Canada Payroll Service

Payroll Taxation Rules

In Canada, each province maintains its social security system outlining the different tax contribution rates. All employee taxes are deducted from their paycheck every month. Under the progressive tax system, the highest federal tax rate is 33%, while the top provincial tax rate varies from 4-21%. Furthermore, taxes differ depending on your residency status in Canada. 

Federal taxes include the Canadian Pension Plan and Employment Insurance. The federally funded social security system also provides several child care benefits, including:

• Fitness Tax Credit
• Universal Child Care Benefit 
• Child Tax Benefit

Every business is legally bound to remit payroll taxes to the federal Canada Revenue Agency or CRA, except in Quebec. CRA is the equivalent of the Internal Revenue Service or IRS. 

Payroll records are also vital in Canada, as you need to retain these records for six years. Your records should account for every employees’ wages, taxes, benefits, overtime, accrued vacation, and other vital details.

Canada Payroll Options 

There are three main options when choosing a payroll processing company:

1. Hire a local payroll administrator to handle payments, filings, and other payroll calculations. You will still be considered the Employer of Record and liable for any errors. 
2. Establish a subsidiary in Canada and take on payroll yourself. This will require hiring individuals with full knowledge and experience handling Canadian taxation and payroll regulations. 
3. Outsource payroll to companies like HR Options, making that company the Employer of Record. They will process payroll and all related matters on your behalf. 

Canada Entitlement & Termination Terms 

Canada does not require companies to create an employment contract before or after hiring. Nevertheless, it is recommended to draft a written agreement with clear terms to protect yourself from liability. 

Employees are entitled to paid or unpaid time off for the following reasons:

• Bereavement
• Citizenship Duties
• Compassionate Care
• Jury Duty
• Maternity Leave, Paternal Leave, Adoption, and Child Care Needs
• Illness
• Voting
• Wedding 

Once employed for three or more months, employers must give a notice period or pay wages before termination. 

Rather than stress about handling payroll in a foreign country without breaking any laws, hiring an HR consulting firm such as HR Options is advisable.