If you’re an employer looking to onboard talent in Canada, you might consider partnering with a professional employer organization (PEO) in Canada. A PEO is an organization that provides HR and administrative services to small and medium-sized businesses. Your PEO will operate as a direct employer of your workforce and handle HR functions such as payroll, employment taxes, and employee benefits to serve your business.
Working with a PEO can simplify the process of engaging workers in Canada. Canadian PEOs will help you hire employees in the country without setting up a legal entity there. Here’s what you need to know about using a PEO in Canada.
What are the benefits of using a PEO in Canada?
Ensuring compliance with local labor laws
When you hire workers internationally, you must comply with all relevant local labor laws. However, staying on top of foreign labor laws can be challenging, especially if your company employs workers in several countries.
Using a PEO in Canada takes care of that problem. Canada has both federal and provincial labor laws, with the latter often varying widely between provinces. For instance, labor relations in Ontario are governed by the Employment Standards Act, while British Columbia has the Employment Standards Act and Regulation. The PEO representatives will know the ins and outs of labor laws regarding areas like sick leave, minimum wage, parental leave, and overtime rules. In addition to providing specialized knowledge of the Canadian labor landscape, a PEO can help you stay up-to-date on legal changes and seamlessly manage multiple jurisdictions if your company has employees in different provinces.
Working with a PEO in Canada can also save your company time—both in the hiring process and, more broadly, in entering Canadian markets. Creating an entity in Canada (or any foreign country) is often a time-consuming, tedious process that can drag on and on. If you create a new entity to hire Canadian workers and expand your business into Canada, you may have a long wait ahead.
You won’t experience such delays if you work with a PEO in Canada instead. Since the PEO is already established in Canada, you can bypass many administrative steps associated with establishing your entity. You can engage Canadian workers quickly and start taking advantage of opportunities in the country immediately. This means quick onboarding with ready-to-use systems for payroll, employee benefits, and various other HR functions.
Reducing hiring costs and other HR expenses
In some cases, working with a Canadian PEO can reduce your hiring costs and other HR expenses. When you partner with a PEO, you won’t have to handle human resource functions like payroll, benefits management, and onboarding internally—the PEO will take care of that for you. As a result, using a PEO may be more cost-effective than paying in-house HR staff to handle these tasks.
Also, compared to setting up an entity in Canada, using a PEO should be much more affordable. These cost savings may make hiring in Canada more affordable for your company.
Navigating provincial specificities with ease
While federal laws apply across the board, provinces have unique requirements, whether it’s different minimum wages, vacation entitlements, or termination norms. A PEO can tailor contracts and benefits according to the specific province. Additionally, a PEO can handle provincial tax differences and ensure that correct deductions and remittances are processed.
Unique aspects of Canadian labor law
Even if you choose a PEO in Canada, becoming familiar with some of the unique details of Canadian labor laws is worthwhile. Pay special attention to these details of hiring in Canada.
Federal vs. provincial labor standards
Labor law in Canada is primarily governed by provincial and territorial governments rather than the federal government. Each province and territory has its own labor code, which can lead to variations in labor standards and regulations across the country. It’s essential to pay attention to the province where the employee is hired since things like probation periods, statutory termination entitlements, resignation notice requirements, vacation time/pay, and overtime rules can differ.
English and French are the two official languages in Canada. However, the primary and official language for the province of Quebec is French, which sets it apart from the rest of Canada, where English is the predominant language. This linguistic difference affects various aspects of employment, including job requirements and communication in the workplace. For example, it is a legal requirement that employment documents be provided to employees in French only rather than the typical practice of using dual-language agreements.
Employer taxes and other deductions
Employers in Canada may be subject to both federal and provincial tax laws. They must deduct income tax, Employment Insurance contributions, and Canadian Pension Plan contributions from employee compensation. Canada has stringent record-keeping requirements for these taxes and deductions, which must be consistent and current.
Drawbacks of using a PEO
Needing several PEOs to hire in multiple countries
If you plan to engage workers in various foreign countries, you’ll need more than one PEO—you’ll need one in each country where your hires reside. Each PEO uses its own software, systems, and processes, so working with several can quickly become complicated and counterproductive.
Less control over your HR services
Maintaining high-quality HR services is essential for companies, and using a PEO means losing control over your HR services. You may find that the PEO does not offer the same level of service that your internal HR team would.
No compliance guarantees
Though PEOs help your company comply with local labor laws, you have no guarantee. If your PEO makes a mistake, that could create headaches for your company, even if you’re not ultimately found liable.
Alternatives to Canadian PEOs
If you’re a foreign company looking to bring on a new Canadian team member, the two main alternatives to using a PEO in Canada are opening your own entity or using a global employment platform. Let’s explore how these options compare to working with a PEO in Canada.
Opening your own entity
Opening up your own entity in the country is the traditional route for hiring foreign workers. This will establish a permanent presence for your company in the country after a significant investment of time and resources.
If you’re only planning to hire a few staff in Canada, the costs of this approach outweigh the benefits. Establishing an entity in Canada is only preferable for companies interested in bringing many Canadian employees on board.
Using a global employment platform
The better alternative for companies interested in hiring several Canadian workers is using a global employment platform. A global employment platform is a software solution that helps you scale your team with international workers. These solutions often act as your Canadian employer of record (EOR), offering many of the same advantages as PEOs.
Compared to the other two options, global employment platforms are easy to set up and use. You can use the software to hire employees from the same platform in multiple countries. Try Oyster, a leading global employment platform, today to start hiring Canadian candidates.
Using Oyster to onboard talent in Canada
Looking to engage remote workers from Canada to support your business? Oyster makes hiring, paying, and taking care of workers hassle- and worry-free.
With Oyster, you can manage HR and payroll and automate compliance across 180+ countries—all in one, easy-to-use platform.