Hiring a remote Canadian worker for your business opens avenues in a foreign market that you didn’t have before. But you may be wondering what the recruitment process in Canada even looks like and how to handle the legalities of hiring a remote Canadian worker.
US companies can hire Canadians as either contractors or employees. For employers wanting to hire Canadian employees, you have two options: create a Canadian entity or engage a PEO. With a PEO, US companies can leave payroll, taxes, and compliance in the hands of experts.
Canadian Payroll Services works with our clients to find the top remote workers in Canada while also taking care of back-end responsibilities of the business. With Canadian Payroll Services, you are one step away from hiring a remote Canadian employee that best fits your needs.
A Guide to Hiring Remote Canadian Workers for US Companies
Many American companies look north to hire Canadian employees to work remotely for their operations. It could be salespeople selling their products or services in Canada, technicians to service their Canadian installations, or simply Canadian talent to support their business inside the US or internationally. In such cases, a US work visa is not required as the Canadian worker is not relocating to the US, but rather working remotely in Canada – typically out of their home or in a shared executive suite.
Now you’re probably wondering “How do I hire a foreign worker in Canada when we don’t have a legal presence there?” The good news is that you can, and this article will explain how.
Option 1: Hire Remote Canadian Workers as Independent Contractors
One simple solution is to hire the Canadian as an independent contractor and maintain a business-to-business relationship. However, this solution is fraught with potential problems. Independent contractors are allowed to set their own hours and schedules, take on additional clients that could be your competitors, and even hire substitute workers to perform work on their behalf!
Without a legal presence in Canada, you can’t genuinely reciprocate the type of employer-employee relationship that most workers seek in return for their loyalty and commitment. To make matters worse, there is also an income tax liability that your Canadian worker bears for being an independent contractor, which may make them queasy or unwilling to work for you in such an arrangement.
The Canada Revenue Agency (CRA) is Canada’s equivalent of the IRS and they don’t like seeing Canadian workers misclassified as independent contractors when they behave as employees. If your relationship has strayed from B2B to employer-employee, you may be putting your Canadian worker at risk. Although CRA normally penalizes the employer for worker misclassification, when the employer is outside of the country, it is the Canadian worker who must deal with the consequences. In that case, the Canadian worker is deemed a “Personal Service Business,” or PSB.
All of a sudden, your Canadian worker is not allowed to write off any business expenses, all their revenues become taxable, and they are forced to back pay employer payroll taxes (often with penalties) that you, as their real employer, would have been obligated to pay had you been located in Canada. Your once happy and loyal Canadian worker may suddenly become the thing of the past, finding it too complicated and costly to continue your working relationship.
Option 2: Hire Remote Canadian Workers through a Professional Employer Organization (PEO) based in Canada
Professional Employer Organizations (PEOs) are essentially intermediary employment agencies that act as your talent source in Canada. The PEO agency becomes the Employer of Record (EOR) for your Canadian worker, and they lease the worker back to you as their foreign client. This gives you full control over the daily activities of the worker, while the PEO processes their payroll on your behalf.
As the Employer of Record for your Canadian worker, your PEO partner would look after all the following:
- Canadian employer payroll tax remittances
- Employee source deductions
- Worker’s compensation insurance
- Social Security contributions (known as CPP in Canada)
- Unemployment insurance contributions (known As EI in Canada)
- And even issuing your Canadian worker a tax form at the end of the year
Most PEOs in Canada are also registered employment agencies, as Canadian labour and tax laws have specific regulations allowing employment agencies to hire workers as their agency employees, but placed under the direction and control of their clients. Such specific employment agency laws help protect placement worker rights and keep our clients in compliance with laws.
Work With a PEO to Hire Canadian Remote Workers
Working with a PEO allows your company to find the best remote Canadian workers for your company. In doing so, you will also help your company stay compliant with local tax and labour laws.
Working with a PEO like Canadian Payroll Services can help you stay on top of cross-border employment compliance and avoid any discrepancies that could cause legal problems for you and your company.
Contact us to learn more about how you can hire a remote Canadian worker through Canadian Payroll Services.