidence and ease