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Setting up and running a Canadian payroll
Canada is a diverse and developed country that is a common site for business expansion. Its proximity to the USA, developed economy, and strong cultural work ethic make it a great place to do business.
However, expanding in Canada can be complicated. With two national languages, provincial differences, and a unique set of labor laws, expanding here can take longer than expected. Delays can lead to loss of revenues, so it is important that any organization interested in expanding here understands the laws and procedures.
At Horizons, our Canada payroll outsourcing experts specialize in the outsourced setup and management of Canadian payrolls, enabling your organization to start hiring and expand as efficiently as possible, whether or not you already have an established entity in the country.
Why choose the Horizons payroll solution?
If you have an entity
If your organization already has an established entity in Canada then we can set up and run your Canada payroll, keeping you fully compliant with local regulations and getting you ready to operate as quickly as possible.
This level of outsourcing is ideal for larger organizations and those looking to establish a long-term presence in Canada.
If you don’t have an entity
If your organization does not have an established entity in Canada then our employer of record service can offer you all the benefits of hiring locally without the complex administration.
Our Canada subsidiary can act as employer of record for your hires, so you don’t need to set up an entity. We can also set up and run your Canada payroll outsourcing, handle all ongoing administration, and ensure compliance with local regulations.
This service can help you offer flexible, scalable, and low-risk expansion into Canada.
Hire borderless talent with Horizons
Canada payroll guide
Tax and withholdings in Canada
Canada’s tax system follows a flexible model, with employees paying a higher percentage of income at higher levels of earnings. Canada’s system is more complicated than many other countries as regulations of social contributions and taxes can vary significantly from province to province.
There is a maximum federal income tax rate of 33% and provincial rates which vary from 4% to 21%, so the rates will be different depending on your location. The federal taxes include contributions to social security funds, which cover things like pensions and other social benefits.
| National Pension | 5.25% |
| Employment Insurance | 2.21% |
| Total Employer Cost | 7.46% |
| National Pension | 5.25% |
| Employment Insurance | 1.58% |
| Total Employee Cost | 6.83% |
| 0-131,220 CAD | 10% |
131,220- 157,464 CAD | 12% |
157,464- 209,952 CAD | 13% |
209,952- 314,928 CAD | 14% |
314,928 CAD and over | 15% |
| Pension (capped at 2,898.00 CAD annually) | 5.25% |
| Employment Insurance (capped at 1,198.90 CAD annually) | 2.21% |
| Total Employer Cost | 7.46% |
| Pension (capped at 2,898.00 CAD annually) | 5.25% |
| Employment Insurance (capped at 1,198.90 CAD annually) | 1.58% |
| Total Employee Cost | 6.83% |
| 0- 41,725 CAD |
5.06% |
|
41,725- 83,451 CAD
|
7.7% |
|
83,451- 95,812 CAD
|
10.5% |
|
95,812- 116,344 CAD
|
12.29% |
|
116,344- 157,748 CAD
|
14.7% |
|
157,748- 220,000 CAD
|
16.80% |
|
220,000 CAD and over
|
20.5% |
| Pension (capped at 2,898.00 CAD annually) | 5.25% |
| Employment Insurance (capped at 1,198.90 CAD annually) | 2.21% |
| Total Employer Cost | 7.46% |
Entitlements and terminations regulations in Canada
When hiring in Canada, contracts are not legally required. However, we recommend that employees are provided with a written contract of employment, with all entitlements and termination terms clearly stated.
There are also various regulations giving employees rights, such as maternity leave, vacation pay, sick pay, and more, but these can also vary depending on location in some cases.
If employees are not in a probationary period (usually around three months), then employers need to provide a notice period for termination.
How to establish a Canada payroll outsourcing
It is possible to run a business in Canada from abroad, but it can be a complicated procedure with a lot of associated administration. If you want to run your Canada payroll in the country yourself, then you will need to establish an entity, which adds to the complication and can take a significant amount of time.
Alternatively, organizations can outsource their payroll setup and management to a global PEO such as Horizons. Our experts can take care of your payroll setup, run all administration, and more to make the process as straightforward as possible for you, even if you don’t have an entity established in the country.
Manage payroll in Canada
Whether it’s EOR service or just payroll management, Horizons’ employment experts can help you get started in 24h.
