How to hire in Canada from the US

If your US business is growing and you’ve recently expanded to Canada, you probably need to hire (and quickly at that). Luckily, Canada has one of the best talent pools spanning the globe. 

Here’s our guide on how to source and hire talent in Canada from the US to assist your growing business. 

Why should you hire in Canada?

Hiring in Canada is a wise business move because there are few language and cultural barriers. With Canada having a population of about 35 million people, 22.8% speak French. But both Canada and the US are primarily English-speaking countries. 

Outside of dialect, Canadian workers can easily market your US business’s products and services. French has a rising status as a business language with more and more people learning it in the corporate sector. This helps your business in more ways than one. Canadian workers can likely copyright and perform other marketing tasks in both English and French, furthering your reach in the global marketplace.

The US is also Canada’s next-door neighbor. This makes working with global hires feasible because you’re within the same time zones, give or take a few hours depending on location. Meetings, business trips, customer service, and shipping and delivery schedules will be much more manageable as a result. 

As for the money-saving benefits of bringing Canadian workers onto your team, hiring the right person in Toronto to manage clients in NYC is more cost-effective than hiring a candidate living in Dallas or Los Angeles.

Additionally, Canada has many of the same corporate traditions as the US, making it easy for Canadians to acclimatize to US business culture (and vice versa). Canada also boasts a highly educated workforce. An impressive 61% of Canada’s 25- to 34-year-old population has a tertiary education, ranking it third in the world. 

What’s an employer of record (EOR)?

The most efficient option to use when hiring a remote Canadian worker is an EOR. An EOR is an already-established legal entity with local payroll, giving you (a business employer) the freedom to immediately hire and onboard employees. 

EORs are especially useful when hiring global talent because they are fully compliant with tax and entitlement calculations, saving your business potential trouble down the road. 

So, while your EOR allows and administers employment in Canada, your US business can still continue to manage your employees’ work schedules, projects, and tasks. EORs are also beneficial because Canadian workers who aren’t employees, rather a contractor or freelancer, can rely on them as residents. 

Who should you hire?: employees vs. freelancers vs. contractors

Once you’ve chosen to grow your business on a global scale and hire in Canada, you then need to decide the type of worker you need. Your options consist of contractors, employees, and freelancers.

Both freelancers and contractors are self-employed. Companies hire them to handle certain assignments or help out during contractual periods of time. Contractors will usually stick with one client for the duration of a contract, typically lasting a couple weeks to several months. Freelancers, on the other hand, typically take on numerous clients at any given time depending on their workload. 

Employees devote all of their time to a single business and are typically under a contract that restricts them from doing work for other companies. They are essentially with a given employer for an indefinite amount of time until they are either fired, quit, or resign to take on work at a different business. 

Pros and cons of each

When you hire someone as an employee, you have full control over the work they are assigned and how they complete that work, as well as their general schedule under designated work hours.

Hiring an employee, rather than an independent contractor or freelancer, comes with tax and payroll responsibilities. If you’re a business employer, it’s a legal requirement to have a full-time employee on your regular payroll, but not a requirement for contractors or freelancers. 

Additionally, you have three options when hiring a remote employee in Canada from the US:

1. Directly hire them.

2. Establish a Canadian subsidiary that acts as the employer.

3. Use an EOR service.

Freelancers and independent contractors, on the other hand, are self-employed and responsible for handling their own accounting (including the withholding of taxes). Employers will still need to report the amount they paid their independent contractor or freelancer for a given fiscal year. However, they aren’t responsible for withholding or paying taxes for them. 

There are many benefits to hiring contractors and freelancers, such as not being responsible for their taxes, the freedom to end contracts if work is subpar, and having help with temporary large work loads. However, there are also some cons.

One of the fallbacks of hiring contractors and freelancers is that you can’t control the way in which they choose to complete their task. You can only assign tasks and deadlines. Sometimes this leads to tension if an employer is particular about the way in which an assignment is handled. 

