Contractor Payroll in Canada

Positioning a candidate internationally means navigating unfamiliar tax and payroll systems. Not only does this generally mean more work for you, but even small missteps can have serious financial or even legal consequences.

If you want to successfully place a contractor, you should first familiarize yourself with the contractor payroll process in Canada, as well as how you can make the situation simpler.

Contractor Payroll in Canada

Payroll options in Canada

There are several different options for payroll in Canada:

  • The client can provide payroll for the contractor, but not all clients offer this for temporary workers.  
  • The contractor can do it on their own, but this creates serious risk for the end client and possibly your agency, as well. Like most people, many contractors do not specialise in Canada’s tax system, nor do they always have the time or means to pore over complex tax returns.
  • Your contractor can use a local payroll company.

The third option is the simplest and quickest. An even simpler and quicker option is to use an Umbrella Company, as they offer the same services as a local payroll provider in addition to other services that simplify international assignments (such as Work Permit sponsorship).

Check out our FAQ for specific quotes on payroll providers and Umbrella Companies. 

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Questions and Answers about Payroll in Canada

Q: How does payroll work in Canada?
A: much the same as it does globally. Your employer (the company sponsoring your visa) pays the candidate on a monthly basis. Payroll tax and employer social security contributions are estimated at 4.75% for CPP and 1.78% for Employment Insurance. These compulsory deductions and individual income tax (which ranges from 0 to 29% for federal taxes and 4-24% for provincial taxes) are deducted at source and paid to the Canada tax authorities. Candidates are able to offset their taxable income with relevant business expenses. The World Bank estimates it takes employers in Canada 36 man days to ensure compliance with payroll and labour taxes each year.
Q: What is the monthly cost to outsource payroll in Canada?
A: For simple outsourcing of the calculation of pay-roll it would be $30 CAD per person

Q: What is the estimated net retention for a contractor in Canada earning USD 1000 per day?
A: It is state dependent and also depends on whether the candidate is eligible for Living Away from Home Allowance. Can be up to 75% of their gross billing.

Q: What is the minimum salary required per month in Canada when a candidate is sponsored on an Work Permit?
A: $6,000 CAD per month

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