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Employer of Record Solution – Canada

The modern international business environment is more complex than ever, as countries continue to strengthen immigration rules and restrict the entry of foreign nationals to work and live.   Canada, as a developed nation with a high quality of life, follows this trend and you to ask yourself: does your company need a GEO employer of record solution for your Canadian assignments?

Shield GEO offers your company the three C’s when we act as an employer of record in a foreign country

  1. Cost-effective: saves money and time in deploying workers
  2. Compliant: meets all host country immigration and employment laws
  3. Comprehensive: we take care of every aspect of local employment

If you are expanding your business into the Canadian market, you will need high quality employee-assignees who are supported in the host country at every stage.  The­­­ truth is that establishing a Canadian branch or subsidiary and then sending employees on assignment is not an easy process for most companies, and that is exactly where Shield GEO can step in and ease the transition.  We make employment simple.

As your company plans to send employees to Canada, you will need to assess whether you are prepared to do this on your own.   

Unless you are a large multinational, with both HR and legal professionals who know the intricacies of employment law in Canada, you are probably going to need assistance.  To meet this need, Shield GEO has developed an end-to-end employer of record solution to give your company ongoing immigration, employment and payroll support in the foreign market.

Broad International Employment Experience

We bring our clients a network of local partners and experts who are already in place and ready to act as the local employer of record. Shield GEO is a legal intermediary between the client-company and employee on assignment, and we create a valuable method for rapid deployment of staff into 90 countries.

For every ROADBLOCK that you may encounter, we offer a GEO SOLUTION

To give you an idea of how our service can be effective in Canada, here are some of the challenges that you will face if you decide to do it alone. After reading this, you might understand why many companies choose a GEO solution for their international employment needs.

Immigration and Work Permits in Canada: A Maze of Regulations 

The steps required to meet immigration rules in Canada can be overwhelming for even the most accomplished mobility professional.  Small to mid-size companies need to think carefully whether they have the resources to attempt this process without expert guidance.

What are the consequences of not meeting immigration laws? 

Time delays, unnecessary expense and potential red flags from authorities.

To get a clear idea of how complex this process is you can refer to the full set of regulations at http://www.cic.gc.ca/english/resources/tools/temp/work/opinion/index.asp

A quick glance at these regulations will give you an idea of the multiple steps required, applications and possible exemptions.  For many companies, it is tempting to navigate these unfamiliar rules on their own, but there is a better alternative: The Shield GEO Employer of Record solution.

Our local partners and experts can facilitate every step of the immigration, visa and work permit process for your employees being assigned to Canada.  Nonetheless, some businesses want to know what the big deal is with getting a simple work permit, and need more information on what is required.

To help you understand what your company is facing, here is brief summary of the key Canadian immigration rules, but please consider the negative business consequences of trying a DIY approach that does not work out as planned.

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What is Labour Market Impact Assessment (LMIA)?

One of the first requirements to obtain a work permit is to apply for an LMIA, which shows that a foreign worker is needed for the job, and no qualified Canadian is available. The Canadian Service takes this rule seriously and there is a concern Canadians are losing jobs to foreign workers.  In other words, this is not an automatic process, and you will need to submit information on the position, skills required and why the worker should be granted a work permit.

You may also need pre-approval before recruiting for the position, especially if the posting in Canada is long term.  After all of this, there is a chance your application could be denied, and then your only recourse is to send more information or update the application.

If approved, you can recruit for the position, and only then can the hired foreign worker apply for a work permit.  If approval is denied, then you will have to try find an exemption for the worker.  Welcome to Canadian immigration laws…

ROADBLOCK:  Unfamiliarity with LMIA criteria, application process or failure to meet the requirements means your employee is denied a work permit, and there may be delays in beginning the assignment.

GEO SOLUTION:  Shield GEO can apply for the LMIA on behalf of your worker using our local employer of record and make a thorough case that the worker qualifies for a work permit. 

Note: We will let you know ahead of time if it appears the employee will need an exemption, allowing time to plan alternative strategies.

How to hire workers via the Temporary Foreign Worker Program (TFWP) and the International Mobility Program (IMP)?

No work permit possible?  You still have options…

The TFWP allows some foreign nationals to work in Canada even if the LMIA requirements are not met, and the application is denied.  For example, if a company needs short term skilled labor, they might qualify for the TFWP.