You also don’t have control over the timeframes in which they work. Freelancers and contractors set their own work hours. So, if your business runs from 8 a.m. to 4 p.m. PST, it’s your hire’s choice to work within that time frame (or not). 

How to convert a contractor to an employee

Canada has certain regulations when it comes to changing the work titles of freelancers, contractors, and employees.

Time limits to request a ruling

Either a worker or an employer (the payer) can request a work status ruling by June 29th of the upcoming year. For example, if a worker’s employment started in 2021, the ruling request has to be submitted no later than June 29th, 2022.

Ruling period before a decision

A decision letter will include the names of both the worker and the employer and whether the employment is insurable (or pensionable) for the period of employment. A decision ruling applies to a specific period of employment and is final unless it’s appealed. 

If the terms of the employment change after the decision is issued, you can request another ruling. 

Converting contractors to employees (and vice versa) is more time-consuming than it is difficult. You just need to make sure you do proper research and submit the correct information. Failing to comply with any of Canada’s employment guidelines can result in consequences such as fines or jail time for tax evasion. This is in the event that you didn’t file or pay taxes to the Canada Revenue Agency (CRA) based on employee compensation.

Freelancing platforms

If hiring a freelancer makes more sense for your business than a contractor or employee, it’s wise to create an account with a freelancing platform to help connect you with potential hires. 

Here are some popular freelancing platforms that global businesses use to source their hires:

• Workhoppers: Workhoppers is an online platform that matches businesses with specific professionals in a designated city. This saves businesses time in sourcing, screening, and selecting candidates for temporary, freelance, or part-time help. 

• Fiverr: Fiverr is essentially a digital marketplace that allows you to list and/or apply for freelance services. A business will purchase a particular service or services that a freelancer states that they offer. 

• Upwork: Upwork is a platform allowing freelancers to bid on desired projects by sending job applications and cover letters to the employers of available jobs.

• Toptal: Toptal is rank-based, requiring freelancers to sustain high customer satisfaction ratings. Employers are more likely to get an experienced worker from this system, and can also use a test period of two weeks before setting anything in stone with a hire. 

How to hire: required paperwork and resources for hiring in Canada

You’ll need to comply with various tax forms and contracts as a global business hiring in Canada. 

Managing your taxes                 

It’s very important to keep your taxes in shape and streamline your accounting. Working with reliable tax and accounting platforms such as Amaka is the best route to go. 

Amaka makes it easy for global businesses of all kinds, including eCommerce ones selling through Shopify, Etsy, eBay, Amazon, and more to handle their finances. 

You can sync your sales and payment transactions (such as paying your freelancers, contractors, or employees) with your accounting software. Let’s say you have a CAD global business account with Airwallex. You can sync it with Amaka to make your payments, accounting, and tax management as smooth as possible. 

It only takes a handful of minutes to set up your free account with Amaka.

Required forms and contracts 

As a US business, you’ll need to take the following steps to hire in Canada. 

Obtain certification for the US Department of Labor (DoL)

Follow these steps then contact the DoL to hire abroad: 

1. Provide proof that you have a vacancy and need a foreign worker to fill it.  

2. Show that your vacancy meets criteria under the Foreign Labor Certification Program.

3. Submit the appropriate electronic travel authorization (ETA) form.

4. Have evidence that you can offer at least the average wage paid to similarly employed workers.

5. Mail your ETA form and other attachments to a designated office. 

Determine if you need a work visa

Once you’ve chosen a candidate to hire, you’ll probably be concerned about visas. Luckily, your Canadian hires don’t need a work visa unless they go to the US to work in-office. They’re only necessary for work done on US soil. 

However, in case your Canadian employee decides to work in the US at one of your offices, there are three types of visas to choose from:

• H1-B visa: This visa is for people with “specialty occupations,” such as engineers, accountants, website designers, computer analysts, and more.

