Are you a Canadian business finally ready to start making your first hires? Or are you a foreign company looking to hire Canadian employees? Going remote in the past year has most likely highlighted things that you, or your company haven’t needed to think about. If you’re looking for guidance on hiring for your remote team, look no further.
From registering for payroll with the Canada Revenue Agency (CRA), offering an employee a job, setting up employee deductions and remaining compliant, our guide will help you learn everything you need to know about the employee hiring process in Canada.
Whether you're a Canadian entity or not, we can help you navigate the process seamlessly!
TABLE OF CONTENTS
- Getting Started
- Hiring Employees in Canada
- Setting up a Canadian payroll account with the CRA
- New Employee paperwork
- Onboarding your new employee
Foreign Companies Hiring in Canada
- Hiring Employees in Canada for Remote Work
- Hiring Employees in Canada as Independent Contractors
- Hiring Canadian Employees via PEOs
- Knowing your Duties and Responsibilities as an Employer
Before you get started
As a business owner, you must open a payroll deduction account with the CRA. To begin the process, you need a business number, also known as a BN.
To obtain a business number, you can do any of the following:
- Register for your CRA Business Number online.
- Retrieve and complete Form RC1 (Request for a business number), then mail/fax it to your local tax service office or tax center in Canada.
- Or, you can contact the CRA directly by phone at 1-800-959-5525 and complete the registration over the phone during business hours.
Top tip: Two birds, one stone. Go the phone route if you can. While tedious, you can also request a payroll program account with the CRA when you register for a business number.
If you've already registered with the CRA for a business number, you can add a new account to your existing one.
Did you know? Managing all your business accounts (along with payroll) online with the CRA is now easier than ever, thanks to the CRA's My Business Account online portal.
Setting up a Canadian payroll account with the CRA
Adding a payroll account with the CRA is easy. Similar to obtaining a BN, you can use one of the following ways to add it:
- Add it to your account via your existing CRA My Business Account.
- Retrieve and complete Form RC1 (specifically Part C), then mail/fax it to your local tax service office or tax center in Canada.
- Or, you can contact the CRA directly by phone at 1-800-959-5525 and ask for a payroll program account.
Did you know? Your business can have more than just one payroll program account on your CRA My Business Account.
If you have various offices or branches across different Canadian cities, you may also seek separate payroll accounts for each office. Read more about starting up payroll in our comprehensive guide.
Hiring Employees in Canada
If you're a Canadian company hiring Canadian employees, have registered for a payroll account, and have identified the roles you require, you're ready to get hiring!
Next, we'll take a look at what you need to do to make sure you're covered legally before those new employees begin working for you.
Have the new hire accept the role and sign the job offer
Remote or collocated, it's essential that your new employee formally accepts and signs the job offer.
While the Canadian government doesn't require this, it's a good idea to have everything in writing. After you've crafted the perfect job offer, having the employee sign the paperwork outlining any role-specific duties, work hours, salary, benefits, bonus structure, probationary period (if applicable) can help protect the company and reduces the potential of any future misunderstandings.
When hiring Canadian employees, your job offer must be structured according to each province's or territory's employment standard.
Here are the official employment standards to review depending on where you are located or are hiring from. If you are hiring an employee from another province or building a remote team, make sure to adhere to the employment and labour standards outlined in the following resources.
Review the Employee's Social Insurance Number
The Social Insurance Number (SIN) is necessary for administering benefits provided by the government. Employers must review every new employee's SIN card within three days of their official start date. From there, you must record the employee's name and SIN information exactly as it is on the card.
When you come across SINs that start with the numeral "9," be aware that this is a signal of a person who is not a Canadian citizen or permanent resident. They are only authorized to work for a specific employer and a particular period under a "valid employment authorization" issued by Immigration, Refugees, and Citizenship Canada.
If the potential new employee can work in Canada but does not have a valid SIN, you can point them towards a Service Canada Office to apply for a SIN card.
Filling out the required forms
When they first start, full-time employees should fill out some essential new employee forms. These include:
- Form TD1 and
- Personal Tax Credits Return (this determines how much tax is to be deducted from a person's employment income).
Remember: a new employee must complete both the federal TD1 and the provincial TD1 if they claim more than the basic personal amount. Different provinces have various forms and deductions. To stay compliant, make sure to check out our blog on new employee forms.
Open up a file for the new hire
When your new hire begins, it is best practice to open up a new file for them. As an employer, you will need to collect records for each of your employees. These can include:
- Pay stubs
- Performance evaluations
- Forms related to taxes, benefits and running payroll (including T4 slips and more)
If your employee is remote, it's in your best interest to collect as much information on them as possible to avoid any issues or lost information later on.
Onboarding a remote employee
A good onboarding process is vital to ensuring your new employees are set up for success. Did you know that a solid onboarding strategy can improve employee retention by 82%? Yet only 20% of organizations worldwide do it effectively.
This process is even more critical when onboarding remote employees who are getting their first introduction to the organization from the comforts (or confinements) of their home. Read our blog to learn more about onboarding remote teams and employees (with a free checklist!).
If you are a foreign employer looking to hire in Canada, here are the things you need to know.
Are you a business looking to hire employees in Canada? The above guide will be helpful for those companies which are already located in Canada and hiring internally, but for those businesses who are looking to set up a branch or headquarters from abroad, this part of the guide will serve you best.
Indeed, Canada is an ideal place to set up shop. It features many options for businesses, including a welcoming business environment and an educated workforce. Canada is a perfect place for you to hire employees from.
