Why are we sending work to Canada?

March 8, 2008 9:17 AM

I work for the US division of my company; there are also divisions in Canada and the UK. Recently we laid off a few people, and were told that the work they did would be handled by the Canadian division. But we work with large video files (up to 10GB) so transferring them electronically is reasonably time consuming and often results in transfer failures. So why would my company do this? Why is it desirable for them to lay off people in the US and "send" the work to Canada?

If it makes any difference, my company is owned by a larger European company with 60 000 employees in 30 countries.

posted by The_Partridge_Family to work & money (14 comments total)

Wages, presumably, and overheads. You're looking at the detail a bit too much:

If the premises are in a cheaper area than yours, the overheads can be significantly cut.

If the cost of living is lower in the Canadian area, or there is a surplus of the necessary skills, the wages may be lower.

The transfer of files may be time consuming, but factoring that against a 10% reduction in building overheads (for instance) means restructuring the workload to cope with the extra delay makes economical sense, even if efficiency takes a tangible hit.
posted by Brockles at 9:25 AM on March 8

It might be less common now that the dollar is more equal, but IBM Canada used to do a lot of work for IBM corporate / IBM US. The exchange rate made Canada a much cheaper source of labour than the US, while at the same time, our employees were in the same time zone and spoke largely Americanized English as a first language, which reduced some of the problems inherent in global outsourcing.
posted by jacquilynne at 9:46 AM on March 8

Corporate decisions don't always make sense. Someone I know was recently laid off from a restaurant chain that was doing very well. The corporation decided to close all the branches within a specific geographical region regardless of the individual profitability of any one store. It doesn't make sense why a restaurant employed 60 people and doing well would close, but that is the corporate mentality.
posted by 45moore45 at 9:54 AM on March 8

Brockles: thanks. Let me add some extra information though. The people let go would have been earning $30K, at most $40K. Three of them were let go, so much of a saving can that be? Also, if we're renting the premises, aren't we paying for it irrespective of how many employees we have? I mean, if we lay a few people off, we're still paying the same rent. And we have plenty of space - they weren't kicked out to make room for other people. So how does laying a few people off cut overheads?

Obviously my concern is that if management wish to lay people off to save what would seem like a trivial amount of money to company of its size, then why shouldn't I expect them to lay me off and send my work to Canada?
posted by The_Partridge_Family at 9:57 AM on March 8

There are costs associated with employing people in regards to tax and benefits, though. It may be more economical to employ a $30K person in Canada than it is in the US. Also, if expansion is planned for the future (in the potentially cheaper Canadian office), that expansion may be going to happen in Canada, so even if the wages are the same cost, it may make more sense to have those employees there.

I'm not sure there is any way you can predict the future in this regard, as you have nothing like the availability of all the variables that will allow you to judge whether this implies that your job is on the line. It could just as easily be totally irrelevant through to ominous. But don't forget that what is trivial to you may involve more complicated sums than you have access to.
posted by Brockles at 10:03 AM on March 8

Is there any way that their work could be construed as film development or R&D? Canada offers many compelling tax incentives for this sort of work. Our small business and corporate tax rates have also fallen over the years. And our medical services plan is very cheap, when compared to the US. It's also possible that wages or rents are cheaper here.
posted by acoutu at 10:14 AM on March 8

Decisions like this can have less to do with bottom-line costs than politics between two or more corporate managers. Someone sees an opportunity to increase the size of their empire at the expense of a rival. A corporation that size probably has made a decision to lay off some percentage of the workforce and so people are looking for redundancies. It probably has more to do with overall headcount than with how expensive it is to employ a person in Canada vs. the United States. Maybe some guy in corporate headquarters likes the Canadian location more because of any reason you can think of for someone liking a Canadian location more than a U.S. location.
posted by thomas144 at 10:33 AM on March 8

I wouldn't be shocked to find that it's particularly cheap to move low- and medium-wage jobs to Canada, just because universal health care is way the hell cheaper than buying health insurance. This is especially true if everyone get the same package. $300/month is a bigger percentage of $30K/year than it is out of $200K/year.

Or, if they make you pay the full cost of health insurance, maybe they get better workers in Canada for the same money because they're offering higher net pay in Canada.

Or, if you live in any of those large swaths of the US with stunningly terrible public schools, they might get better workers for the same money in Canada because fewer of their workers up there are semieducated pinheads.

Or it might just be that they realized that they didn't need people doing that job in both Canada and the US, and the US division lost for any of these reasons or no good reason at all.

why shouldn't I expect them to lay me off and send my work to Canada?

Worrying about this seems entirely reasonable to me. Every time you see an increase in health insurance costs, especially on the employer's side of the ledger, you should remember how much cheaper Canada's health care system is.
posted by ROU_Xenophobe at 10:35 AM on March 8 [1 favorite]

I think ROU_Xenophobe is on the right track about the healthcare angle.

Another thing you mention is that the company is owned by a larger European-based corporation. There may be some real anti-US politics being played-out there, as well. Given our nation's recent asshattery, I could see a foreign company thinking "why bother?" and simply pull their resources out of the US.

But, I think the healthcare issue is probably the stronger argument.

And, yeah, you should probably fear, if just a little, for your job. Of course, these days, that's pretty true with any job in the US.
posted by Thorzdad at 11:49 AM on March 8

this is the answer microsoft is using to send more work from the states to canada:
the visa program. your visa program in the states is highly restrictive meaning they cannot hire skilled workers overseas and bring them into the states easy enough. canada on the other hand makes it fairly easy to import workers since canada has a smaller number of people yet a high demand for skilled workers too.

and despite what you think, taxes in canada can actually be cheaper in many income brackets than in the states.
posted by Jack Feschuk at 12:22 PM on March 8

I've heard that US car companies make a significant proportion of their cars in Canada and healthcare costs is a big part of the reason.
posted by tetranz at 7:07 PM on March 8

Easier Canadian visa and immigration rules have been identified by industry and government in Canada as having strategic importance as we try to increase productivity and improve competitiveness with other jurisdictions, most importantly the US. Universal health care is also a reason why there is such close integration between the Canadian and American auto industries. Another strategic competitive advantage, our previously cheap dollar, has vanished, almost overnight.

If anyone can tell me of an easy and quick quick quick way to transfer very large video files over the Internet for editing and production work, please let me know.
posted by KokuRyu at 8:41 PM on March 8 [1 favorite]

taxes in canada can actually be cheaper in many income brackets than in the states

Canada's maximum income-tax bracket is well below the one here. It may be more equal if you consider that we don't have a 5% federal sales tax added to anything.
posted by oaf at 8:51 PM on March 8

taxes in canada can actually be cheaper in many income brackets than in the states

When I was a teacher living overseas I was a Lefty, and agreed with Canada's tax regime. Now that I've moved back and have changed professions (and make more money) I think Canada's income tax laws stink.
posted by KokuRyu at 10:28 PM on March 8