A US company hiring Canadian remote workers: what to get right

Hiring Canadians is one of the lowest-friction ways for an American company to widen its talent pool. Overlapping time zones, no visa to sponsor, and a currency difference that usually works in your favour.

It is still a foreign hire, and four things reliably catch companies out.

1. The work is taxed where the person is

A Canadian resident working from Canada pays Canadian income tax on that income, regardless of where the employer sits or where the money comes from. There is no arrangement where a Canadian employee of a US company is simply paid as though they were in Texas.

Running Canadian employment means Canadian payroll: a CRA payroll account, source deductions for income tax, Canada Pension Plan contributions, and Employment Insurance premiums. Employer-side CPP and EI contributions are yours to pay on top of salary.

This is the main reason companies use an employer of record for their first few Canadian hires. See the comparison.

2. Permanent establishment risk is narrower than it sounds

The worry: does an employee in Canada create a taxable presence, exposing the company to Canadian corporate tax?

The Canada–United States tax treaty sets the terms, and it is worth reading what it actually says rather than assuming.

Dependent agent (Article V(5)). "A person acting in a Contracting State on behalf of a resident of the other Contracting State — other than an agent of an independent status ... — shall be deemed to be a permanent establishment in the first-mentioned State if such person has, and habitually exercises in that State, an authority to conclude contracts in the name of the resident."

So the risk turns on authority to conclude contracts, habitually exercised. An engineer writing code in Halifax is not concluding contracts. A sales lead in Toronto closing deals in the company's name may well be.

Services PE (Article V(9)). Added by the Fifth Protocol and applying to tax years beginning after 1 January 2010, this treats services provided in Canada as a permanent establishment, but only if one of two tests is met:

• an individual is present in Canada more than 183 days in a 12-month period and more than 50% of the enterprise's gross active business revenues in that period come from services performed in Canada; or
• the enterprise provides services in Canada for 183 days or more in a 12-month period on the same or a connected project, for customers who are Canadian residents or who maintain a permanent establishment in Canada.

Note the second condition on each limb. A US company whose Canadian employee serves the company's US customers does not obviously meet either. The rule is aimed at cross-border service delivery into the Canadian market, not at the existence of a remote employee.

None of which means "ignore it." A physical office changes the analysis. So does a Canadian sales function. It is worth an hour with a cross-border tax accountant before your first hire — and worth going in knowing what the tests are.

3. Employment standards are provincial, and at-will does not exist

There is no single Canadian employment law. Ontario, British Columbia, Alberta and Quebec each set their own rules on vacation, public holidays, overtime and termination notice.

Termination is where the gap from US practice is widest. At-will employment does not exist in Canada. Ending an employment relationship requires statutory notice or pay in lieu, and common-law reasonable notice can run considerably longer than the statutory minimum. A US offer letter that assumes at-will termination will not protect you, and a poorly drafted termination clause can be struck out entirely, leaving you exposed to the common-law figure.

Have Canadian employment agreements drafted by someone who practises in the province where the employee will work.

Federally regulated industries — banking, air and rail transport, telecommunications, broadcasting, inter-provincial trucking — are governed by the Canada Labour Code rather than provincial standards, and the Code's unjust dismissal provisions are more protective again.

4. Ontario's posting rules probably apply to you

If you have 25 or more employees and you publicly advertise a job that could be performed in Ontario, Ontario's job posting requirements apply. Being headquartered in San Francisco does not exempt you; the rules follow the work.

Since January 2026 that means disclosing expected pay in the posting, disclosing any AI used in screening, not requiring Canadian experience, stating whether the vacancy is real, telling interviewed applicants the outcome within 45 days, and keeping the records for three years.

They do not apply if you are federally regulated, if the role is performed entirely outside Ontario, or if you have fewer than 25 employees. See the full breakdown.

A workable order of operations

1. Decide the engagement model — contractor, EOR, or direct entity.
2. If direct: register a CRA payroll account and register in the province of employment.
3. Get a Canadian-law employment agreement drafted. Do not adapt your US one.
4. Confirm your permanent establishment position with a cross-border accountant.
5. Write the posting to meet the requirements of the province the work can be done in, before you publish it.
6. Budget for employer-side CPP and EI on top of salary.

What Canadians will ask you

Expect these in the first conversation:

• Am I an employee or a contractor?
• Who is the legal employer — you, or an EOR?
• Is the salary in CAD or USD?
• What benefits apply, given provincial health coverage already exists?
• What happens to my employment if the company restructures?

Answering these in the posting shortens your hiring cycle, because the people who apply have already decided the arrangement works for them.

Choosing an employer of record

If step two of the order of operations above lands you on an EOR, the three that cover Canada properly are Deel and Remote.com at roughly $599 USD per employee per month on annual billing, and Oyster at roughly $699 — list prices checked 18 August 2026. The longer comparison, including what an EOR does not solve, is in our guide to EOR, contractor and direct employment.

Hire a Canadian takes no referral fee from any of those providers, and none from any employer on this board. The comparison is ordered by list price, and that page says the same thing at more length.

This is not legal or tax advice

Cross-border employment is genuinely complicated and the details are fact-specific.

Primary sources: the Canada–United States tax treaty and IRS Publication 597 for the treaty summary, the CRA's Employee or Self-employed?, and Part III.1 of Ontario's Employment Standards Act. This page is a map, not a substitute for advice.