What You Need to Know About Payroll Companies In Canada

What You Need to Know About Payroll Companies In Canada

Starting payroll in a new country can be intimidating. Payroll and tax rules tend toward complexity in every jurisdiction, but that’s often the only thing they have in common. Expanding your team internationally requires learning an entirely new set of laws and adjusting to different expectations about payroll from your employees. Choosing to outsource to international payroll companies is a great way to avoid the fines and lawsuits that come from getting payroll wrong.  

However, choosing an outsourcing partner takes some learning too. Payroll processing in Canada is a crowded market, but not every company caters to international businesses. In this blog, we look at payroll processing companies in Canada from the perspective of global business, outlining the difference between payroll and PEO, and what you need to look for in a payroll partner.  

What Is A PEO? 

For many global businesses, a PEO, not a payroll processer is what they need. Professional Employer Organizations (PEOs) are international payroll processing companies that deliver payroll, HR, and employer of record services to global companies, so that they can hire workers without opening a local subsidiary. They go beyond what most payroll service providers in Canada offer, becoming the legal employer of your team and then leasing them back to you. You manage their day-to-day activities, while the PEO provides payroll, compliance, and HR.  

The Difference Between PEO And Payroll Companies

Payroll providers and PEOs both specialize in payroll outsourcing; delivering timely, accurate and compliant payroll to companies without an internal payroll department, or companies with international workforces. The key difference between PEOs and payroll providers is employee leasing, but how else can we compare payroll services in Canada?  


The cost comparison between a PEO vs payroll company seems clear at first; payroll processing companies provide much less expensive services. Because they deliver payroll only, they can provide an extremely cost-effective option for companies looking to outsource their payroll. PEOs have varying business models but because they offer more complex services, they tend to cost more than payroll providers. However, a strict one-to-one cost comparison between payroll processing companies and PEOs conceals the cost-savings that PEOs offer.  

Employer of record services are designed to help businesses expand their teams without opening local subsidiaries. The time and cost investment to register a subsidiary and set up local payroll can be substantial. PEOs ensure your payroll is set up correctly and your workers are hired and onboarded compliantly, preventing future fines and lawsuits.   


Payroll processing companies focus on one core service, outsourcing payroll, and a few ancillary services. Payroll processors issue pay stubs, records of deductions, tax forms and various reports. Payroll companies keep accurate and compliant records of your payroll and can assist with an audit or investigation into past payments. Finally, payroll companies keep on top of changes in tax and payroll law and keep their clients informed as well.  

PEOs provide all the same services, but with the added benefit of employee leasing. PEOs make it possible for you to hire internationally without a local subsidiary, through employee leasing services. PEOs create compliant contracts, hire your team to their own payroll, and provide ongoing HR support to international employers, including advice on discipline, termination, and workforce expansion.  

Because they are the employer of record, PEOs can provide a range of employee and contractor benefits that payroll processing companies can’t including health insurance, retirement savings, and various perks.  

Remitting Taxes and Worker’s Compensation  

Payroll processing companies and PEOs can both handle payroll taxes, benefit premiums, dues and worker’s compensation payments, but their approach is different. Because payroll providers don’t hire your workers onto their payroll, they don’t pay employer taxes for you, they do it on your behalf. When you work with a payroll processing company, you must have already registered your business so that you can pay taxes and process a payroll. Your outsourcing provider takes on the payroll function and remits taxes on your behalf, using your business number.  

PEOs collect and remit taxes and premiums using their own accounts. Because their clients don’t have a local subsidiary, PEOs handle every aspect of payroll compliance, including paying taxes. With their higher headcount, PEOs can typically negotiate lower benefit premiums than smaller companies, and in some provinces may have lower worker’s compensation premiums.  

Who is the Employer?  

When it comes to payroll outsourcing, who is the employer, is clear. Payroll companies process payroll without taking on any employer obligations; they process payroll, debit the employer’s account, make deposits into employee accounts, and then generate records.  

When a PEO becomes the employer of record for your team, it’s a little murkier. PEOs sign your team onto their payroll, becoming their employer of record so that that you can employ them without opening a local subsidiary. While PEOs are the employer of record, you remain their true employer, directing their day to day. From a worker’s perspective, there is no confusion about who is the employer in the PEO arrangement. For them, the PEO offers outsourced payroll and HR support but does not direct them in any way.  

Work With A PEO Like Canadian Payroll Services 

Payroll companies in Canada are a great option for businesses looking to outsource their payroll! They provide timely, accurate payroll services at a great price. However, for global businesses that want to hire in Canada, PEOs are the right choice. Working with a PEO means that you can hire quickly and compliantly without going through the confusion of setting up a local subsidiary, while outsourcing your payroll to a trusted partner.  

Canadian Payroll Services is a PEO that focuses on helping global businesses hire in Canada. We provide employer of record services and compliant, contractor payroll to businesses all over the world. But more than that, we provide hands on HR support that payroll companies can’t match. Our team of certified payroll administrators and HR account managers keep you compliant and stay on top of changes in Canadian payroll and tax laws so that you don’t have to.  

Want to learn more about how we can help with your Canadian payroll? Get in touch today!

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