A Guide for Canadian Companies Hiring in the US

The US and Canada are highly linked in terms of trade and business partnerships. It makes sense that with a spike in remote work, Canadian companies would look to their southern neighbours for skilled talent.

Why should Canadian Companies expand their talent search to the States? What employment structure should they choose? And what do Canadian businesses need to know about employment laws in America?

In this post, explore a pocket-sized guide for Canadian companies hiring in the US.

US Market Expansion: Why Try?

Let’s begin with the “why.” When there appears to be enough talent within the Canadian borders, why expand your search to the United States? Here are a few compelling reasons:

• Access to a Vast, Diverse Consumer Base: The market potential in the US is virtually unparalleled. Hiring local talent in the US allows Canadian companies to access these vast, diverse consumer bases.
• Expansive Talent Pool: The US civilian labour force (167.9 million people) is eight times that of Canada’s (21.6 million people). Tapping into that talent pool can help you fill gaps in your workforce, access niche skills, and find the right cultural fit for your business.
• Strategic Partnerships and Networks: Establishing an employee base in the US allows you to forge prized strategic partnerships and networks.
• Supportive Regulatory and Tax Frameworks: Depending on the state, Canadian businesses will find a favourable environment in which to expand. Some states, like North Carolina, Ohio, Pennsylvania and Indiana, feature competitive tax incentives, grants, and regulatory frameworks. To learn more, explore this Forbes ranking of the best states for businesses.

What Employment Structure Should You Choose?

The most critical decision your business will make when expanding its talent search to the US is employment structure. Here, you have three options: establishing a subsidiary, hiring independent contractors, or partnering with an Employer of Record (EOR) platform.

Of the three, establishing a subsidiary is the most time-consuming and resource-intensive option. It involves setting up a legal presence in the United States and managing the entire HR process – paying, withholding taxes, dispensing benefits, and more. – internally.

Next, hiring independent contractors is perhaps the most flexible option. The structure allows you to expand and contract your international team at will. However, it might not attract the same quality of talent as hiring employees. It also leaves your business vulnerable to high turnover rates and misclassification risks.

Finally, You can partner with a global EOR. These providers assume the HR and legal compliance responsibilities to your US employees, allowing you to bypass the need for establishing a pricey subsidiary while still keeping full employees on staff. The best EOR platforms, like Borderless AI, are easy to use, highly streamlined and cost effective.

Understanding Federal and State Employment Laws

US employment is governed in part by federal laws and in part by state laws. As such, the regulatory and legal landscape is complex.

Notably, employment in the US is classified as “At will,” meaning that an employee or employer can terminate the agreement at any time, for any reason – a sharp departure from Canada’s “just cause” termination laws. Next, the US minimum wage is established federally (rather than provincially, as in Canada). And finally, there are no US federal laws mandating severance pay, vacation, or termination notice, unlike in Canada.

Therefore, to remain compliant, Canadian companies either need to invest significant resources into understanding and adhering to state and federal laws for employees, or partner with an EOR to shoulder the burden.