What does a Canada Employer Of Record Do?
EORs in Canada handle HR admin and payroll for employees in Canada so organizations can focus on achieving business goals, not struggling to understand and comply with Canada’s complex web of employment and tax laws.
- Acts as the Legal Employer
From the perspective of the Canadian courts, Provincial Employment Legislation and Employment-related tribunals, the EOR is the legal employer. It is the responsibility of the EOR to ensure compliance with all employment laws and regulations. The employee signs an employment contract with the EOR and agrees to do work for the client company. The contract clearly states who the client company is, who will supervise the employee’s daily work and what their duties and responsibilities will be.
- Payroll Processing and Tax Management
A Canada EOR handles all payroll and tax processes for their clients. They should have extensive knowledge of federal and provincial deductions and have secure, simple payroll processes and technology for invoicing and payment of employees. They generate tax documents for employees (T4, T2200) and the government and provide advice to clients on how best to handle taxable benefits, paid leave, and proper handling of expenses to clients.
- Administers Health Benefits and Life Insurance
A Canada EOR typically provides extended health benefits to their employees including Prescription Drug, Dental, Health, and Vision coverage. They may also provide life insurance and long-term and short-term disability (LTD, STD) coverage, as well as Accidental Death & Dismemberment (AD&D) Insurance.
- Ensures Compliance with Provincial and Federal Employment Laws
Employment law varies province to province in Canada and can overlap with federal regulations. The EOR should have an employment contract for each province, one that is compliant with employment laws and is informed by the latest common law decisions. They should also ensure a basic set of employment policies is in place for every province covering everything from job protected leave and hours of work to Health and Safety Requirements.
A Canada EOR mitigates the financial and legal risk of hiring Canadians and stays on top of evolving regulations so their clients can rest easy knowing they are compliant with local laws and can avoid surprises if difficult HR issues arise like employee discipline or terminations.
An EOR handles legal and tax documentation including contracts, tax forms and helps talent enroll in health, retirement and other benefit plans. They will also explain the different benefits and options and are the first line of contact for employee questions. They can also help with offboarding tasks and provide record of employment documentation for employees.
In Canada, an EOR typically provides a group retirement savings plan (RRSP) through a trusted investment company to provide savings options for retirement (similar to the 401k program in the US) The EOR can advise client companies on matching contribution percentages, help talent enroll and choose the right plan for them and ensure payroll deductions and tax documentation are accurate and provided to the employee in a timely manner. They can also advise client companies on contribution matching expected by top talent.
- Paid Leave TrackingIn Canada, every employee is entitled to paid leave and entitlements vary by province. A Canada Employer of Record helps navigate the complex web of local regulations for vacation, advises on maternity or other job protected leaves, minimum entitlements and carefully tracks paid leave to ensure compliance and avoid large payouts at the end of employment.
What does a Client Company do?
The client company partners with the Canada EOR to legally employ talent on their behalf. Their responsibilities in the EOR relationship are as follows:
- Defines job requirements, pay and responsibilities for talent
- Identifies the ideal candidate
- Signs client service agreement with a Canada EOR to employ talent
- Provides day to day direction for the Canadian employee
- Onboards talent in terms of teaching them about organizational culture and how works gets done in this organization. They are responsible for introducing Canadian employees to their manager, team and making them feel like an integral part of the team, no different than team members who work on site.
- Provides all the resources required for work – Laptop, software, system access
- Conducts performance reviews and determines if pay raises or promotions are deserved
- Submits, reviews and approves bi-weekly invoices from the EOR to ensure accurate and on-time payment of Canadian employees
When a client company partners with a Canada EOR to hire a Canadian they:
- Avoid the significant costs, time and hassles of setting up a legal or tax entity in Canada.
- Mitigate legal or financial risks by ensuring compliance with federal and provincial employment and tax laws in Canada.
- Outsource non-strategic but time-consuming functions like payroll and benefits administration
- Access a broader pool of skilled and educated candidates
What Does the Talent (Employee) Do?
