5 Mistakes US Companies Make When Expanding into Canada

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2-3 (2)An increasing number of US companies are setting up shop in Canada, while others have plans to do the same. Unfortunately, expansions are often rushed in order to start profiting from a new market as quickly as possible, and this leads to mistakes being made.

Though the economic landscape is fruitful, strong, and steady, you must avoid making devastating mistakes when expanding into Canada. Here are the top mistakes that are constantly being made by US companies that cross the border.

1. Failing to Understand Canadian Employment Laws

Though Canada and the United States are similar in many ways, there is one distinct difference that must be considered: employment law. Once you start to hire Canadian employees, you must treat them, pay them, and manage them following Canadian employer standards—not the US standards that you’ve been used to following.

Many businesses expanding into Canada fail in this regard. They do not research federal and provincial/territorial laws, and thus, they fail to follow the required regulations. Whether it’s overtime pay, health and safety, human rights, payroll or anything in between, you must be compliant or you will face the consequences. Seemingly simple regulations such as drug testing employees is different in Canada, so ensure you do your compliance research.

2. Failing to Research the Market

Canadians may seem to love your brand. You may believe that you’ll make a great profit by expanding into Canada, but it’s important to understand just how large, complex, and costly of an undertaking it is to cross the border in business. If you don’t take the time to research your market, the demand, your competition, and the available talent, your new business venture could end up failing. Target’s failure in Canada is a great example of this mistake.

3. Employee Misclassification

We cannot begin to count how many US companies thought they could get away with classifying all of their new workers as independent contractors in order to avoid administrative headaches, employment standards, and additional costs, like insurance and payroll. Employee misclassification is bad for business, plain and simple. It is not worth the risk. The Canada Revenue Agency is strict and severe about the issue and violators will be prosecuted. This one mistake could ruin all of your plans of expanding into Canada.

4. Wasting Time Establishing an Administrative Presence

Before you can start operating in the Great White North, you have to establish an administrative presence in the country. This involves a lot of time and bureaucracy. You will need to set up accounts and infrastructure, register with the correct government bodies, and fill out a lot of paperwork.

Setting up an administrative presence can significantly slow down your expansion, which can harm your bottom line. Many US companies have made this mistake. Instead of falling into the same trap, partner with a professional employer organization. This will allow you to skip many time-consuming and tedious procedures that come with setting up shop, so you can get right to operating your new business as soon as possible.

5. Managing Payroll, HR, and Compliance Alone

As we mentioned above, Canadian employment legislation is complex but must be diligently followed. US companies often try to handle tasks like payroll, human resources, and compliance in house, which is extremely risky. It can lead to costly mistakes and non-compliance.

Instead, your PEO can take over the legal responsibility of your new Canadian employees and many of your administrative tasks, including payroll, human resources, and compliance. Partnering with a PEO is a smart risk management decision when you have little experience and knowledge of Canadian regulations in these areas.

Here’s to helping you better understand what’s in your pocket.

Until next time.

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