Your business is located in the U.S. and you want to hire someone to work remotely. You’ve found someone to hire, but they live in Canada, and you don’t have a branch office there. What can you do? There are some options available to you for remote work. Let’s take a look at some of them.
Hire Your Worker as an Independent Contractor
If you’re a corporation with no presence in Canada, you may want to hire your new worker as an independent contractor. Doing that provides you with a business-to-business relationship with them instead of an employer-employee one. However, there are many potential problems with this arrangement.
Independent contractors can set their hours and schedules, work with additional clients that could be your competitors, and even hire substitute workers to perform work on their behalf.
Since you don’t have a legal presence in Canada, you can’t reciprocate the type of employer-employee relationship that most workers look for in exchange for their loyalty and commitment.
There is also an income tax liability that your Canadian worker bears for being an independent contractor, which may prevent them from working for you in this manner.
Working With the Canadian Revenue Agency for Remote Work
The Canadian Revenue Agency (CRA) is Canada’s equivalent of the IRS, and they don’t like seeing Canadian workers misclassified as independent contractors when they operate as employees. If your relationship strays from B2B to employer-employee, you could be putting your Canadian worker at risk. Although the CRA usually penalizes the employer for worker misclassification, the Canadian worker must deal with the consequences when the employer is outside the country. When this happens, the Canadian worker is considered a “Personal Service Business”, or a PSB.
When that happens, your Canadian worker can not write off any business-related expenses. That’s because all of their revenue becomes taxable, and they have to back-pay employer payroll taxes, often with penalties. This is something that employers usually pay if they are located in Canada. This tax burden for your Canadian worker may be too much to bear, and they may end their relationship with you.
Open a Canadian Office
To open an office in Canada, you must register your business with the local authorities in the province it will operate in. Once this is finished, you can legally hire the worker you want and fulfill all employer requirements.
Having a Canadian branch requires the usual government reporting and filing requirements. Indeed, your new Canadian branch will be responsible for filing the same reports as other corporations in Canada do.
Some of these requirements include:
- Annual corporate tax returns
- Employer payroll remittances
- Collecting payroll deductions including Canadian pension plan, employment insurance, and income taxes
- Administrating provincial workers’ compensation plans
- Setting up local banking services
- Dealing with group benefits plan coverage
- Following local labor laws
There are many services throughout Canada that can assist you with the registration process. Several accounting firms, law firms, and bookkeepers can help you with filing corporate tax returns and administering the payroll on behalf of your company.
How BrightR Solutions Can Help With Remote Work
BrightR Solutions will help you hire the right Canadian remote worker without the hassle of dealing with their complicated paperwork. We’ll hire your remote worker in Canada as our BrightR employee.
Your company will receive the services from the BrightR employee you want to hire. You won’t have to open a Canadian office or deal with the complexities of independent contractors. Our BrightR employee works exclusively for your company. Your company pays a fee for our service. The BrightR employee provides the service you need, and we deal with all the provincial employment laws, human resources, and payroll administration responsibilities.
We also provide intellectual property protection, confidential data protection, Canadian tax compliance, and labor law compliance, so you don’t have to deal with any administration. If you want more information on hiring remote Canadian workers, contact us today.
