Written by Stephen Beard, Managing Director of Plyo Bookkeeping, a Vancouver-based bookkeeping firm.

Managing Payroll for Remote Employees- Traditionally, in the pre-COVID-19 world, people mostly worked in the same province where they lived. This rise of remote work means that many Canadians are now working remotely in a different province from where their employer is based. To determine whether you use the employee’s or the employer’s province for payroll taxes, you must determine the employee’s province of employment (POE). The CRA has an interactive tool to help with this, which we recommend using. Below we’ll go through some common scenarios for illustration purposes, where we’ll assume that the employer’s head office is based in Vancouver BC:

Outcome

The province of employment (POE) is the employer’s province, BC.

Outcome

Professional guidance may be needed to determine the exact facts of this case. The CRA requires that we ignore the remote work contract and instead ask whether the employee would reasonably be expected to work at the employer’s physical location in Ontario, in the absence of any remote work contact. For example, a salesman may never need to go to the Ontario office for their role, in which case one could argue that BC is their POE. But, if the role would normally be carried out at the Ontario office location (in the absence of the remote work contract), then Ontario would be the more likely POE.

Scenario 3

Facts

• The employer’s Head Office is in BC and the employee works remotely in Alberta
• The employer has a physical presence (office or worksite) in Alberta
• The employee has worked for the employer in person before going fully remote

Outcome

Again this case may require professional guidance depending on the exact details. Several indicators point to different conclusions. The employer has a physical presence in the employee’s province, which would be a secondary indicator that Alberta should be the POE.  However, the employee previously traveled from their residential province to the employer’s province for work before transitioning to remote work. This is a primary indicator that the POE is the employer’s province. As primary indicators are more important than secondary indicators, it appears that the employer’s province, BC, is the more likely POE.

Remote Employee not resident in Canada

The most common scenario for Canadian companies is to employ a remote staff member in the USA. We strongly advise against having any non-resident Canadian staff members on your Canadian payroll. Having an employee working remotely in another country means you may have to file tax returns in multiple countries. The complexity and cost of your Year-End Accounting fees will rise significantly. We recommend that you seek professional accounting advice when hiring staff outside of Canada.

Conclusion:

You’ll need to determine the province of employment for every staff member, based on the specific facts of each employee. The CRA wants all facts (or what they call indicators) to be considered when making a decision. They consider certain indicators to be more important than others, which they call primary indicators. For example, having previously worked for an employer in another province before becoming a remote worker is considered a primary indicator – effectively proving that the employer’s province is the POE. If there are clear primary indicators, then it should be easy to determine the POE. If there are only secondary indicators, then the situation is more complicated and you may want to seek professional guidance.

Additionally, Cloud accounting software, with its robust capabilities, proves invaluable in managing and streamlining payroll complexities across multiple provinces or even countries.