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Payroll & Tax in Canada

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Canada payroll & taxation

There are specific rules for payroll and taxation in Canada, depending upon whether your company employs foreign nationals or local Canadian employees, and the type of business structure used. The primary concerns for a foreign company that needs to comply with tax laws in Canada are: individual income tax (IIT) for employees in Canada, social security costs, payroll tax, GST/HST tax, withholding tax, corporate tax and permanent establishment concerns.

Employment standards in Canada provide a set of minimum standards by law for work conditions. Both the federal and provincial governments have authority over labour and employment law in Canada, which could affect payroll administration.

Your Payroll Options in Canada

Remote Payroll

A remote payroll in Canada is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Canada. This path will still require the company to report Canadian source earnings and tax withholdings, so it can carry quite an administrative burden. One option for a non-resident company to payroll its employees (local and foreign) in Canada is to use a fully outsourced service like a GEO which will employ and payroll the staff on their behalf.

Local Payroll Administration

In some cases, a company will register their business in Canada under one of the forms available, but prefer to have another company administer its payroll.  This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll

Larger companies with a commitment to Canada may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Canadian payroll, and can fulfill all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Canadian employment laws.

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in Canada to a GEO, like Shield GEO. This is possible for both foreign workers and Canadian nationals. This is the easiest, fastest and safest way to payroll staff in Canada.

Shield GEO manages all aspects of payroll for workers in Canada, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in Canada

Information Explanation
Currency ?

Canadian Dollars

Employee Information Required ?

Canadian laws require that the following information shall be provided to employees, or printed on employees’ pay statement:

Employee name;
Date of pay period;
Rate of pay and hours of work at each rate;
Gross earnings;
Itemised deductions;
Net pay.

Tax Registration Requirements ?

In Quebec, employers are required to register with Revenu Québec if income is paid to an employee who reports for work at one the employer’s establishments in Québec or the amount is paid to an employee who is not required to report for work at any of the employer’s establishments (in Québec or elsewhere), but is paid from one of your establishments in Québec.

Social Security Registration ?

Pension Plan contributions in Canada and Quebec are required by both the employee and employer.

Documentation Required for New Employees ?

Documents required for new employees in Canada are as follows:

  • Written statement of the main terms and conditions of employment, signed by both the employee and employer. See the CPA’s New Hire Guidelines for more information (member login required).
  • Itemised pay statement: Each employee must receive an itemised pay statement and the information reported must comply with employment/labour standards as per the legislation of where the work is performed.

Payments

Information Explanation
Payment Mode ?

Online filing is preferred. Majority of payments, indeed, are done electronically and may be a requirement based on remitter type

Frequency of Salary Payment ?

Most common are:

  • Weekly – 52 pay periods (53 every seven years) – 18% of employers
  • Bi-weekly – 26 pay periods (27 every eleven years) – 60% of employers
  • Semi-monthly – 24 pay periods – 15% of employers
  • Monthly – 12 pay periods – 7% of employers
Invoice / Payslips required ?

A payslip is required and can be provided either by paper or electronically, depending on the jurisdiction.

Minimum Wage ?

Ranges from $8.90/hour to $11.00/hour by jurisdiction and legislated by the provincial and territorial governments.

Employee Entitlements

Information Explanation
Disclosure and Confidentiality of Personal Information ?

Employers and employees are often subject to privacy laws in Canada, one of which is the Privacy Act, which applies to employee information in federal government institutions and the Personal Information Protection and Electronic Documents Act (PIPEDA) applies to employee information in federal works, undertakings and businesses.

It is considered an employer’s responsibility to safeguard employee data. Policies and procedures, in particular, should be put in place in reference to the methods they currently use to collect, use and disclose personal information, and make the proper determinations in relation to what is reasonably required for the purpose of establishing, managing, or termination an employee relationship.

Employee Protection and Anti-discrimination Rights ?

Most employees have the right to refuse work that they feel is unsafe to themselves or another worker or believes they are endangered by workplace violence or harassment

Time Off Work ?

Almost all employees have a legislative right to unpaid or paid time off work for the following reasons:

  • Bereavement
  • Citizenship
  • Compassionate care
  • Jury duty
  • Leaves for family situations
  • Maternity (pregnancy), parental, paternal, adoption and child care l Organ donor
  • Reservist
  • Sick
  • Voting
  • Wedding
Medical Leave ?

Not all jurisdictions have legislation in place relating to sick leave. Those do not have legislation in place rely on employer sick leave policies or general/emergency leave provisions in their legislation to cover individuals who are absent due to illness.

Employment Termination

Information Explanation
Resignation / End of Service Payment ?

An employer must either give the employee a period of notice, or pay the employee wages in lieu of the notice period to an employee who has been continuously employed for 3 months (or 90 days) or more, depending on the jurisdiction.

Termination of Employment ?

All employers must complete a Record of Employment (ROE) when an employee experiences an interruption of insurable earnings. The employer must provide a copy to Service Canada, the employee and retain copy with the employee’s records.

The ROE can also be completed online either through Service Canada or through a payroll service provider where the electronic copy is automatically led with Service Canada and the employee can access their copy on Service Canada’s website.

Canada

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