We see it all the time. We’re working with a U.S. based company and a request comes in letting us know that the company will be hiring a new employee. But this isn’t just any new hire, it’s a special new hire. It’s an international new hire. And the worker that this company wants to hire lives in Canada.
“Where do we start?” they ask….
We’ve put together a checklist/reality check that you can use to get the ball rolling on bringing on board your new Canuck. Note that this is just a starting point, and not an exhaustive to-do list. But here are some things you should consider when thinking about employ your new Neighbor to the North. Here’s how to get started:
1. Gather Information
This might be the most important step in the process. Find out as much as you can about your employee. What province do they live in? In which province will they be working? What exactly will they be doing? Where will they be doing it? Are they a Canadian citizen, living in Canada, or just visiting for the time being? Do they have Canadian work authorization?
2. Determine Employee vs. Independent Contractor
This can be a confusing step. Much like U.S. workers, you’ll need to determine if the work this person is doing qualifies them as an employee or an independent contractor. Canada’s version of the IRS (the CRA) can be helpful in figuring this out. There are also different rules for individuals living in Quebec.
- Employee – If they’re an employee, you’ll need to figure out how to employ them in Canada. Have you set up an entity in Canada? That’s one option. Can you employ them through a payrolling company in Canada? That’s another option. Can you register for a business number and and set up a payroll deductions account? There’s a third option. Regardless of what you do, you’re going to need to withhold Income Tax, Canadian Pension Plan (CPP) withholdings, and Employment Insurance (EI) for your employee (and pay on behalf of the company as well). You’ll also need to have the employee fill out some forms and you’ll need to register with the WISB.
- While employment law in Canada is primarily provincial/territorial, Canada does have an Employment Standards Act – the ESA – that covers most employees (and most provinces/territories like to follow it). U.S. folks can think of this as bits of the FLSA, OSHA, and NLRA wrapped up in a neat box with a red maple leaf stamped on it.
- Contractor – If your worker is an independent contractor you’ll need to have them sign a W-8BEN or a W-8BEN-E and keep it on file. Remember, no need for W9 because they’re not going to be issued a 1099. Banking info is needed, and remember, because your worker will be using a Canadian bank, you’ll need their SWIFT number and account number. (Sorry Yankee, no Account and Routing number in these colder parts of the world).
Next we need to figure out how we are going to “paper” this person. Do you have an agreement in place? You should. Has it been localized to where they live? Does it need to be in English and French? If they’re an employee, we should probably consider putting an offer letter in place. It should include things like: their pay rate, when they’re paid, what they’ll be doing, when they start, time off, benefits, etc.
4. End of Year
You’ll need to figure out what sort of end of year documentation your employee or contractor will need. Do we need to issue a T4 or T4A?
Need to terminate your employee? Make sure you provide them with a Record of Employment!
There are also different and unique rules depending on what province you’re in. And sometimes even what city your person is in. Remember, special attention should be always be paid to Quebec (it’s kind of like Canada’s California when it comes to tricky and nuanced employment laws and concerns).
Keep in mind that just like the IRS, the CRA doesn’t look kindly upon any companies, international or domestic, that misclassify employees as contractors.