Expanding your business into Canada brings the promise of tapping into a diverse talent pool and enjoying the benefits of a stable economic environment. The Canadian landscape, renowned for its multicultural demographic and innovative spirit, presents a tantalizing prospect for businesses looking to diversify and expand. Naturally, this leads to the consideration of hiring local talent, with Human Resources (HR) often at the forefront of such decisions. But, as many soon discover, there’s more to the hiring equation than just the upfront salary.
Even though the Canadian HR market is very cost-effective and competitive — especially due to the value of the Canadian dollar against US currency — delving deeper into the intricacies of the Canadian job market, several hidden costs become apparent, dramatically affecting the Return on Investment (ROI) of each hire. These aren’t mere additions to the baseline; they can inflate employment costs significantly and impact your bottom line. In such a scenario, understanding these nuances is paramount to make informed decisions. Which is where an expert Employer of Record outsource may be the most cost effective entry into Canada.
Solutions like Employer of Record (EOR) or Professional Employer Organization (PEO) offer viable alternatives to the expense of opening a local office, streamlining the hiring process while ensuring that businesses remain compliant and cost-effective. At Pivotal HR Solutions, we believe that knowledge empowers decision-making. So, let’s delve into the actual costs associated with hiring expert HR resources in Canada and understand how EOR can be a game-changer.
To understand the differences between a full-service EOR and a PEO, see:
- PEO or EOR: Which is Right for Your Business Plans in Canada?
- Pros and Cons of EOR and PEO compared
- 5 Signs Your Organization Needs to Partner with a PEO (Professional Employer Organization)
- EOR and PEO blogs, features, and knowledge articles>>
The Unseen Financial Implications
When you plan to employ HR professionals in Canada, the first figure that likely comes to mind is the base salary. This is your initial financial commitment. But there’s a labyrinth of additional costs hidden in the recesses of the employment framework.
Consider the Employment Insurance (EI) and Canada Pension Plan (CPP) Contributions. In Canada, these aren’t mere suggestions but are mandated contributions. As an employer, there’s the responsibility of matching the CPP contributions of employees and, in terms of EI, an even greater financial requirement. Add to this the costs of recruitment, management, compliance and the cost of employee turnover.
Case Study: the Real Costs of Hiring
For example, in an interesting case study on Enkel  (book keeping specialists) they estimated that for a book keeper earning $46,000 per year in Canada (estimated as of June 2021):
- CPP Canada Pension Plan premiums: In Canada, employers are required to match employee CPP contributions at 5.45% adding $2316.25 to the total annual
- EI premiums would work out on this employee to approximately $1017.52 (as of June 2021)
- Benefits for skilled employees in Canada will add up to $120 per month
- Add to this: sick days, managing employees, payroll costs, recruitment, compliance, and training.
- Net salary will average, for this book keeper, approximately 1.4 times to base salary, or $64,400 (in this case study.)
Benefits can be “nuanced” and competitive
Benefits packages, too, are a nuanced matter. In the competitive Canadian job market, a run-of-the-mill benefits package won’t suffice. To attract and retain premier HR talent, businesses often find themselves enhancing these offerings, pushing the employment costs further north.
Time is also currency
Time is also a currency. Onboarding an HR professional isn’t a simple plug-and-play process. Before they fully align with a company’s ethos, culture, and specific processes, there’s a period of training and acclimatization. This phase is an investment of time, energy, and of course, money.
Lastly, the impermanence of employment is a financial factor. Not every HR professional will fit seamlessly into your organization. Turnover, therefore, isn’t just a disruption but a repeat of the hiring cycle, each iteration bringing its own set of costs.
Employer of Record (EOR) – The Alternative Route
In light of the complexities, many companies are turning to the Employer of Record (EOR) model, particularly when seeking HR talent in Canada. An EOR, like Pivotal HR Solutions, stands as an intermediary, providing businesses with the talent they need without the direct burdens of employment.
Imagine a scenario where the intricacies of EI, CPP, and benefits aren’t a direct concern. This is what an EOR promises. They handle the nitty-gritty of employment while businesses can focus on leveraging the expertise of the HR professional.
Moreover, the value of time is optimized. Instead of diving into the often-tumultuous waters of hiring and onboarding, businesses get direct access to professionals who fit the bill. These HR experts, under the EOR model, come pre-vetted, trained, and ready to integrate.
The financial predictability is another boon. With a clear-cut agreement with the EOR, businesses can anticipate their expenses without the lurking variables of traditional hiring.
Speedy Access to Canadian HR Resources with EOR
In the fiercely competitive world of global business, a slow move can mean missed opportunities. And when it comes to global expansion, speed isn’t just a luxury—it’s a necessity. A prolonged onboarding process can significantly impede your growth trajectory, especially in a market as dynamic and promising as Canada.
Consider the traditional hiring methodology, which encompasses everything from job advertisements, screening applications, multiple interview rounds, background checks, to finally onboarding the selected candidates. This process can be lengthy and riddled with potential delays. With an EOR, however, much of this timeframe compresses, allowing businesses to bypass many of these steps.
Furthermore, EORs typically maintain a pool of vetted professionals, making it possible to match the right candidate with a business’s specific needs in a fraction of the usual time. The undeniable benefit? Your business can establish its footing in the Canadian market faster and more efficiently than the often sluggish pace of conventional hiring.
Reducing Risks and Enhancing Compliance
Canada, with its commitment to the welfare of its workforce, has established a robust framework of employee-centric regulations. These regulations are designed to protect the rights of workers, and in doing so, they mandate businesses—both domestic and foreign—to adhere strictly to a comprehensive set of employment laws.
Non-compliance isn’t a matter to be taken lightly. Aside from the immediate legal repercussions and substantial penalties, the long-term impact on a brand’s reputation can be catastrophic. And for businesses unfamiliar with Canadian employment laws, the risk of inadvertently breaching these regulations looms large.
This is where the EOR model showcases its undeniable value. Armed with local expertise, experience, and a dedicated focus on the evolving legal landscape, EORs shoulder the responsibility of ensuring full compliance. They keep abreast of changes in employment laws, guaranteeing that the businesses they serve remain on the right side of the law at all times.
Making an Educated Decision
To sum things up, while the allure of tapping into Canada’s HR talent pool is undeniable, it’s essential to understand the comprehensive financial implications. The base salary is merely the tip of the iceberg, with numerous hidden costs lurking beneath.
EORs, like Pivotal HR Solutions, present an elegant solution to this conundrum. They not only streamline the process but also ensure cost-effectiveness and compliance, allowing businesses to truly harness the potential of the Canadian market without undue burdens.
For businesses poised on the brink of Canadian expansion, it’s crucial to weigh the traditional hiring model against the benefits of an EOR. Making an educated decision now can significantly influence the trajectory of your success in the Canadian market.
Contact the experts in Employer of Record EOR at Pivotal HR Solutions.
 – Pivotal EOR PEO Blog