Compliance checklist for U.S. companies employing Canadians

Employing people in Canada brings federal tax obligations and a second layer of provincial rules that change with the employee’s province. This checklist covers what a U.S. company has to get right, with links to the guides that explain each item and to the official sources. Rates and thresholds change, so we link to them rather than repeat them.

Which rules apply

Most private-sector employers fall under the employment standards of the province where the employee works. Federal standards (the Canada Labour Code) apply only to federally regulated industries such as banking, telecommunications and interprovincial transportation. A U.S. software company with a developer in Ontario follows Ontario’s rules; if it hires again in British Columbia, that employee follows British Columbia’s. See employment law basics and the province explorer.

The checklist

Registration

• CRA business number and payroll program account before the first pay (CRA requirements)
• Revenu Québec registration for employees in Québec
• Workers’ compensation registration in each province where people work, such as WSIB in Ontario, CNESST in Québec or WorkSafeBC
• Any provincial employer health tax registration that applies (Ontario, Québec, British Columbia, Manitoba and Newfoundland and Labrador have one)

Payroll

• Federal and provincial income tax, CPP or QPP, and EI withheld every pay, at the current CPP and EI rates
• Employer contributions added and remitted on the schedule the CRA assigns
• T4 slips (and RL-1 slips in Québec) issued and filed by the last day of February
• A Record of Employment issued whenever an employee’s earnings are interrupted
• Payroll records kept for six years

The Canadian payroll guide walks through each step.

Employment standards

• Pay at or above the provincial minimum wage for all hours worked, including for salaried staff
• Overtime thresholds and exemptions checked for the province: some provinces, such as Ontario and British Columbia, exempt certain IT professionals under specific conditions; others have no such exemption
• Vacation time and vacation pay at or above the provincial minimum
• Statutory holidays and holiday pay as the province defines them
• Statutory leaves (parental, sick, family) honoured

Contracts and termination

• A written employment contract that meets the province’s minimum standards
• A termination clause drafted carefully: a clause that falls below the statutory minimum can be unenforceable, exposing you to much longer “reasonable notice” at common law
• An understanding that Canada has no at-will employment; ending employment without cause requires notice or pay in lieu, and sometimes statutory severance

Health, safety and privacy

• Occupational health and safety obligations, including workplace violence and harassment policies, which apply to remote employees too
• Employee personal information handled under the applicable privacy law: Québec, Alberta and British Columbia have private-sector laws that cover employees; elsewhere, follow PIPEDA’s principles as good practice

Classification

• Every contractor relationship checked against the CRA’s employee or self-employed factors: control, tools, chance of profit or risk of loss, and integration. See EOR vs contractor.

Where U.S. companies most often go wrong

• Assuming U.S. defaults. At-will employment, overtime exemptions for tech roles and “unlimited PTO” do not translate.
• Treating a full-time contractor as a vendor. If the person works like an employee, the authorities will treat them as one, with back deductions and penalties.
• Using one template contract across provinces. Minimums differ, and a termination clause that fails one province’s standard can fail entirely.
• Missing provincial registrations. Workers’ compensation and employer health tax are easy to overlook when payroll is set up from the U.S.

Getting it done

You can register as a Canadian employer and run this checklist yourself, usually with a Canadian payroll provider and employment lawyer. Or an Employer of Record can be the legal employer and carry the checklist for you, while you direct the work. See how our Employer of Record service works, or read how we approach compliance.