Canadian working for US company -- PEO option?

March 29, 2021 9:47 AM

Canadian citizen working in MA on a TN for a private college which has no presence in Canada. I am exploring the option of relocating back home to ON and continue to work remotely for said college. I have been told that a PEO is the only option and that the associated costs could be 40-50% of my salary. Surely this can't be accurate?

(I am posting this question for my sibling)

I have been searching through posts on this but am hoping to get more insight.

My background: Canadian citizen working in MA on a TN for a private college which has no presence in Canada. I am exploring the option of relocating back home to ON and continue to work remotely for said college. If this were to transpire, I won't need any benefits from my employer as I would be covered through my spouse who will be working for a Canadian company and so I thought i would be saving them some costs with my continued employment. I don't think that they will agree to set up a presence in Canada for just one employee so that is not an option. I have been told that a PEO is the only option and that the associated costs could be 40-50% of my salary. Surely this can't be accurate -- so my first question is are there some PEOs folks on here that have had good experiences with a PEO or can recommend that won't take half of my salary?

Second question is: how long can I be in Canada and working remotely before being considered a resident for tax purposes?

Thank you for any thoughts!

posted by methroach to Work & Money (7 answers total)

What is a PEO? Have never heard of that, only TN, W2 and C2C (Corp-to-corp)
posted by rozcakj at 11:10 AM on March 29, 2021

Second question is: how long can I be in Canada and working remotely before being considered a resident for tax purposes?

There is no cut-and-dried time limit. Your status is judged on the balance of the "residential ties" you establish with Canada. If you have a home and a spouse in Canada, those are "significant ties". You would also have some "secondary ties" in the form of personal property in Canada (presumably) and the health insurance with a Canadian province or territory once you have met any provincial residency requirements.
posted by Johnny Assay at 11:16 AM on March 29, 2021

Response by poster: Update:

"A PEO is used in this instance to handle payroll and taxes to ensure the employer is compliant with Canadian taxes/law where I would be a resident. My employer is not equipped to handle Canadian payroll/taxes so would outsource to a PEO, for example this ADP article."
posted by methroach at 11:52 AM on March 29, 2021

LOL, fun with acronyms. I suppose the audience of people likely to be able to answer this will be Canadians working in the US, but for the rest of us ...

MA = Massachusetts?
TN = "Trade NAFTA" visa, used by Canadians?
PEO = Professional Employer Organization, an outsourcing firm
ON = Ontario?

(I used to tell my old boss, who wrote like he spoke (ridiculously fast and meandering), that after he wrote an email to always go back and replace the pronouns (it, they, etc.).)
posted by intermod at 4:38 PM on March 29, 2021 [3 favorites]

Digging through various webpages, it does seem like the Government of Canada requires all employers to deduct taxes, CPP payments, etc. from the wages of any employee resident in Canada. There are certain exceptions if you're a non-resident, but they only apply to temporary periods of work in Canada, and even then your employer would have to file for the exception.

Does your work lend itself to being an independent contractor for the college? In general, if you're doing things where the college really only cares about the final product and you have control over when & how you do the work, then your work might be doable by an independent contractor. If this is the case, you might be able to restructure the terms of your arrangement with the college so that you are no longer an employee of the college but rather a vendor that the college pays for certain services. Independent contractors in Canada can work for US companies remotely, though the tax situation is still complicated (and you would be personally responsible for much more of the details of it.)

I am not a tax attorney, just a dual citizen who thinks about moving back to Canada from time to time. Consult with someone who knows what they're doing before you commit to any plan.
posted by Johnny Assay at 7:35 AM on March 30, 2021

From an anonymous commenter:

I work at a private college in Massachusetts and am currently administering a handful of PEOs in different countries - although none in Canada - and unfortunately can confirm that surcharges of 40-50% (or higher) are standard in my experience. That said, we are no longer paying University-employee benefits (healthcare, retirement, transit subsidy, etc) for PEO workers, so the overall additional cost is slightly mitigated.

Being an independent contractor/consultant could be a workaround and would save a lot of money. . . but fwiw my institution is very wary of converting employees into ICs, and none of our PEO workers met their (justifiably) rigorous test.

posted by taz at 4:22 AM on March 31, 2021 [1 favorite]

Response by poster: Thanks for all of the replies, especially anonymous. My sibling is looking into next steps from here.
posted by methroach at 5:54 AM on March 31, 2021