Although they legally work for the Canada EOR, that relationship is mostly invisible to the employee, limited to payroll, tax forms (T4, T2200) and basic HR paperwork or interactions. The employee’s work life and primary relationship is with the client company from whom they receive day to day work assignments, resources and guidance. Their responsibilities in the EOR relationship are as follows:
- Fulfill job duties as assigned by the client company
- Meet performance expectations and deadlines
- Maintain professional conduct and adhere to EOR company policies
When a Canadian enters into an EOR relationship they:
- Gain valuable international experience without having to relocate
- Avoid the uncertainty, paperwork, tax headaches and hustle needed to work as a consultant
- Get a regular pay cheque, benefits, RSP and paid time off including sick leave and vacation
- Workplace flexibility: Work in Canada in their home office (or local coffee shop)
3. Pros and Cons of Using an EOR versus Setting Up a Legal Entity
A quick comparison of the pros and cons of using a Canadian Employer of Record compared to establishing a legal entity in a Canada:
NOTE: If no revenue is generated in Canada, companies may not be able to set up a legal entity
|Cost & Timeline
- Hire in as little as 1 day
- Pay a % of salary or min. amount per pay period
- Able to quickly add more employees
- Can start with 1 employee
- 6 -12 months to set up
- Registration Fee
- Costs for Canadian accountant, payroll provider
- $7,000 – 10,000+ per province to draw up employment contract and policies
- Need 10+ employees to be worth effort
- Has policies and contracts compliant with provincial and federal laws
- Mitigates risks and advises on each employment stage
- Stays on top of evolving employment regulations and updates contracts and policies regularly
- Find experts in provincial law, policies and taxes/ payroll
- 1-2 months to create province specific contracts and policies
- Assume all legal risks and liabilities for Canadian employees
- Once per year review and update of all contracts and policies to ensure ongoing compliance
- Ensures accurate deductions and prepares tax documentation T4,T2200 for (employee) and government
- File taxes in each province where employee resides
- Stay up to date on evolving tax landscape and ensure deductions are correct.
- Prepare tax documentation and ensure records are correct
|Payroll & Benefits
- Have certified payroll practitioners with in-depth knowledge, ensuring accurate and compliant payroll processing.
- Streamline payroll tasks, saving time and effort for client companies.
- Navigate complex employment laws, reducing the risk of legal issues related to payroll and benefits.
- Avoid the expenses and complexities associated with managing payroll and benefits in-house.
- Most time consuming part of bookkeeping
- Complexity – irregular employment laws and regulations require local legal expertise
- High risk and inaccuracies due to complex local regulations
4. Navigating Canadian Employment Law
Federal and Provincial Laws
Canada’s employment laws are governed by a complex and overlapping framework of federal and provincial legislation
. Some employees are regulated by federal laws (The Canada Labour
Code) such as railways, airlines, banks, pipelines and mining. Most other employees are regulated by the labour and employment standards as set out by the province in which they work. Although there are many similarities in standards between the provinces, there are also many technical differences that an employer must be aware of. This can create a compliance nightmare that can be difficult for a foreign employer to navigate and contracts must be regularly reviewed and updated to ensure ongoing compliance. Areas of complexity include:
- Wages And Hours
- Minimum wage, overtime pay, and other wage-related entitlements vary by province and industry.
- Compliance with provincial rules regarding scheduling, breaks, and leaves of absence.
- Employment Standards
Employment Standards are the legislative acts that govern the employer – employee relationship and ensure employees are treated fairly and equitably. Employment standards also set out specific requirements for employers, for example the requirement to have certain policies or workplace programs in place.
- Policies to ensure employees are treated fairly and equitably and that the EOR employment contract meets or exceeds legislative requirements in all jurisdictions where they have employees. These policies also set a minimum standard for employee conduct.
- An EOR can advise client companies on termination of employment, severance pay, workplace safety and many other legal questions
- Paid And Protected Leaves
Every province in Canada requires a minimum amount of vacation time or pay, as well as paid time off on statutory holidays and job protected leave. Each province also has its own rules governing eligibility for overtime and rates of overtime pay.
- Statutory Holidays: Each province has their own. For instance, in Ontario, there are nine mandatory paid holidays in 2024 plus four optional ones.
- If employees do not use their paid time off as it is accrued, significant financial liabilities for the client company can result as paid leave must be paid out when employment ends.
- An EOR should ensure provincial laws are being followed and track and correctly accrue paid leave to avoid unexpected payouts.
- Canada also has a number of job-protected leaves (eg. maternity, critical illness, family care) and each province has different requirements or entitlements for each. A Canada EOR should have clear policies on these leaves and provide the employees and client companies information about these protected leaves.
- Ending Of Employment – Terminations, Layoffs And Offboarding
Given the contrast between the ‘at-will’ employment structure in the United States and other countries and Canada’s complex web of employment regulations, a Canada EOR plays a vital role in advising on severance packages and notice periods. The right Canadian EOR can ensure a smooth and legally compliant transition for employees and limits financial exposure for the client company with a sound and legally enforceable employment contract. The EOR’s expertise in navigating the nuanced employment laws of each country enables a seamless offboarding process, minimizes potential challenges and promotes a respectful and compliant conclusion to the employment relationship.
Worry-Free Employment With A Canada Employer Of Record (EOR)
Navigating the complex and evolving landscape of Canadian employment laws and regulations can be a daunting task. A Canadian Employer of Record alleviates this burden, providing worry-free employment of Canadian talent. An EOR in Canada must understand both federal and provincial employment laws and should have contracts and policies specifically tailored to each province.
