Payroll Deductions
Effective January 1, 2024, employers must assess the employee’s Province or Territory of Employment (referred to as “POE”) to ensure appropriate deductions are withheld. This applies to the following deductions: CPP/QPP, EI, QPIP and Income Tax.
Going forward, the employee’s province of work is determined by where an employee would physically attend work if they weren’t remote workers. Or, if they were employed by their current employer when they moved to fully remote, the assessment would be where they worked before becoming fully remote.
Example: If an employee lives in Alberta, and if not working remotely, would attend their place of work in Ontario, then Ontario is the province which is used for payroll purposes. If an employee attended work in Ontario before they became fully remote and then moved to Alberta, their source province for deductions would remain Ontario. If the employer had a satellite office in Alberta, but their payroll is out of Ontario, then Ontario payroll deductions would still apply.
Further criteria to determine an employee’s POE include:
- Where the employee attends or would attend in-person meetings (through any type of communication);
- Where the employee receives or would receive work-related material or equipment, associated instructions and assistance;
- Where the employees comes or would come in person to receive instructions from their employer regarding their job, through any type of communication; and,
- Where the employer is responsible for supervision of the employee as indicated in their employment offer letter or contract.
Click here for an interactive questionnaire to establish Province of Employment
Provincial Labour Laws
If an employee has a home base in Ontario, but they travel outside Ontario to accomplish their work, then their work is considered a ‘continuation’ of the work they perform in Ontario. Therefore, they are subject to Ontario’s labour laws such as Health & Safety, Statutory Holidays, Employment Standards Act (ESA) requirements, minimum wage, overtime rules, hours of work, vacation, public holidays and termination requirements.
However, if an employee physically lives and works in another province, even though an Ontario company has hired them, they would be governed by the provincial labour laws in the province in which they reside. These include Health & Safety, Statutory Holidays, Employment Standards Act (ESA) requirements, minimum wage, overtime rules, hours of work, vacation, public holidays and termination requirements. These requirements can differ between provinces and territorial jurisdictions.
Considerations when Hiring a Remote Worker in Another Province
- Include in the original employment agreement a provision requiring approval from the employer before the employee changes their designated work location.
- If an employee is approved to work out of their home-base province, review the legal requirements associated with having the person work from another jurisdiction.
- Work all this out before implementing any remote work location and ensure that the employment agreement is clear on the rules which will apply.
Hiring Remote Workers in the U.S.
If you are a Canadian employer considering hiring a U.S.-based employee who will be working fully remote, the rules are more complex. For example, U.S. Federal and state income tax laws generally look at where the work is physically taking place and apply the rules of that jurisdiction. For example, an Ontario-based employer hiring a fully remote worker in Michigan will need to register for and remit U.S. Federal, Michigan state, and potentially city payroll taxes (including Medicare and Social Security) and must adhere to all employment law standards of the employee’s home state. The administrative burden for a Canadian-based employer with U.S.-based employees is significant and should be discussed with your trusted tax advisor prior to finalizing such an arrangement.
U.S. Employers Hiring Canadian Remote Workers
If you are a U.S.-based employer considering hiring a Canadian-based employee who will be working fully remote, the rules are similarly complex. Canadian tax and employment law will apply, including compliance with CRA payroll calculations, remittances and T4 reporting. The province/territory of residence is generally determined based on where the employee’s work takes place. Consult your trusted tax advisor about the particulars of any potential cross-border employment arrangement.
Contact Ford Keast LLP in London to Help Understand and Navigate Remote Workers
Remote work is becoming more prevalent as employers seek a wider, more geographically diverse talent pool. Individuals have their reasons for considering working outside the province where their employer is located. Although rare before COVID-19’s impact, it is our reality now.
Contact our expert HR Consultants and Tax advisory specialist if you have, or are planning to have, employees who are fully remote, either full-time or temporarily, and their provincial or territorial location differs from their employer’s physical work location.
To learn more about the CRA changes and subsequent employment law implications, connect with our team of HR and Tax Consultants online or by telephone at 519-679-9330, to help you and your business.
