Canada

Pension plan - 5.45% - 5.9% depending on the province

Employment insurance - 1.6% - 2.2% dependent on territory

Employer Health tax - 0.98% - 4.3% dependent on territory

Canada pension plan: 5.45% - 5.9%, dependent on territory

Employment insurance - 1.18% - 1.58% dependent on territory

Income tax: Income taxes in Canada are levied on both federal and provincial/territorial levels, see details here.

While there are generally four ways of employing people across borders, not all are legal or sensible. Here is an overview of each way to employ a worker in Canada, outlining the potential cons.

HQ country employment & payroll

While the person is in Canada, they are employed and paid directly by the company’s HQ entity.

Cons: This may appear attractive, but it generally isn't legal in the long term. HQ payroll won't be possible if the person is not a tax resident in the HQ country.

Independent contractor agreements

People are locally registered as sole traders or limited liability company owners in Canada and invoice for their work. There is no direct employment relationship.

Cons: In Canada, this is not a compliant or legal way to engage full-time workers who work solely for your company. There will be challenges in attracting and retaining talent.

Direct local employer setup

The company sets up as a fully-compliant local employer. This often involves setting up a local entity and local tax registration.

Cons: Expensive, time-consuming, high-level of complexity. Unknowns around how obligations and costs will evolve over time. There will be a need to stay on top of changes in regulations.

Partnering with an Employer of Record Canada /full-service Professional Employer Organisation

Employment is handled by a platform that specialises in employing people on behalf of customer companies. The Employer of Record helps to hire and pay employees.

Cons: For some countries, the ongoing costs may be higher than direct employment. Some education is needed to inform employees about how the employment relationship will work.

Setting up a local company in Canada is relatively straightforward. However, the difficult part comes after the initial setup when the employer needs to run payroll for their Canadian employees every month, file taxes, extend and manage employee benefits, follow changes rules and regulations. Here is an overview of everything an employer in Canada will find themselves needing to do for their Canadian employees.

While many employers practice employing remote workers as independent contractors, it's a bad practice. If an individual is giving their full and undivided attention to your company in Canada, treating them as an independent contractor is a likely breach of Canadian employment laws and of those in your country.

Your company could be liable for fines on owed holiday pay, sick pay, social welfare payments, paternity benefit, maternity benefit, or other legal measures. Since the individuals you are working with do not receive the benefit of local employment laws and protections that are often afforded to people working full-time hours.

Read more on why hiring remote people as independent contractors is a bad idea.

When you hire employees in Canada, you have certain obligations as an employer. HR compliance is about ensuring your policies and procedures respect all applicable laws and regulations regarding employment and work practices. Complying with local employment law in Canada is fundamental for the correct running of your business - not only because these laws are in place to protect employees and guarantee their rights are safeguarded, but to minimise your risk of liabilities as an employer. Being compliant means respecting and following all local labour laws, sick leave and illness benefits, annual leave, minimum wage, tax credits, working hours regulations, employment contracts, etc.

As with every other country, there are certain costs associated with employing a worker in Canada that come on top of the gross salary you are offering. In Canada, those are pension plan contributions, employment insurance, and employer health tax. To view the exact percentages and amounts given the salary you are planning to offer, you can use our handy calculator tool.

It means that Boundless is the legal employer of the individual, as far as the Canadian government, tax, and employment authorities are concerned. In Canada, we hold a Personnel Placement Agency licence, number AP-2101873 and are responsible for:

• informing you about any pre-employment requirements
• ensuring their employment is compliant with Canadian employment law
• informing you about the length of the maternity leave, paternity leave, public holidays, illness benefits, medical benefits
• providing a locally compliant employment contract
• processing local payroll
• filing employment-related tax returns
• issuing payslips to the employee
• distributing salary payments
• payments to the local tax authorities

Customers that work with an Employer of Record in Canada are responsible for:

• sourcing and recruiting Canada employees (whether on their own or with support from a recruitment agency)
• managing the employee’s day-to-day work load
• contributing to the personal / professional development of the employee through their work
• following any guidance we give on employment and HR best practices or legal obligations in Canada, such as the employment contract, public holidays, annual leave, sick leave, maternity and paternity benefits, probationary periods, overtime pay, statutory redundancy payments, liability insurance and many others
• ensuring that payroll bills relating to their team are paid to Boundless before the cut-off point in each pay cycle

Boundless as the Employer of Record Canada files all pertinent taxes, Canada pension plan contributions and other contributions to the social system in order for the Canada employee to be compliant.

We carefully choose employment lawyers or advisories to partner with in each country we operate in, including Canada. They ensure the Canada employment contracts, and any other relevant documents required for new employees comply with the local jurisdiction. We have thorough discussions on specific norms such as payroll services, social protection, data protection, notice period or work-from-home regulations. Whenever a potentially sensitive issue arises in Canada, our internal team contacts the relevant firm to ensure all steps are taken to resolve it promptly.

The company remains responsible and informs employees of the day-to-day management of the people and teams that are employed through Boundless, including any disciplinary or performance issues.

Boundless ensures compliance with Canadian-specific procedures, practices and labour laws while employing people and teams on behalf of the company.

Any new employee that is locally employed through an Employer of record gets full employment rights and benefits as specified in Canadian employment law. They get a locally compliant employment contract, statutory maternity leave, annual leave, illness benefits, any relevant tax credit, and many more. All Canada-based employees receive healthcare through the public healthcare system.

In Canada, both employers and employees have to pay taxes. For employers, these include pension plans contribution, employment insurance, and employer health tax and for employees, they include Canada pension plan contribution, employment insurance, and income tax. To get a clear overview with both employee and employer taxes, use our salary breakdown calculator, submitting any additional data needed and get a downloadable pdf like this one.