This is not an automatic process, and the application will be closely scrutinized since many foreign workers are being used for cheap labor inside the country.  The entire program is currently under government review, and could change at any time, another important reason to use Shield GEO’s experienced local professionals to monitor the regulations.

One of the exceptions to obtaining a work permit is the IMP, which will allow certain types of workers to enter the country and reside while employed.

Free Trade Agreements and LMIA Exceptions

Hiring workers via the IMP require that certain exceptions to the LMIA rules are met, usually those associated with a free trade agreement between Canada and another country.  Other categories may include entrepreneurs or investors who wish to start a business in Canada, but those wont really help your employee waiting for their assignment.

To be claim exemption from the LMIA, you must apply at least 30 days prior to the worker entering the country.  The process of hiring through the IMP is basically obtaining an exemption from a work permit, and the worker must also be from a visa-exempt country, another hurdle to overcome.

ROADBLOCK: Researching and understanding the exemptions under the IMP is time consuming and subject to change at any time.  You cant really afford to get it wrong…

GEO SOLUTION: Shield GEO claims any LMIA exemption on your behalf and facilitates all documentation to give the employee the best possible chance of work approval and entry.

How to extend a temporary worker’s work permit?

Assuming that your worker is already in Canada it is possible to extend a valid work permit.  If the job is extended, changed or there is a switch in employers, the work permit can be extended.   The extension must be applied for before the work permit expires.

However, the length of time working cannot exceed 4 years cumulatively for any number of positions, and at that point the worker must leave the country for an equivalent 4 years.

ROADBLOCK:  Extending a work permit can mean complex applications and strict adherence to time limits, and denial is always a possibility 

GEO SOLUTION: Shield GEO can take care of extensions, transfers to a new employer and calculation of permitted time frames, giving your worker the best chance for a legal extension.

Shield GEO Immigration Services: We make employment simple. Our employer of record directly sponsors the work permit for your employee, and handles all of the documentation, application and approval processes through immigration.

Why take the risk of failing to meet immigration rules in Canada?  Please consider our GEO solution to streamline the entry and work permit process for any number of employees.

Complying with Employment Regulations in Canada

Even if a company is successful in obtaining a work permit for an employee, there are numerous Canadian employment regulations that have to be followed.  Some of these rules may seem like simple administrative tasks, but often require a company to establish a local subsidiary to legally hire the employee and run a local compliant payroll.

There are both federal and provincial labor and employment laws that must be followed, making local expertise essential.

Shield GEO makes employment simple, by offering clients a local employer of record to ensure compliance at every stage of the employment process.  This means that you don’t have to set up and register a subsidiary in Canada, and can rely on us to handle the entire employment process for you.

If you are still not convinced, here is an overview of the intricate Canadian employment regulations: 

The essentials: What does the employee need to begin the employment process and be able to start work?

All foreign workers will be subject to income tax withholding in Canada and are required to obtain a tax id number prior to starting work.

ROADBLOCK:  To obtain tax ID numbers for employees, a foreign company must establish a local corporate subsidiary, an expensive and time consuming process.

GEO SOLUTION: Shield GEO provides a local employer of record that is already legally registered at both federal and provincial levels, and can quickly obtain the tax ID numbers for the foreign employee. 

Regulations and standards: What requirements does the employer have to meet in order to employ workers.

Foreign workers in Canada have the same rights and protections as Canadians, and an employer must meet employment standards as established by the federal and provincial governments.

These standards include:

  • Health and safety measures
  • Statutory leave for illness, maternity and vacation
  • Withholding steps for pensions, medical coverage and other benefits
  • Adherence to notice periods, causes of termination and severance pay
  • Measures to prevent discrimination and harassment
  • Registration with all relevant government authorities
  • Compliance with changing labor standards
  • An employment contract that complies with Canadian laws

If that seems like a lot of work…it is! Are you ready to invest the time and money to meet all  of these requirements on your own?

Essentially, if a company elects a DIY approach and sets up a subsidiary in Canada they are obligated to comply with the entire range of employment and labor laws in place.  You must offer a level of employment rights and benefits that is at least equal to Canadian statutory requirements.  This is significant undertaking that carries both enterprise and business risks, that will require an investment of time and resources for any size company.

