To be competitive, Canada must address payroll barriers to remote work

While offering remote work is key to attracting talent for businesses struggling to find and retain employees, doing so comes with barriers that Canada must address before being competitive in the marketplace, PricewaterhouseCoopers Canada suggests in a new report.

Nearly two-thirds (65%) of 46 Canadian employers that were interviewed this past summer for the report — which was conducted for the Canadian Payroll Association — were hiring or open to hiring remote employees across Canada, and one-third were hiring international remote employees or open to doing so.

In the finance and insurance sector, those figures were 86% and 29%, respectively.

However, legislative and regulatory complexities related to pay, including compliance and tax obligations, contribute to barriers in offering remote work, the report found.

For example, businesses with remote workers are challenged by valuation of taxable benefits and the treatment of work-from-home expenses. Additionally, when employers have workers across multiple provinces or countries, businesses must face the complexity of complying with multiple tax jurisdictions and varying employment standards.

Such barriers provide “an opportunity for the government to revisit policies and procedures that may not align with the remote-work paradigm,” said Kim White, a tax partner specializing in global mobility services with PwC Canada, in a release.

“Making it less administratively burdensome for businesses to hire remote talent, and for workers to be hired across Canada and abroad could help to promote the remote working model,” she added.

One way to do that is with simplified tax reporting, with most businesses interviewed wanting the T2200 tax form for claiming home-office expenses to be either simplified or eliminated, which would save time that could be spent on higher-value tasks.

The shorter T2200S, the form for work-from-home expenses used for the 2020 tax year amid the pandemic, is an example of such simplification, the report noted. Employers would like to see a similar form available for employees who work from home long term.

The report also suggested measures that included: aligning workers’ province of employment with province of residence, not with the province where the employer is established; harmonizing employment standards and clarifying workers’ compensation rules for those working from home; and reviewing Canada’s restrictions related to Canadians working remotely for foreign employers.

As the various legislative and regulatory challenges are addressed, the report suggested payroll professionals should be involved. As a result, the issues around tax and other withholdings, reporting requirements and payroll implications could be better understood and planned for.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.