What employers need to know
For the growing multi-national organisation looking to further expand its operations, Canada is a welcoming destination.
As the geographically second-largest country in the world and home to a well-educated and growing population, the country offers great opportunity for companies to grow their business and find the qualified talent that can carry out key objectives. But expanding to Canada is not without its challenges, particularly when it comes to compensating those employees.
With complex rules that vary significantly between the country’s 10 provinces and three territories, plus stiff penalties for non-compliance, a solid understanding of Canada’s payroll regulations is essential to achieving success.
Employment and compensation policies
Employers hiring workers in Canada must become familiar with the nation’s various labour laws and regulations. For example, rather than being set at the national level, minimum wages are established by each province and territory and they can vary based on type of worker.
Overtime laws are also set at the provincial level, with employees working beyond their set maximum hours eligible for overtime pay at one and a half times their regular hourly rate.
The amount of leave employees are given also varies by province and territory, but usually amounts to two weeks of paid vacation in an employee’s first five or six years on the job, which is then extended to three weeks. In addition, employees who have been at their job for at least 600 hours are eligible for maternity and paternity leave of 35 weeks, which can be used entirely by one parent or split between both parents.
In regard to compensation, employers are required to pay their employees on a regular basis, whether weekly, biweekly, semimonthly, monthly or in 13 annual payments, accounting for any overtime, holiday, severance or bereavement pay.
Employers are required to maintain records of all payroll activities, showing the time worked by each employee and all social insurance contributions, deductions, pension information and slips related to the returns field. Employers must also maintain records on all tax withholdings, entitlements and benefits for six years following the end of the most recently filed tax year.
Taxation regulations
Employers operating in Canada are required to withhold income taxes, at both the federal and provincial or territorial level, from their employees and submit them to the appropriate tax collection agencies.
Companies with employees in the province of Quebec must submit taxes to Revenu Quebec (RQ), while employers in all other provinces and territories submit taxes to the Canada Revenue Agency (CRA). The tax rate is progressive based on income, ranging from 15 percent for the lowest bracket, to 29 per cent for the highest earners (BNA Bloomberg, HR and Payroll Resource Centre, International Payroll Decision Network, International Payroll Country Primer - Canada, Income Taxes, 2015)
All income taxes must be deducted from the employee’s salary each pay period and returned either annually, monthly, bi-weekly or weekly; this depends on the amount of income tax collected. Employers that neglect to withhold income taxes from their employees may be subjected to a penalty equalling 10 percent of the taxes not withheld (BNA Bloomberg, HR and Payroll Resource Centre, International Payroll Decision Network, International Payroll Country Primer - Canada, Income Taxes: Penalties, 2015).
Social contributions Employers in Canada are required to withhold Canada Pension Plan (CPP) contributions, as well as Employment Insurance (EI) premiums for all employees aged 18 to 70.
Both employer and employee make a contribution of 4.95 per cent of the employee’s salary, which is withheld on a maximum of $53,600 in wages (BNA Bloomberg, HR and Payroll Resource Centre, International Payroll Decision Network, International Payroll Country Primer - Canada, Social Taxes: Rates and Taxes). Those operating in Quebec must contribute to the Quebec Pension Plan (QPP) rather than the CPP, with employer and employee contributions being 5.175 per cent of the salary, up to $53,600 (Ibid) .
All employers must also make EI contributions - the employer pays 2.632 per cent of their employee’s salary, while the employee contributes 1.88 (Ibid). The government of Quebec also requires contributions to the Quebec Parental Insurance Plan (QPIP) for all employees working in the province, with employee contributions of 1.53 percent and employer contributions of 2.142 (Ibid).
Success in Canada
Given the complexity of payroll in Canada, the right strategy is essential to achieving success and getting the most benefit from expanding to the country. This starts with a firm understanding of the various laws at both the national and provincial levels and what employers can do to ensure compliance. With high penalties for companies that fail to meet these various regulations, it is essential that any organisation considering a move to Canada work with a payroll solutions provider that can help them navigate these complex policies. The right global payroll partner can help companies expand to the Canadian market, or anywhere in the world, with confidence.