ROADBLOCK: Is your company prepared to employ workers in Canada on its own, risking the penalties and fines that accompany violations of employment laws?

GEO SOLUTION: Shield GEO has local partners that meet every level of Canadian employment standards, and can handle all of the steps required to be fully compliant.

Shield GEO Employment Services: Due to the long list of employment compliance standards in Canada, it really makes sense to allow Shield GEO to take care of these tasks as the employer of record.

When you begin to add up all of the time it takes to apply, revise, register and research, it is no surprise that Shield GEO’s clients prefer to let us solve any employment issues, so they can focus on their business.

Compensation and Benefit Regulations: Canadian Protections for Foreign Workers

Canadian Tax Regulations for Companies and Their Employees

Once you have tax ID numbers for you employees, do you know what to do to prepare both your business and your employee for the increased complexity that comes with the administration of international assignments? 

If no, then you need Shield GEO… 

Do you know the rules governing Canada tax residency and how it impacts your requirement to withhold?

If no, then you really need Shield GEO…and so do your employees on assignment. 

Here a few of the tasks associated with taxation in Canada:

  • Tax residency rules for international assignees
  • Understanding balance sheet compensation
  • Administering a tax equalization policy and understanding alternative approaches
  • Overseas employment tax credit: requirements and source deductions

ROADBLOCK: Canada, like many countries, strictly enforces tax laws and may audit your company at any time to make sure that all withholding and payments are accurate.  Mistakes can result in penalties and unanticipated payment of back taxes.

GEO SOLUTION: Shield GEO has partners with provincial and federal tax expertise in Canada, and we will ensure that your tax computations, withholding and possible credits are all correct for each employee on assignment.

How Many Ways Can a Company Run Payroll in Canada?

It depends – if they are using Shield GEO…then many there are many ways!  Unfortunately, many companies try to just run a remote payroll from their home country, an illegal practice in many countries.  Don’t make this mistake that could bring penalties, fines and owed back taxes – let us help you structure an ideal payroll method for your assignees.

If you think that you can run a compliant payroll on your own in Canada, ask the following questions of your HR department:

  • Are you ready to carry out the requirements of payment arrangements in Canada?

(how are pay checks issued, how often, international or domestic banking, reporting rules?

  • Do you know how your international assignment policy is developed, what additional types of compensation are typically paid to international assignees?

(What benefits are required, are they taxable, what about family expenses?)

  • Do you understand how your business is impacted from a compliance and reporting perspective?

If you answered NO to any of these questions, then you are not prepared to run a Canadian payroll on your own, and face the very real possibility of running afoul of Canadian payroll regulations.  Shield GEO is here to help you in the following specialized ways.

Solutions for Running a Compliant Payroll in Canada With Shield GEO

1. Split or Shadow Payrolls in Canada

Split and shadow payrolls are a sophisticated method of allocating compensation to account for home country employment contracts, seniority and accrued benefits.  If done correctly, it can minimize taxation for the employee in Canada, as well as company statutory contributions in Canada.

ROADBLOCK: If you do not structure a split or shadow payroll taking into account the Canadian payroll and tax laws, your company could end paying double taxes or excess withholding for benefits.

 GEO SOLUTION: When your employee on assignment in Canada requires a split or shadow payroll, this is most easily achieved by using the Shield GEO service:

  • The GEO calculates salary, tax and social security contributions and invoices the client for the Total Cost of Employment plus a service charge.
  • It deducts taxes and social contributions from the funds, pays the net salary to the employee, remits withholdings and taxes to local authorities and handles all host country paperwork. In this way, local compliance is assured with no problems from tax or employment authorities.
  • The non-resident company pays the home country salary portion of tax and social security contributions directly if needed

Just try to imagine accomplishing this complex process on your own, and you will begin to understand just how essential a GEO can be for companies sending employees into the Canadian market.

2. Stock options/severance payment and reporting for international assignees in Canada

ROADBLOCK: When you offer stock options from your home country to assignees, these will need to be reported.  Depending on the way you structure payroll in Canada, they may be subject to tax in the home country, Canada or both, which will require tax offsets and management of withholding so the employee is not penalized.

