How American Companies Can Hire Canadian Talent Through an Ontario Corporation

American companies are increasingly looking north to Canada for talent. With a strong educational system, competitive salaries, and a favorable exchange rate, Canada—particularly Ontario—has become an attractive destination for US businesses seeking to expand their workforce.

Why Hire in Canada?

Cost Savings

Studies indicate that tech talent in Canada typically commands lower salaries compared to equivalent roles in major US cities, with compensation gaps varying by role and location. When combined with the favorable USD to CAD exchange rate and lower employer costs for benefits, the total cost savings can be significant for US companies.

Access to Top Talent

Canada’s universities consistently rank among the best in the world for STEM programs. Cities like Toronto, Waterloo, and Ottawa have thriving tech ecosystems producing highly skilled graduates.

Time Zone Alignment

Most of Canada operates in time zones that align well with US business hours, making collaboration seamless.

Cultural Compatibility

Canada shares many cultural similarities with the United States, reducing friction in cross-border business operations.

Setting Up an Ontario Corporation

To hire employees in Canada, US companies typically need to establish a Canadian legal entity. An Ontario corporation is often the best choice for several reasons:

Ontario Corporation Benefits

• Business Hub: Ontario is Canada’s largest economy and home to the country’s financial and tech centers
• Talent Pool: Access to graduates from universities like University of Toronto, Waterloo, and Queen’s
• Infrastructure: World-class business infrastructure and support services
• Tax Treaties: Favorable tax treatment under Canada-US tax treaties

The Process

1. Incorporate in Ontario: Set up a subsidiary or branch corporation
2. Obtain Business Number: Register with the Canada Revenue Agency
3. Payroll Setup: Establish Canadian payroll to comply with employment standards
4. Employment Agreements: Draft compliant Canadian employment contracts
5. Benefits: Consider Canadian benefits packages to attract talent

Legal Considerations

Employment Law Differences

Canadian employment law differs significantly from US employment at-will. Key differences include:

• Minimum notice or pay in lieu for termination
• Different overtime rules
• Provincial employment standards
• Vacation minimums

Tax Implications

Setting up a Canadian subsidiary has tax implications for both the parent company and the Canadian entity. Key considerations include:

• Transfer pricing rules
• Withholding taxes on dividends
• Treaty benefits
• Provincial tax variations

Immigration

While your Canadian entity will hire Canadians directly, you may occasionally want to transfer US employees to Canada or bring Canadian employees to the US. Understanding work permit requirements is essential.

Market Trends

US tech companies expanding into Canada often cite several advantages:

• Cost-effective talent acquisition
• Favorable immigration policies
• Strong tech ecosystem with world-class universities
• Quality of life factors that attract top candidates

How Frontier Law Can Help

We assist US companies in establishing their Canadian presence:

Corporate Setup

• Ontario incorporation
• Federal vs. provincial incorporation advice
• Corporate structure optimization
• Shareholder agreements for subsidiaries

Ongoing Compliance

• Annual filings and maintenance
• Corporate governance
• Regulatory compliance

Coordination

We can coordinate with your US counsel to ensure your Canadian structure aligns with your overall corporate strategy.

Ready to expand into Canada? Contact us for a consultation on setting up your Ontario corporation.

This article is for informational purposes only and does not constitute legal advice. For advice specific to your situation, please contact us for a consultation.