For companies who hire an Employer of Record in Canada, this provides worry-free employment of Canadians:
- Freedom to hire anyone, anywhere in Canada.
- A single point of contact for all Canadian HR and payroll services.
- Advice to ensure compliance and mitigate risks throughout the employment life cycle.
- Outsource of administrative functions so they can focus on business objectives and growth without worrying about compliance, costs and risks associated with Canadian employees
5. Streamlining Payroll and Tackling the Canadian Tax System
Outsourcing Payroll and Tax Processes for Foreign Employees
Payroll Processing in Canada
Payroll processing, known for its complexity and time-consuming nature, plays a crucial role in an organization’s financial management. The intricacies involved in managing employee compensation, tax deductions, benefits, and compliance with ever-changing regulations make payroll a challenging yet essential function. Some scary payroll stats and facts:
- 40% of small business owners say taxes and bookkeeping are the worst and most time-consuming part of owning a business (SCORE).
- Payroll typically takes up 5 hours each pay period or 21 days each year.
- There are twice as many mistakes when using homegrown payroll solutions versus third-party payroll solutions (Aptitude’s Payroll Index Report).
- 25% of small businesses use pen and paper for tracking finances. 45% don’t have an in-house accountant or bookkeeper (Clutch).
When managing payroll in Canada, employers must have extensive knowledge of federal and provincial deductions encompassing Canada Pension Plan (CPP), Employment Insurance (EI), as well income tax or benefit deductions. They should also understand taxable benefits, paid leave accrual, and how to properly handle expenses. An Employer of Record handles all payroll processes and functions on behalf of their clients including:
The Complex Canadian Tax Landscape
- Handling Time-Consuming Calculations: An EOR handles intricate calculations, including regular wages, overtime pay, bonuses, tax deductions, and other entitlements.
- Ensuring Compliance With Payroll Laws: Employers in Canada must comply with various payroll laws at the federal and provincial levels as well as Canada Revenue Agency (CRA), Employment and Social Development Canada (ESDC) and the Provincial Ministry of Labour and ensure accurate employee payments to timely tax deductions and submissions
- Filing And Reporting Requirements: An Employer of Record manages the filing of payroll reports with government agencies, such as tax authorities and employment insurance offices.
Canada’s tax system is a multi-jurisdictional one, with federal and provincial levels of government imposing taxes. As a result, tax compliance is a significant administrative burden for businesses. A Canada Employer of Record (EOR) should possess in-depth knowledge of this complex tax structure, ensure meticulous paperwork and reporting.
6. Outsourcing HR Administration
Focus on Strategic HR Initiatives Not Admin
Talent management professionals spend more than 50% of their time on administrative tasks
. This leaves little time for strategic HR planning, employee relations, and talent development. For instance, small businesses report the following:
When engaging a Canada Employer of Record, they will handle all the nitty-gritty boring but critical HR administration and compliance tasks for Canadians, so client companies can focus on more strategic initiatives like talent motivation and development.
- HR Compliance: Review and update policies (eg. harassment, substance use, protected leaves, health and safety) on an annual basis, review employment contracts annually, provide Canada specific training or assessments (eg. health and safety, ergonomic) and ensure compliance with employment standards, maintain meticulous employment records and paperwork.
- Benefits Administration: Manage benefits administration seamlessly is a part of a comprehensive Employee of Record service, enhancing the overall employee experience.
- Onboarding Employees: Ensure all paperwork is completed and signed including employment contracts, tax forms, direct deposit, benefits and other relevant forms. Review company policies, paid leave and benefits packages with employee, help them enroll in benefits and RRSP to set the stage for a successful and smooth employment lifecycle.
Benefits And Retirement Savings
Ensuring Employee Well-Being
Although Canada has a publicly funded, universal system for medically necessary health care services, some services like prescription drugs, dental and vision care are not covered. Employees in Canada expect employers to provide health benefits that cover these gaps for themselves and their families and also extend health coverage to include services like physiotherapy, psychiatry, naturopathic or massage. A Canadian Employer of Record (Canada EOR) will engage with a Canadian benefits provider to provide a comprehensive health benefit package to cover the majority of health-related expenses not covered by the public system.
- Supplemental Health Benefits Management
- Negotiate Contracts with Benefits Providers: Contract with Canadian health benefit providers to secure optimal but cost-effective supplemental health benefits.
- Employee Enrollment: Assist employees in enrolling and selecting supplemental benefits to best meet their needs.
- Explain Coverage and Claims Process: Most benefit providers have online portals that make it easy to file claims, check on the status of a claim or find out about what is included in coverage.
