5 Common HR Compliance Pitfalls
It’s a brave new world when it comes to recruiting talent and growing your team. Remote work and borderless hiring have not only expanded your potential talent pool, but also redefined what’s possible.
It’s a big reason why businesses like yours are probably looking northward to Canada as a source for that next perfect candidate.
But let’s temper that enthusiasm just a little bit and talk about Canadian employment law and HR compliance. Sure – it’s not everyone’s favorite subject, but it’s an important one. Especially if you and your business want to avoid legal issues, tax troubles and other major disruptions.
That’s why we’re covering five of the most common employment compliance pitfalls you might run into when hiring Canadian talent – and how best to avoid them.
Pitfall #1: Not having a valid employment contract in place
An employment contract is (or should be) the bedrock upon which your relationship with your employees is built. Done properly, employment contracts help prevent misunderstandings, clearly outline expectations and responsibilities, as well as offer protection in the event of a dispute.
However – if you’re using an employment contract that you’ve pulled off the internet, or if it hasn’t been recently reviewed by an employment lawyer, it may not stand up in court should anything go wrong.
Now, add Canadian-based employees to the mix! Each Canadian province has slightly different employment standards and laws, so you need a contract specific to each province that an employee lives in to ensure that your contract will stand up in court.
Pitfall #2: Getting tangled up with terminations
Terminations happen – it’s simply a reality of business. But it’s important to understand how terminations work in Canada versus what you might be accustomed to in the United States.
The US has “at-will” termination – where employees can be dismissed at any time and without providing a reason – or severance pay. Canadian employment law, on the other hand, requires that you provide written notice of termination or pay in lieu of notice.
While the specific severance requirements vary, the take-home message here is: To end an employment relationship in Canada, you’re likely going to have to shell out some dollars.
That, of course, brings us back to having province-specific employment contracts, which clearly lay out probation periods and other conditions of employment to cover you if and when a termination occurs.
Pitfall #3: Paid time off
Paid time off is another major point of difference that can catch companies off-guard. One big example is maternity leave. The US only requires 12 weeks of unpaid leave annually. In Canada, meanwhile, new mothers can take 15 weeks of paid maternity leave, and then receive a further 35 to 61 weeks of parental benefits.
In terms of other paid leaves, the standards vary by province. For instance, in British Columbia, all employees are entitled to five days of paid sick leave, but three days in Manitoba and two days in Quebec. Ontario employees, meanwhile, get three unpaid days.
If we look at vacation time and vacation pay, most provinces legislate that new employees are entitled to a minimum two weeks of vacation per year. However, in Saskatchewan, that requirement is three weeks.
Pitfall #4: Understanding (Canadian) payroll and taxes
Payroll and taxes are far from the flashiest things your business will deal with but getting them right – especially for Canadian employees – is incredibly important.
Here, you have to navigate both federal and provincial regulations including Canada Pension Plan (CPP), employment insurance, tax deductions, taxable benefits, expenses, allowances – and more.
Let’s look at allowances, for example: You’re providing an annual lump sum to your Canadian employee for car repairs and gas. If you’re not following Canada Revenue Agency (CRA) guidelines on how this allowance should be taxed and reported, you could be putting employees at a major tax disadvantage or run into tax issues yourself.
Pitfall #5: Workers’ compensation
In Canada, worker’s compensation is handled through independent provincial Worker’s Compensation Boards. As a business, you sign up and pay your employees’ premiums. And you can’t choose to opt out of worker’s compensation in favor of your own private insurance.
Worker’s compensation premiums can vary by province, as do requirements for reporting workplace accidents. Not paying worker’s compensation premiums or properly reporting accidents could lead to serious fines for non-compliance.
Choose a partner that can help you avoid HR compliance pitfalls
We’ve outlined five of the most common employment compliance pitfalls, but we haven’t yet talked about how to avoid them. Well – we’re here to tell you that you don’t need to be a subject matter expert in all things payroll, benefits and employment law. Why? Because in us, you have a Canadian employer of record partner that can handle it all on your behalf.
We’re experts at navigating the complex and oft-changing web of federal and provincial employment regulations. We can also provide province-specific employment contracts, and timely HR advice during major employment events like terminations.
Ready to navigate Canadian HR compliance?
Let’s get started by getting your business in compliance and all set to hire Canadian talent.
Talk to us today!