• TN1 visa: This visa is for people with occupations that are different from those covered by an H1-B visa, such as a graphic designer, medical worker, or scientific professional. A full list of TN1-covered occupations is in the Code of Federal Regulations.

• L1 visa: This visa is for managers or executives who are transferring from a Canadian subsidiary or branch of your business. They are required to have worked at the business for at least one year before applying and must be transferring to the US for an equivalent management position. 

If you’re a foreign worker in Canada that is having taxes withheld by your employer in the US, you’ll need to submit a W-8 BEN tax form.

Additionally, employers should look into the following forms to determine if a worker is an employee or self-employed:

• Guide RC4110

• Form CPT1 - Request for a CPP/EI Ruling

Payroll guides 

There are a few steps you need to tackle before putting an employee on your payroll. 

You need to first register with the CRA. It’s your responsibility to cancel, file, and submit payments for Employment Insurance (EI), a Canadian Pension Plan (CPP), and relevant income tax deductions through the CRA. 

All of this allows you to pay Canadian payroll taxes. You’ll then have to open a Canadian bank account — unless you choose to use a fintech payroll platform such as Remote.

Remote is able to handle international payroll, taxes, benefits, and compliance for businesses of all sizes. They also provide EOR services, which are especially helpful whening managing your finances in Canada. 

Here’s an ordered list of payroll steps:

1. Find out if you need to make payroll deductions: This depends on if you are an employer, trustee, or payer.

2. Set up a new employee: You’ll need to get your employee’s social insurance number (SIN), a completed TD1 Form, and Personal Tax Credits Return before you can start paying a worker.

3. Open a payroll program account: You’ll need to register for a payroll account and receive a payroll number before you can send any deductions.

4. Calculate contributions and deductions: You can now calculate EI and income tax deductions from employee pay, as well as CPP contributions. Take a look at the CPP and EI forms in the previous section for more information.

5. Pay source deductions: You’ll now need to send CPP contributions and EI and income tax deductions, report anything that is zero or correct any remittances, and confirm your payment receipt.

6. Send payroll information returns: Lastly, you need to file a year-end summary of all the payments and deductions you made to workers.

Following all of the Canadian HR regulations is important because you could face consequences if you don’t abide by their regulations. 

It’s in your best interest to hire a business, such as Remote, that’s familiar with Canada’s guidelines for accounting and tax filing. You’re more likely to make mistakes when completing and submitting important paperwork on your own.

Legal considerations per province

All 12 provinces in Canada have their own set of federal labor laws. Minimum wage and overtime rates, for example, are unique to each province.

Canada is also stricter than the US when it comes to interviewing applicants. Employers are not allowed to ask any questions related to:

• Gender

• Religion

• Age

• Pregnancy

• Criminal record

• Citizenship status

• And more

They also can’t ask whether an applicant can work on weekends, holidays, or evenings because it has the potential to reveal one’s religious beliefs.

Additionally, Canada does not practice at-will employment. As a US business hiring in Canada, you cannot fire a worker without warning — you need to have a legitimate reason and should give about one month’s time before formally dismissing anyone. 

However, Quebec has an additional rule when it comes to termination. Two years of employment with a business give Canadian employees more protection, meaning they can only be terminated due to layoffs or a serious issue. 

And in reference to fixed-term contracts that are common among independent contractors, open-term or indefinite agreements are much more common in Canada. Employers who attempt to use fixed-term contracts could put themselves at risk of liability issues.

Contact Airwallex to facilitate your expansion to Canada

Hiring from Canada’s diverse talent pool will help you achieve the growth you want, especially with its expansive eCommerce market. Luckily, Airwallex is here to help. We charge minimal to no fees, offer low foreign exchange rates, and work with 144 currencies to give you flexibility in your business endeavors.

If you’re ready to better manage your international finances, sign up for a free global business account with Airwallex today. 

Related article: The ultimate guide to paying overseas vendors