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Payroll services are an essential part of any business, but they require a great deal of time and money to maintain correctly. As a result, companies of many different sizes and industries outsource their payroll requirements to employer of record services (EORs).
These organizations, also known as professional employer organizations (PEOs), handle bookkeeping, taxes, and matters relating to employee payment, such as the Canada Pension Plan (CPP) and employment insurance, in addition to many other tasks.
Hiring an EOR can help you maximize efficiency in your enterprise and keep resources from going to waste. Here are four ways employer of record services can help your company continue to run smoothly.
1. Manage Resources Better
Companies must make the best use of their resources to remain sustainable for the long term. But this can be difficult when it comes to managing payroll departments. If you hire a full-time staff, you’ll have to sacrifice a significant portion of your business’s money. But if you try to do it yourself or work with very small teams, you could potentially compromise the quality of the work, which would lead to even costlier fines. Using an EOR can help mitigate these losses, since they offer both proven experience and flat, affordable monthly rates.
2. Follow Regulations
Following payroll regulations is easier said than done sometimes. Enterprises must account for rules governing vacation pay, overtime, workers’ compensation, and more. Policies differ from province to province, so companies that work on a national level may find it difficult to keep track of all the different guidelines. Organizations like the Canada Revenue Agency (CRA) also update their regulations frequently, so laymen may struggle to stay abreast with each new policy.
Furthermore, enterprises that fail to meet these requirements often have to pay steep penalties. For example, the CRA can charge a fine of up to 10 per cent of a business’s annual income if they fail to file their taxes on time. In addition, they can charge up to two per cent of the outstanding balance every month until those taxes and any accrued interest are paid in full. Making mistakes on taxes or payroll can be extremely detrimental to a business’s ongoing sustainability. EORs hire professional staffers that are well-versed in existing policy, eliminating the legwork for employers.
3. Move into New Territories
Opening your products up to new markets can be crucial to growing your business. But poor payroll practices could stop your enterprise’s progress dead in its tracks. To set up shop in a new country, businesses often have to obey new regulations with which they may not be familiar. With new insurance and banking policies to sort out, companies are often too busy to handle payroll services. An EOR can complete much of the administrative and regulatory work that comes with hiring new employees in new territories.
4. Prevent Employee Misclassification
Businesses are increasingly relying upon independent contractors to complete day-to-day operations. These workers are technically self-employed, and don’t require direct supervision or guidance from an employer in the same way that full-time staffers do. Therefore, regulations governing these workers’ employment insurance, CPP, workers’ compensation and other benefits are much different. If your organization misclassifies a full-time employee as an independent contractor or vice-versa, they may not receive the benefits to which they are technically entitled.
As a result, the CRA maintains an unforgiving attitude toward organizations that misrepresent the status of their workers. Penalties can be steep and often incur interest, which can make a devastating dent in a company’s finances. Misclassification also exposes companies to potential lawsuits from the aggrieved employees, plus investigations into the misconduct. EORs can ensure your employees are properly classified, eliminating any possibility of having to pay these harsh sanctions.