If you are a U.S. company hiring in Canada, simply extending your U.S. payroll system across the border is not an option. In fact, it’s a compliance disaster waiting to happen.
Running payroll in Canada involves a completely different set of rules, tax codes, and regulatory bodies. To avoid penalties from the Canada Revenue Agency (CRA), here is what U.S. employers need to know.
1. Registering with the CRA
Before you pay a single dollar, you must register a business number and a payroll program account with the CRA. This is mandatory for remitting the necessary deductions.
2. Mandatory Deductions are Different
You cannot simply swap “Social Security” for “CPP.” Canadian withholdings have specific formulas and caps:
Canada Pension Plan (CPP): Mandatory retirement contributions funded by both employer and employee.
Employment Insurance (EI): A federally managed insurance program.
Income Tax: Deducted at source based on federal and provincial tables.
3. Employment Standards are Provincial
In the U.S., you navigate Federal vs. State laws. In Canada, employment standards regarding vacation pay, notice periods, and overtime are governed strictly by the province where the employee resides.
Example: Termination rules in Ontario differ significantly from those in British Columbia. Failing to adhere to the local Employment Standards Act can lead to costly wrongful dismissal suits.
Simplify Canadian Payroll and HR
Don’t let payroll compliance become a full-time job for your finance team. Syndesus acts as your Canadian payroll department, managing everything from CRA remittances to T4 slips.
Ensure your Canadian payroll is compliant from day one. Learn more about our Payroll services.