CanadaHiring in Canada comes with its challenges — from intricate labor laws to social security regulations. But a Professional Employer Organization (PEO) can help.
These organizations co-employ your workforce while taking over repetitive HR tasks. They ensure legal compliance while allowing you to retain some administrative control over employees.
However, it’s important to be aware that you can’t use a PEO unless you already have a local entity set up. And that’s why, in this article, we look at an alternative: the Employer of Record. This solution allows you to hire, onboard, and manage staff anywhere in the world.
Read on to learn more about PEO services in Canada, explore PEO vs EOR, and find the right solution for your needs.
What is a PEO (Professional Employer Organization)?
A Professional Employer Organization is a company that co-employs your people and takes over some of your HR functions. This means you’ll be jointly responsible for ensuring your company adheres to local labor and tax laws, but you can outsource tasks such as:
- Payroll processing
- Benefits administration
- Compliance management
- HR consulting
- Risk management
- Tax filings and withholdings
Benefits of PEO services in Canada
PEOs offer services that help you comply with labor and employment regulations, saving your company from penalties and legal trouble. Here we look at the other major benefits.
Streamlined HR
PEOs take over your payroll, benefits administration, onboarding, and compliance, freeing you from repetitive paperwork and administrative hassles.
Enhanced compliance
PEOs partially assume the responsibility of keeping up with Canadian laws. This reduces the risks of penalties and damage to brand reputation.
Benefits
PEOs pool multiple clients together to negotiate health insurance, retirement plans, and other employee benefits.
Employee onboarding
A PEO can help onboard new employees, facilitate new hire orientation, and introduce new hires to your workplace culture, policies, and procedures.
Challenges and limitations of PEOs in Canada
Here are the limitations to PEOs in Canada:
Shared liability
While PEOs handle compliance, the legal responsibility of your people still rests with you. This means you still face risks of legal violations. What’s more, keeping updated on labor and tax laws can take a considerable amount of time.
Management and control issues
Your company will share operational decisions concerning HR matters with the PEO. This will potentially slow down your decision-making and ability to take action independently. For example, if you decide to roll out a new performance review system, you would need to coordinate with the PEO to ensure it aligns with their existing processes.
Cost hurdles
PEOs may come with variable rates and hidden fees. You may discover these fees when you request scaling, customization, or termination. The uncertainty relating to costs can disrupt your financial management.
Alternatives to PEO: Introduction to Employer of Record (EOR)
While a PEO might be well-suited for some businesses, many companies prefer partnering with an Employer of Record (EOR) when expanding into Canada.
What is an Employer of Record (EOR)?
Employers of Record (EOR) are companies that function as legal employers for your workforce in countries where you don’t have a legal entity. This helps with international expansion without incurring time and costs to set up an official office.
EORs like Multiplier handle the legal, administrative, and compliance responsibilities on behalf of the client company, such as payroll, tax withholding, benefits, and compliance with local labor laws.
Why consider an EOR in Canada?
EORs can fast-track your hiring in Canada and help you enter the new market confidently. They can also save you costs, cut risks, and avoid repetitive tasks. Here’s how.
Enhanced compliance
EORs take over that responsibility and full legal liability for your employees. This means you don’t need to keep track of evolving laws and international regulations. You can also hire more quickly and easily.
Simplified management
With EORs, you gain clarity on the division of responsibilities. While they ensure compliance and take over HR functions like payroll processing, benefits administration, insurance, and compliance, you retain control over operations and your employees’ day-to-day tasks. Simplified management means faster decision-making.
Transparent costs
EORs don’t come with hidden fees that come with customization or scaling requests. A transparent pricing structure helps you build trust with the EOR and budget more confidently. For instance, Mindvalley, an edtech company, used Multiplier to hire workers in six countries, scaling without unexpected costs.
Deciding between PEO and EOR
PEOs are more suitable for companies that have a local entity in Canada and are looking for domestic expansion. Whereas, EORs can power your global expansion dream by letting you fish for suitable talent in the global talent pools.
When to choose a PEO
Here are some factors that make PEOs a good option for you:
- You want shared control over your HR function. A PEO gives you responsibility over tasks like benefits administration.
- You need extensive local, HR support. A PEO’s comprehensive ongoing HR support can help you handle your workload.
- You already have an entity in the countries where your employees are located. A PEO allows you to remain the legal employer of your employees.
When to choose an EOR
Perhaps the greatest advantage of using an EOR is the ability to expand into new markets internationally without opening new business entities. Here are some other reasons why you might prefer the services that an EOR offers over those of a PEO:
- Operational control with outsourced administration. Maintain control over your operations but outsource payroll, benefits, HR compliance, and other administrative responsibilities.
- Quick market entry. An EOR can handle all the legal and administrative tasks that permit you to set up operations without establishing legal entities.
- Flexible workforce management. EORs can quickly scale operations to expand your workforce or presence internationally.
- Complex labor laws. EORs understand local employment laws, ensuring compliance and mitigating the risk of penalties and legal disputes.
- Risk mitigation. EORs are responsible for employment-related risks, protecting potential liabilities and compliance issues.
How Multiplier can help
Multiplier is a reliable partner for onboarding Canadian employees. You can hire and onboard staff without setting up a local office then ensure that benefits, payroll, taxes, and more are handled compliantly.
In just one platform, you can manage your workforce in multiple countries without setting up subsidiaries there. You can even hire part-time workers and Multiplier can generate compliant contracts for different types of workers in seconds.
Learn more about our EOR services in Canada.
EOR vs PEO: Making the right choice for your business
Picking between PEO and EOR solutions depends on how much control you want to maintain over HR as you scale and how much risk you are willing to take on.
PEOs let you share both HR responsibilities and liabilities. This makes them well-suited for those who still want to handle some HR tasks. However, the co-employment arrangement leaves room for ambiguities relating to management styles as well as cultural and procedural alignments.
On the other hand, EORs set clear boundaries between responsibilities so you can make faster decisions. They also let you harness global talent since you don’t need to set up a local entity.
If you’re looking for an affordable solution as you scale, an EOR could be the best option for you.
Speak to Multiplier today to find out more.
