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Hiring Remote Workers in Canada: A Guide for US Companies

US companies are beginning to look abroad for top talent, who can be hired as remote workers in their own country.  Given that remote work is gaining traction in the US, it is a natural step to look across borders and one of the closest countries to hire remote workers is just to the north in Canada.

A few of the advantages of hiring in Canada are purely practical, such as sharing English as a primary language, proximity to the US for ease of travel, similar time zones, and a developed educational and professional environment.  But then your company will have to find a way to legally hire a Canadian citizen.  This guide will outline your options and the main compliance concerns when employing in Canada, with the need to set up a Canadian payroll from the US.

Can a US company hire a Canadian citizen?

If you have recruited a Canadian worker, the steps of hiring them may seem daunting.  It is one thing to hire employees in the US in a familiar system, but that becomes more complex in a new country.  The primary challenge is running a compliant Canadian payroll, and meeting all labor and employment regulations. 

If you do this on your own, your HR department will be facing an entirely new regulatory framework, without any local assistance.  However, there are ways to overcome these barriers with the use of third-party expertise.

How do US companies hire Canadian employees?

There are two main methods for US companies to hire Canadian employees:

  • Set up a Canadian entity
  • Employ your Canadian employee through an employer of record

The choice will depend on your level of commitment to Canada, number of employees and cost considerations.

Set up a Canadian entity

Your company can set up its own Canadian entity as a branch or subsidiary, and hire and payroll the employees directly.  But this method is less than ideal if all you want to do is hire Canadian workers.  It is costly and time consuming to set up an entity in any foreign country, and will require the use of legal and accounting experts in Canada.  It really only makes sense if you are hiring an entire remote Canadian team, or have other strategic business plans in the country.

Employ your Canadian employee through an employer of record

A more efficient option is to use a Canadian employer of record (EOR) to hire your remote employees.  The EOR is already set up as a legal entity with a local payroll that can hire and onboard your employees immediately.  The EOR will ensure that your company is in full compliance with tax and entitlement calculations, which your Canadian employees can rely on as residents.  While the EOR administers employment in Canada, your company continue to manage the employee’s schedule and work projects.

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Can US companies hire Canadian workers as an independent contractor?

It is tempting to simply hire a Canadian worker as an independent contractor, but that method has some limitations.  It can work for short term projects or part-time support, but is not the best if you really want to retain a skilled Canadian worker.  Contractors often work for more than one client, and can easily leave for another opportunity.  Employees tend to be more loyal due to the commitment by your company and statutory benefits.

What is considered an independent contractor in Canada?

If you do decide to hire a contractor, it is important that they are truly independent, and that you don’t treat them like an employee.  In Canada, as with most countries, an employee relationship could be created if you control the worker’s schedule and work methods, or pay them a fixed salary.  In that case, they could be deemed your employee if the worker brought a misclassification claim, and you would have to put them on a payroll to retain their skills.

Can a US company hire a Canadian employee and put them on a US payroll?

You might think it is simplest to just run your Canadian employee through your US payroll.  The problem with attempting a ‘remote payroll’ is the employee has no ties to the US such as a tax ID number or participation in social security and retirement plans.  Further, the employee would not be receiving the tax withholding, entitlements and social contributions that they need in Canada.

Does a Canadian employee working for a US company have to pay US social security or taxes?

As long as your Canadian employee does not establish residency in the US, they don’t have to pay US taxes or social security.  The fact that they are being paid by a US company does not equate to personal income tax liability for the employee, as long as they remain in Canada.

Do Canadian employees need a work visa or permit to work remotely for a US company?

The simple answer is that as long as the Canadian remote worker is physically performing the work in Canada, no US work visa is required.

However, if at some point your Canadian employee needs to visit the US for work purposes, they will need some type of visa to enter and stay in the US.  This will depend mostly on the amount of time they will spend and the type of activity.

Business Visa

  • Duration: 90 Days or Less
  • Attending meetings, trainings, site tours, conferences
  • Meeting with customers

Work Visa

  • Duration: up to three years
  • Filling in for a US employee on leave
  • Giving training or consulting
  • TN-1 Visa for eligible professions
  • Suitable for full-time positions

You will have to keep in mind that if your worker uses business visas frequently, then immigration may inquire about the nature of their work activity and role in the US.

How does Shield GEO employ and pay Canadian employees for US companies?

At this point, you might be wondering how to manage all of this for one or more remote workers in Canada.  We offer you a simple and cost-effective service to employ your remote Canadian workers legally and quickly to support your US operations.

You don’t have to go to the expense of setting up a Canadian entity, or take the risk of hiring contractors.  The Shield GEO employer of record in Canada is ready to do it for you, complying with every part of Canadian and provincial employment laws, and making sure that your new employee is taken care of locally.   A regional account manager will interface with you, your employee and the employer of record to make sure every detail is attended to during hiring, onboarding and setting up payroll.

If you’re looking for more information on doing business and hiring employees in Canada, check out our Ultimate Guide to Hiring in Canada!

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Looking to hire an employee in Canada? Get in touch.

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