Hiring Foreign Workers in Canada: TFWP, IMP, Payroll and Tax Duties

Hiring foreign workers in Canada means choosing an immigration route for the employee and then meeting the payroll and tax rules that apply from the first pay date. The two main routes are the Temporary Foreign Worker Program (TFWP), which usually needs a Labour Market Impact Assessment (LMIA), and the International Mobility Program (IMP), which does not. This page is a tax and payroll overview for owners and employers, including U.S. and India-linked companies. It is not legal or immigration advice: a Canadian immigration lawyer or regulated immigration consultant should handle the application itself.

How do the TFWP and IMP compare for hiring foreign workers in Canada?

Inspections under either program can be unannounced, and the TFWP lets the government review treatment of workers going back six years. Quebec has its own TFWP stream. The program pages change often, so confirm current fees and requirements before you apply.

What payroll and tax steps follow the hire?

1. Confirm the right to work. A person who is not a citizen or permanent resident gets a Social Insurance Number starting with 9. Confirm the SIN has not expired and the person has a valid work permit; a 9-series SIN with no expiry date is not valid.
2. Open the payroll account (RP) if you do not have one. See Canadian payroll source deductions for 2026 CPP and EI rates.
3. Withhold as for a resident employee. Income tax, CPP and EI generally apply. EI is not insurable for a non-resident whose foreign country's unemployment insurance laws require premiums.
4. Check for a social security agreement. Canada has agreements with both the United States and India, among others. They are designed so that only one plan covers an employee; ask your Canadian CPA how the agreement applies and what proof to keep.
5. Handle treaty claims correctly. An employer must withhold on a non-resident employee working in Canada even if a treaty likely exempts the pay, unless the employee obtains a waiver from the CRA. Certain non-resident employers can obtain certification instead.
6. Meet provincial duties: workers' compensation, health coverage rules and, in Quebec, registration with Revenu Quebec for source deductions.
7. File T4 slips and issue a Record of Employment at the end of employment.
8. Keep records for six years.

What documents should you keep?

• The LMIA decision letter and annexes, or the offer of employment confirmation.
• The signed job offer or contract and payroll records matching its wage and duties.
• Proof of recruitment or training efforts where the LMIA depended on them.
• Work permit copies, SIN confirmation and expiry tracking.
• Records of any change in wages, duties, location or housing.
• Evidence of medical insurance and workers' compensation coverage, where required.

What if the worker is a contractor or works from outside Canada?

A non-resident contractor who performs services while physically in Canada can trigger withholding and reporting duties for the Canadian payer; the CRA's T2 guide points to Schedule 29 for payments to non-residents and refers to Regulation 105 withholding, so ask your CPA before the first invoice is paid. A person who works only outside Canada is generally outside Canadian payroll, but using overseas staff can create registration or permanent establishment questions in the worker's country. Our cross-border remote work guide covers the U.S.-Canada version of that problem.

Worked example: a Calgary engineering firm hires from Pune

A Calgary engineering firm hires a structural engineer from Pune under an LMIA-exempt permit category. The firm pays the $230 compliance fee, submits the offer through the Employer Portal, and gives the engineer a signed offer at $90,000. After the permit issues, HR records the SIN starting with 9 and its expiry date, opens the payroll account and runs the first pay. At $90,000 for a full year in 2026 the employee is over every ceiling. CPP is $4,230.45 plus CPP2 of $416, and EI is $1,123.07. The employer matches the CPP and CPP2 and pays $1,572.30 of EI, so its payroll cost on top of salary is $6,218.75. If the engineer is instead seconded and stays in the Indian social security system under the agreement, the CPP lines could change, so the firm asks its CPA how the agreement applies before the first pay.

Mistakes to avoid

• Letting the worker start before the permit is valid or on terms the permit does not allow.
• Paying less than the offered wage or changing duties without telling the authorities.
• Dropping the six-year record trail.
• Treating the person as a contractor to avoid payroll, which can lead to CPP and EI assessments.
• Skipping withholding on a non-resident employee because a treaty "probably" exempts the income.
• Ignoring inspections or failing to disclose compliance problems.

A note for U.S.- and India-linked owners

If a U.S. or Indian parent is sending staff to Canada, the host-country payroll duty usually starts when the person works in Canada, and the home-country social security position needs a separate check. Our pages for a U.S. company entering Canada, an Indian company entering Canada, the U.S.-Canada totalization guide and India labour and professional tax compliance set out the surrounding rules. A hire who is moving personally should also use the India to Canada move checklist. On the U.S. side, see our U.S. employer compliance checklist for payroll that continues while an employee is posted to Canada.

How we can help

We are a U.S. CPA firm in Aurora, Illinois. We handle the U.S. payroll, treaty and information-reporting side of cross-border staffing and coordinate with your Canadian CPA, Canadian immigration counsel and Indian Chartered Accountant so wages, residency days and social security positions line up. See our payroll and employer compliance and relocation and immigration tax planning services.

Frequently asked questions

General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.