This section will discuss how you can legally hire Canadian employees and what you need to know about the process.
Despite the ease of doing business in Canada, there is some specific paperwork and information that you need to be aware of before beginning. Let's get started.
Hiring employees in Canada for remote work
If you're a foreign company looking to dip into the Canadian hiring market, there are many ways you can choose to hire a Canadian to work for you remotely.
There are specific duties and legal responsibilities under Canadian law that you, as an employer, must abide by when hiring remotely in Canada. Here is what you need to know.
While Canada has laws around labour and hiring, each province also has their own employment laws and standards. If you are ever uncertain of specific laws and regulations, we urge you to check each province's employment and labour standards. Review them above.
Beyond understanding specific provincial and federal laws for hiring Canadian employees, understanding the differences between your laws and the Canadian government is a must.
If you're an American company hiring Canadians, there are some specific policies that you should be aware of, as it differs from the policies under American employment law. Here are some of the topics that we urge you to review policies for to ensure better compliance.
Hiring employees in Canada as independent contractors
One available option is hiring employees in Canada as independent contractors or freelancers. As we mentioned in our previous post, the type of relationship that you have with your employee will dictate your duties and responsibilities. This one specifically will be more like a business-to-business relationship rather than an employer-to-employee structured relationship.
This type of relationship will allow the employee to work on their own schedule and time zone. Be aware that independent contractors are not regular employees of your company in this type of relationship and therefore are not subject to the expectations as a regular, full-time employee.
Since they are contractors, your business does not have legal responsibilities regarding their government tax and contributions. These contractors would need to pay these as independent contractors even if they work the same way as an average employee.
One thing to note: There is an inherent issue with this structure that can come up. With this arrangement, your employee could be at risk of being identified by the CRA as misclassified workers.
Generally, when this occurs, the company is on the hook for the consequences of the arrangement. But, since your company is not based in Canada, the employee will be charged with paying penalties and any other taxes that the employer would typically pay in a traditional employer-to-employee relationship.
This situation could easily harm your relationship with your employee and even give your business a bad name. For many companies, this may not be the best course of action. But we're here to provide you with all the information to make the best decisions possible.
Hiring Canadian employees through PEOs
PEOs, or Professional Employer Organizations, are registered employment agencies that allow you to outsource your hiring needs when entering a new market. Canadian PEOs will act as your talent source to help you hire workers from the country without setting up payroll or a business entity in Canada.
How does this work?
PEOs will hire the people you need, and they will be listed as the Employer of Record (EOR) of these workers. Upon hiring an employee, full-time, contract or otherwise, PEOs will have the employee work subcontracted out to you as you are considered their foreign client.
This could be an ideal arrangement for you, specifically since you will have complete control of their job, duties and responsibilities as a typical employer would. Since the PEO is listed as the employer of record for your Canadian worker, they will be responsible for managing your employee's payroll and tax needs on your behalf.
Using a PEO can be a great option as it provides the employee with some good options. Being hired through a PEO means that the employee will be legally working for your company, and they will also have access to any benefits they are entitled to. The PEO will also process and pay any taxes and contributions accordingly.
Choosing to hire via a PEO is an excellent option as you can ensure compliance. Everything is legal, and ultimately, the burden is taken off of you and your company.
Knowing your duties and responsibilities as an employer
Although your organization may be operating outside Canadian borders, hiring employees in Canada means fulfilling specific duties and responsibilities to your employee and the Canadian government. If you choose to hire an employee in Canada, you must follow their labour and employment laws.
If you choose to hire your employee through a PEO, payroll deductions and other tax concerns will be managed by them as the employer of record. This can take a lot of heavy lifting off you and free you up for more critical business matters.
Whether you choose a PEO or hire Canadian employees as an independent contractor, you must be aware of the Canadian payroll or source deductions required in their government contributions. This includes Employment Insurance (EI) and Canada Pension Plan (CPP) premiums. These must be considered and should be paid on time.
Ensuring you manage these deductions is vital as it gives your employees access to benefits when they are unemployed or when they retire.
Equally important, you have to consider any federal, provincial, or territorial income taxes. Ensure that they are accurately calculated, deducted, and paid correctly. Taxes may differ province-to-province, so be sure to check the employment laws of where your employee is located.
From here, make sure to calculate source deductions and remit them to the CRA and, if operating in Quebec, Revenu Quebec. To make this process easier, check out the CRA Payroll Deductions Online Calculator or the Revenue Quebec Online Calculator. These tools can help make calculating deductions based on your employee's salary, wage or commissions.
In Canada, you must issue a tax form to the worker at the end of each year. As the employer on record, you or your PEO company are responsible for sending this form to your employee.
Available Government Programs
In the last few years, the government of Canada has built a lot of initiatives to attract and foster both innovation and entrepreneurship within its borders. One such example is the Start-Up Visa program, launched in 2013. This program smartly allows entrepreneurs and businesspeople to live and work in Canada.
This program provides innovators with a pathway to permanent residence for the applicant once they've come up with an idea and after reaching both the registration and minimum funding requirements.
The Start-Up Visa program has allowed Canada to attract entrepreneurial talent from all over the world. Learn how you can benefit from this program.
Finding a fit and ensuring compliance
There are many ways to hire Canadian employees and set up payroll effectively (remote or collocated). But you must choose a solution that works for you and your individual needs.
If you are contemplating entering the Canadian market, you must be clear on Canadian Employment Law so that your business relationship with your employee can be in good standing and remain compliant.
Hiring a remote employee in Canada could be your first step to entering the Canadian market. Read more about hiring remote teams here.