- Contribution Management: For tax efficiency, some benefits (like short-term disability) may be paid by the employee or benefit cost may be shared by the client company and employee. A Canadian EOR will ensure all invoices or payroll deductions are accurate, provide documentation and answer any questions from client or employees.
An EOR can help employees navigate the complicated administrative process of submitting applications and supporting documentation to access these benefits
- Life Insurance, Short-Term Disability (STD), and Long-Term Disability (LTD):
STD and LTD plans provide income replacement to employees in the event of a serious illness that prevents them from working for an extended period.
Short-Term Disability (STD):
- Provides financial protection to employees’ beneficiaries in the event of the employee’s death. This offers peace of mind to employees, knowing their loved ones are financially secure.
Long-Term Disability (LTD):
- Offers financial support to employees who are temporarily unable to work due to illness or injury. Typically covers a portion of the employee’s salary for a specified period, often the initial weeks of disability. Short-term disability plan aims to provide a financial safety net during short-term health challenges.
- Extends coverage beyond the short-term, providing financial assistance for an extended period, sometimes until retirement age. Long-term disability plan covers a percentage of the employee’s salary, ensuring continued financial support during prolonged illnesses or injuries. This plan is essential for employees facing extended periods of disability, offering sustained income protection.
- Retirement Savings Plan (RRSP) Management
- Negotiate contracts with Financial Provider for Group RRSP: An effective retirement plan will provide a number of different investment options to choose from without subjecting employees to undue market risks. Employer Matching: Advise on the amount or type of employer matching expected to attract and retain top talent.
Embracing the Future:
A Paradigm Shift: Making Remote Work Flexible, Seamless, And Personal.
The landscape of the workplace is undergoing a significant transformation, driven by the rise of remote work. The course of the pandemic has reshaped expectations about where work is done. Employees want increased workplace flexibility and organizations that embrace remote work can expand their talent search to a much wider audience. This change enables them to attract top talent that is reluctant to relocate or those who prefer the comfort of working from home. Remote work – plus an EOR relationship – also allows organizations to retain employees who want to return to their home country.
Technology and communications options has made physical proximity to an office less critical. This change is particularly evident in Canada, where professionals are now seeking remote employment opportunities without the need to uproot themselves or face the challenges associated with long commutes.
The below Forbes Insights of the US remote work environment is reflective of the global trend that is shaping the workplace landscape worldwide.
Canada’s workforce faces similar trends and insights.
Forbes Insights: A Glimpse into The Remote Work Landscape.
provides compelling insights into the trajectory of remote work:
- As of 2023, 12.7% of full-time employees work from home, while 28.2% work a hybrid model
- 32.6 million Americans will work remote by 2025
- 16% of companies operate fully remote
sector alone, is expected to show an annual growth rate (CAGR 2023-2028) of 6.82%,
resulting in a market volume of US$38.53bn by 2028.
Bridgewater Talent Integration, a Canada EOR
Your Bridge to Canadian Talent
Bridgewater Talent Integration is a Canada Employer of Record, and we help organizations seamlessly integrate Canadian talent into their team. Our talent integration team seamlessly handles every administrative detail, from contracts to payroll and benefits to offboarding, and stays on top of evolving provincial and federal regulations, so you don’t have to.
We provide our clients with a trustworthy partner for success fostering trust and confidence in every interaction and are proud to deliver:
- Provincial Expertise: Collaborating with top employment lawyers in each province we employ in, we’ve crafted employment contracts and policies tailored to each region, minimizing the financial and legal complexities of international hiring. We vigilantly monitor evolving employment and taxation laws – so you have the peace of mind to lead strategically, unburdened by administrative concerns.Onboarding as little as one day: Bypass the obstacles of relocation, work visas, and prolonged hiring timelines with our agile employment service. Attract top talent in Canada effortlessly, offering them enticing full-time permanent roles. Avoid the complexities, costs, and headaches associated with visas, relocation logistics, or the establishment of a local entity. We pave the way for swift and seamless onboarding, empowering you to build a formidable team without unnecessary hurdles.
- Payroll Precision: Our certified payroll practitioners boast extensive expertise in federal and provincial rules, encompassing CPP, EI, and income tax deductions. Let us guide you with optimal strategies for managing taxable benefits, paid leave, and expenses. We unravel the complexities of deductions, providing clear explanations for you or your employees. Seamless and Transparent Talent Integration: Every aspect, from offers and contracts to payroll, benefits, and offboarding, is expertly managed by our talent integration team. We serve as your guiding force, providing insights into employment laws and best practices, fostering a tripartite relationship where we operate seamlessly in the background, allowing you to channel your focus entirely on your business. Cost–Effective Solutions: Take advantage of the low Canadian dollar and avoid the hassle and costs of setting up a legal entity. Avoid the delays and paperwork needed to establish and operate a legal entity and stay focused on your core business goals.
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