By CloudPay
What employers need to know
For the growing multi-national organisation looking to further expand its operations, Canada is a welcoming destination.
As the geographically second-largest country in the world and home to a well-educated and growing population, the country offers great opportunity for companies to grow their business and find the qualified talent that can carry out key objectives. But expanding to Canada is not without its challenges, particularly when it comes to compensating those employees.
With complex rules that vary significantly between the country’s 10 provinces and three territories, plus stiff penalties for non-compliance, a solid understanding of Canada’s payroll regulations is essential to achieving success.
Employment and compensation policies
Employers hiring workers in Canada must become familiar with the nation’s various labour laws and regulations. For example, rather than being set at the national level, minimum wages are established by each province and territory and they can vary based on type of worker.
Overtime laws are also set at the provincial level, with employees working beyond their set maximum hours eligible for overtime pay at one and a half times their regular hourly rate.
The amount of leave employees are given also varies by province and territory, but usually amounts to two weeks of paid vacation in an employee’s first five or six years on the job, which is then extended to three weeks. In addition, employees who have been at their job for at least 600 hours are eligible for maternity and paternity leave of 35 weeks, which can be used entirely by one parent or split between both parents.
In regard to compensation, employers are required to pay their employees on a regular basis, whether weekly, biweekly, semimonthly, monthly or in 13 annual payments, accounting for any overtime, holiday, severance or bereavement pay.
Employers are required to maintain records of all payroll activities, showing the time worked by each employee and all social insurance contributions, deductions, pension information and slips related to the returns field. Employers must also maintain records on all tax withholdings, entitlements and benefits for six years following the end of the most recently filed tax year.
Taxation regulations
Employers operating in Canada are required to withhold income taxes, at both the federal and provincial or territorial level, from their employees and submit them to the appropriate tax collection agencies.
Companies with employees in the province of Quebec must submit taxes to Revenu Quebec (RQ), while employers in all other provinces and territories submit taxes to the Canada Revenue Agency (CRA). The tax rate is progressive based on income, ranging from 15 percent for the lowest bracket, to 29 per cent for the highest earners (BNA Bloomberg, HR and Payroll Resource Centre, International Payroll Decision Network, International Payroll Country Primer - Canada, Income Taxes, 2015)
All income taxes must be deducted from the employee’s salary each pay period and returned either annually, monthly, bi-weekly or weekly; this depends on the amount of income tax collected. Employers that neglect to withhold income taxes from their employees may be subjected to a penalty equalling 10 percent of the taxes not withheld (BNA Bloomberg, HR and Payroll Resource Centre, International Payroll Decision Network, International Payroll Country Primer - Canada, Income Taxes: Penalties, 2015).
Social contributions Employers in Canada are required to withhold Canada Pension Plan (CPP) contributions, as well as Employment Insurance (EI) premiums for all employees aged 18 to 70.
Both employer and employee make a contribution of 4.95 per cent of the employee’s salary, which is withheld on a maximum of $53,600 in wages (BNA Bloomberg, HR and Payroll Resource Centre, International Payroll Decision Network, International Payroll Country Primer - Canada, Social Taxes: Rates and Taxes). Those operating in Quebec must contribute to the Quebec Pension Plan (QPP) rather than the CPP, with employer and employee contributions being 5.175 per cent of the salary, up to $53,600 (Ibid) .
All employers must also make EI contributions - the employer pays 2.632 per cent of their employee’s salary, while the employee contributes 1.88 (Ibid). The government of Quebec also requires contributions to the Quebec Parental Insurance Plan (QPIP) for all employees working in the province, with employee contributions of 1.53 percent and employer contributions of 2.142 (Ibid).
Success in Canada
Given the complexity of payroll in Canada, the right strategy is essential to achieving success and getting the most benefit from expanding to the country. This starts with a firm understanding of the various laws at both the national and provincial levels and what employers can do to ensure compliance. With high penalties for companies that fail to meet these various regulations, it is essential that any organisation considering a move to Canada work with a payroll solutions provider that can help them navigate these complex policies. The right global payroll partner can help companies expand to the Canadian market, or anywhere in the world, with confidence.
By CloudPay
