Comparing Canadian and USA Payroll Taxes

iStock 178447404 hero scaled 1
By Laura Curran | 07/31/2019 | 2 min read

Canadian and US employment laws are very similar. There are, however, a few key differences in payroll taxes that you need to be aware of if you are doing business on both sides of the border.

Payroll Taxes in Canada Versus the United States

Neighbors, but two different countries, each with their own laws, rules and regulations when it comes to payroll. Most notably, each has its own dollar governed by its own regulators - the Internal Revenue Service (IRS) in the U.S. and the Canada Revenue Agency (CRA) in Canada. Both countries have two tiers of payroll taxes that an employer is required to withhold and/or to pay on behalf of employees. In America, they are referred to as federal and state; in Canada, there are federal and provincial taxes. When doing Canadian payroll, however, most employees fall under provincial jurisdiction, rather than federal employment law. Employers need to be aware of both sets of rules and which ones pertain.

Social Benefits and Programs

One of the areas where Canadian payroll taxes differ is the more extensive welfare – in particular the Canada Pension Plan and Employment Insurance. USA payroll taxes handle benefits differently, with the federal government determining what is and isn’t considered to be a “taxable benefit.”


Just as Canada’s minimum wage varies from province to province, so each state of America legislates its own minimum wage. The only difference in wages is that Canadian wages are normally higher than many of the U.S. states.


In the United States, certain days each year has been designated as public holidays by both the federal government and state governments. While many of these holidays are recognized by the federal government and all state government, each state enjoys additional days each year that may or may not be recognized by other states.

As Simple as 1 – 2 – 3 with PSI Payroll Services Inc.’s Solution

Since 1995 we have been taking the guesswork out of your Canadian payroll in just three easy steps: 1. Submit. 2. Remit. 3. Pay. Contact us today to find out how we can help you.