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When expanding their talent search globally, American companies often look to our northern neighbors first – for good reason.
Canada’s robust education system produces highly skilled workers in niche areas. Its commitment to immigration and multiculturalism makes Canada a “brain gain” hotspot for global talent and, in some key fields, median salaries are lower in Canada, allowing American companies to save on labor.
Before your company pounces on these attractive advantages, it needs to understand the costs. Exploring the true cost of hiring Canadian employees allows you to make smarter, more accurate financial decisions – with fewer disruptive surprises.
While this article does its best to break down the main areas of expenditure, remember that this is just an internet article and no replacement for professional aid. If you want to understand and simplify the process, contact a global Employer of Record (EOR), like Borderless AI, at HireBorderless.com. An EOR helps you hire, manage, and pay your international team quickly and compliantly without establishing a foreign legal entity.
The Cost of Recruitment
The first thing to consider is the cost of recruiting a Canadian employee. Remember, this is a multi-pronged process that includes marketing, qualifying, interviewing, and training.
According to the CPRH (Chartered Professionals in Human Resources), hiring an employee in Canada costs an average of roughly $4,100. This is more or less commensurate with the cost of hiring an employee in the U.S., which Business News Daily puts at around $4,700.
Salary and Wages at a Glance
As of April 1st, 2024, the minimum wage in Canada climbed to $17.30 CAD per hour (12.77 USD at the time of writing). Most companies look to Canada for specialized talent, so this figure serves more as a benchmark than any realistic wage you can expect to pay.
A recent Canadian government study on wage differences between the U.S. and Canada found that compensation was similar in the two countries but that “Canada’s wages are lower than their U.S. counterparts for wholesale and retail, finance and business, manufacturing, and transportation and utilities.”
Payroll Taxes
Here’s where things get interesting. As Borderless AI reports, employer payroll taxes fall into a few key categories, including:
- Federal Income Tax Withholding
- Provincial Personal Income Tax
- Employment Insurance (E.I.)
- Canada Pension Plan (CPP)
- And Employer Health Tax (EHT, only employer-paid in certain provinces)
The report breaks down a sample payroll cost across various salaries: “An employee’s grossing and payroll costs are 24.57% for a base salary of $68,400; 26.56% for that of $100,000; and 29.86% for an employee earning $128,310.” In total, the cost of bringing a Canadian employee aboard – including recruitment and tax – is about 1.3 percent of their base salary. However, that doesn’t include “deal sweeteners” like additional paid leave, dental coverage, additional retirement savings plans, etc.
The company hastens to add that these are rough figures representing complex computations. If you want a simple way to manage costs and payments while ensuring compliance, you should work with an Employer of Record.
Last Updated on by Icy Canada Team
