Whether to escape to a sought-after destination (Kelowna, BC was the fastest-growing urban centre in Canada in 2021), seek out more affordable housing (Kingston, ON tops the list in 2022) or move to the cottage permanently (take note, prices are going up), Canadians moved between provinces more last year than in the last three decades—and employers are in hot pursuit.
For those able to work remotely, packing up and becoming a “digital nomad” sounds good, but of course, there’s a catch for employees and employers alike.
Prudent employers need to confirm their employee’s chosen “Place of Residence.” If it’s outside their company’s main jurisdiction, there are a range of implications, from taxation, payroll and employment standards to health and safety, benefits and more.
Note: Below we summarize a few considerations for employees working in Canada. If your employee is working outside of Canada, there are additional considerations.
Taxation and Payroll
Tax rates differ from province to province. When an employee moves to another province, the first thing the employer needs to ask is whether the move is permanent or temporary, as this determines the employee’s residency status and, ultimately, the province where the employee pays taxes.
Questions for employers to consider
- Where is the employee’s permanent residence?
- Does the company have an office in the location where the employee is moving?
The Canada Revenue Agency says payroll taxes are calculated based on where the employee reports to work. In the case of remote work, the taxes are calculated based on whether you have an office in the same province as the employee:
- If the business does not have a physical office in the employee’s new province, then it deducts payroll taxes based on where the business is located and the location from which it is paying employees. The employee files and pays income taxes in their new province (which may be a different tax rate).
- If the business has a branch office in the employee’s new province, then the payroll taxes are based on the employee’s new province (even if the employee is home-based). The employee files and pays income taxes in their new province.
Worker’s Compensation, Health and Safety
Worker’s Compensation and health and safety legislation vary considerably from one province to the next. In general, applicable rules are based on the employee’s physical work location (including their remote office) and not on the province from which they are paid.
- Worker’s Compensation: Check the provincial requirements to ensure the employee will be covered for the duration of their stay, whether it’s a short- or long-term move. In Ontario, for example, the WSIB covers Ontario employees temporarily working outside of the province for up to six months.
- Health and safety: According to law firm Fillmore Riley, when the employee’s contract doesn’t specify a location, courts will consider things like where the work is done, where the contract was signed, where wage payment occurs, etc. to determine which health and safety laws are most applicable.
Employment Standards Implications
Employers need to consider Employment Standards (ESA), which vary from one province or territory to the next and govern things like statutory holidays, overtime, sick leave, vacation entitlements, a notice of termination, severance pay and more.
Question for employers to consider
- Are your HR and payroll systems flexible enough to accommodate varying employment standards for employees who work in other jurisdictions, either permanently or on a short-term basis?
- All provinces and territories except Quebec offer Good Friday as a paid statutory holiday (Quebec offers Easter Monday).
- British Columbia considers overtime anything over eight hours in a day or 40 hours in a week; in Alberta, overtime starts after eight hours in a day or 44 hours in a week.
- The minimum wage in New Brunswick is $12.75 per hour; in Manitoba, it’s $11.95, the lowest in Canada (set to increase in October 2022 to $12.35 an hour, still the lowest).
Flexible Employment Contracts
The gold standard for employers is to include guidelines around changes of residence in your employment contracts. As a remote-first company with offices across Canada, we added the following section to our employment contracts in case any current or future employees want to move to other provinces across Canada, even temporarily, and to ensure we are prepared to support them:
LOCATION & CHANGE OF RESIDENCE
Given that we’re a remote-first environment, there might come a time when you make the decision to move to a province outside the one in which you currently reside. If this is the case, we ask that you inform our Company at least 30 days prior to your move. This notice period gives us the opportunity to ensure we consider tax and payroll implications, among others. Similarly, if you are planning to work outside your current province for an extended period, we ask that you advise us as soon as possible.
Bottom Line for Employers
Before approving a request from an employee to move to another jurisdiction (or hiring an employee based in another province), be sure to review the requirements and standards of the applicable province or territory to ensure you are prepared. Further, make sure your employment contract reflects the possibility of remote work from another jurisdiction.
And if an employee asks to work from another country, conduct an especially detailed review of the country’s employment legislation, health and safety requirements and tax implications.
- Foreign taxes: Does your employee have the ability to sign contracts on your behalf while working in a foreign country? If so, the foreign country might consider that your company has a permanent location in their jurisdiction and could levy taxes on you as a corporation.
- IT and cybersecurity: Is your IT team prepared to support a team member accessing potentially sensitive information over the network while working in a foreign country? Are they prepared to replace lost, stolen or damaged equipment in a foreign country?
- Work permits and visas: Will your employee need a work permit or visa to work while abroad? Best to investigate before they head out.
Many of these items cross over between your Finance & Accounting, HR, Legal and IT teams, and this team effort should be coordinated.
If you’re hiring in any of these areas for your team, we’re here to locate the talent you need – in any jurisdiction.