GEO SOLUTION: Shield GEO will assist you with finding an ideal method of handling employee stock options while they are on assignment.  We can also advise you on Canadian severance payments, and how those will be reported and taxed.

3. Year-end Reporting in Canada

ROADBLOCK:  Like most countries, year end reporting of total payroll amounts, taxable income and withholding is required by Canadian tax authorities. This can mean a great deal of paperwork and documentation, placing a real burden on your accounting department to learn the rules of the Canadian tax system.

GEO SOLUTION: Our local employer of record will take of all of these local reporting requirements and submit the necessary paperwork on behalf of the employee

4. Special Worksite Allowances in Canada

If your employee is assigned to a temporary worksite in Canada, then the expenses for room, board and transportation may be exempt from taxation.

ROADBLOCK:  There are a half-dozen conditions that must be met before worksite allowances can receive tax exemption.  Failure to fulfil those conditions will mean excess taxes for the employee.

GEO SOLUTION:  Shield GEO will make sure that the Canadian rules for tax exemption of worksite allowances are met and documented.  This will prevent any unexpected tax burden to the employee, which may need to eventually be paid by your company to preserve the terms of the employment contract.

5. The Provincial Factor: Examples of Quebec Differences

Since many employment benefits are regulated at the provincial level, these standards must also be known in addition to federal statutes.  In Quebec, there are differences in notice periods, termination and pensions.  For example, Canadian notice periods range from 1-2 weeks for each year of service, but in Quebec the notice period is 2-4 weeks for each year of service, a significant difference.

Because Quebec is a French speaking province, you may also need to provide employment contracts in French.

ROADBLOCK:  Are you planning on assigning employees to multiple provinces?  You will then have to research and accommodate provincial rules which may be more stringent than federal rules for the employer.

GEO SOLUTION:  Shield GEO’s partners in each province can give you the assurance that you are in full compliance with both Canadian and provincial employment laws.  Why take a chance when you have a reliable ally in Shield GEO to guide your foreign assignment decisions.

Canadian Pension Regulations

According to the Canadian Pension Plan (CPP) both employees and employers must contribute to the national pension.

ROADBLOCK:  Pension contribution amounts and procedure will be affected by the payroll structure for an expat employee on assignment, and any mistakes or shortfalls will likely be shouldered by your company.

GEO SOLUTION: Shield GEO will calculate and withhold the appropriate amounts for pension contributions, based on whether you are running a split, shadow or full Canadian payroll.

Employee Health Insurance Requirements

Employers are required to provide health insurance for all employees, and if the employee does not qualify for provincial insurance coverage, then private insurance must be offered.  Typically, public coverage is available if the employee has a work permit, but even then it takes time for registration.

Off-boarding and Termination Regulations

Employment standards outline the basic rights and responsibilities of the employer when terminating the employment of an employee. An employer in Canada can terminate the employment of an employee at any time for any reason, as long as it is not in violation of human rights or other employment legislation.

An employer must give written notice of termination for employees who have been employed for more than three months. The amount of notice to which an employee is entitled depends on his or her “period of employment” and the province where they work.

An employee can collect severance pay if they have completed at least 12 consecutive months of continuous employment before their termination.

ROADBLOCK:  Failure to follow termination rules can result in penalties and unanticipated payments to the employee, and even amicable terminations require statutory notice.

SOLUTION:  Shield GEO will make sure that any termination will meet the notice requirements, and that any statutory severance is paid to the employee.

THE FINAL WORD…

We have given you a good idea of what international employment looks like, and specifically in Canada. Canada’s immigration and employments laws are intricate and well developed, with highly specific requirements and exceptions to every rule.  Have you considered using an Employer of Record solution  to overcome these issues?  

A GEO Employer of Record solution is an attractive alternative where your company:

  • is looking to setup an office quickly
  • wants to work within a defined budget
  • wants to limit its initial commitment in Canada
  • needs help with tax, employment, immigration and payroll compliance in Canada

The GEO, as the local employer of record for your worker, will handle all immigration and employment requirements, including obtaining the correct work permit in Canada.  This saves your company time and expense, and prevents breaking any immigration or tax compliance rules.

With a global network of local partners in over 90 countries, Shield GEO is fast becoming the preferred GEO solution.  For an assessment on your company’s individual circumstances regarding immigration requirements, contact us for an obligation free chat. 

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