In today’s global economy, more small businesses are going international. In fact, the New York Times now offers a dedicated online section of articles related to small businesses going global, check it out here.
As your small businesses grows and expands you may end up opening cross-border offices in both Canada and the U.S. There is a common assumption these two countries operate with similar laws, business processes, human resources structures and compliance requirements governing business activities. Don’t make the mistake of assuming opening a cross-border office is a fast, simple, no-brainer transition, or ignore international payroll differences.
Consider these differences between employment regulations in Canada and the U.S.:
Payroll deductions: government requirements vary for each country, in addition provincial and state laws are a whole other issue, with different regulations in each.
Taxes: The main point to note is under the Canadian system, taxes are based on residency not citizenship. If your employees have been in Canada more than 183 days their income, no matter the source, is taxable in Canada. There are exceptions for government employees. In the United States taxes are based upon where employees perform the work as well as citizenship. Based on citizenship, the U.S. can actually tax its citizens in Canada (source: Cross-Border Telecommuting – Look Before You Leap)
Termination and Severance Compensation: The concept of “employment-at-will”, which allows an employer in the United States to terminate an employment relationship without notice and legal consequences generally does not exist in Canada.
Health Benefits: In Canada, the provinces individually pick up the tab for basic health care services for employees. In the U.S. small businesses do not have to provide health insurance to employees. Read more in Laws Regarding Health Insurance & Small Business.
Human Rights Legislation: Canada has far more prohibited grounds (such as race, colour, sex or religion) when it comes to laws regarding discrimination. For example, in a Canadian job interview you cannot ask a candidate’s race, religion or even questions about what high school they attended or their marital status. While human rights legislation statutes also exist in the United States, complying with them is often only a legal obligation for larger organizations.
Maternity/Parental Leave: Maternity/Parental leave is significantly different in Canada than in the U.S. in length of time as well as the application process.
This post originally appeared on the Ceridian for Small Business Blog, April 21, 2014.
Chamber members receive a 10% discount for payroll services from Ceridian. View Ceridian’s infographic for an overview of flexible payroll and HR solutions for small business. For more information on companies’ regulations around cross-border employment, check out Ceridian’s multinational solutions.