So you do not want to have a live-in caregiver through the Canadian live-in caregiver program, and decide instead to go the live-out route. Well below are some things you will need to know when hiring a live-out caregiver in Canada.
1. If you are thinking about circumventing the rules and paying your nanny cash, remember this is a lose-lose situation. First of all, if the government catches you not only will they assess you and make you pay the amounts which should have been paid to the CRA, such as paying tax, contributing to the Canada Pension Plan, Employment Insurance, and buying workplace insurance, but they will make you pay the employee portion as well. In addition, you lose the $7,000 deduction on your taxes, and your nanny loses her right to collect Employment Insurance if she gets laid off.
What usually happens in that case is the nanny gets laid off, tries to collect EI, is informed by HRSDC that she is not entitled because she has not been paying into the plan at which point she provides records of payments and then the government is looking for you. Yes, it is more difficult to do but it also rarely ends well.
2. Make sure you have a HRSDC approved labour contract clearly spelling out the details of the job, much as you would sign with your employer. It’s all the same. They’re generally categorized as domestic workers and they have rights to feedback, clearly defined breaks, details around pay, vacation, overtime, expectations, roles and responsibilities. Long gone thankfully are the days where potential employers feel that Canada is better than Hong Kong so it’s okay to stretch working hours, responsibilities or ignore breaks. Getting an agreed upon contract creates good relations between you and outlines exactly everything which can keep you from getting in trouble down the road.
3. What do I need to know about paying my nanny? Well, as the employer, nannies are not self-employed, you have to treat them in a manner in which you would want to be treated and that means with respect. You negotiate the contract and if there are issues with performance, you have to address them in a respectful manner, much in the same way your employee has venues to complain about your treatment, including suing you for wrongful dismissal.
This step-by-step guide to payroll deductions should help getting you on the way and around the fear of the CRA;
Step 1 - Call 1.866.959.5525, the Canada Revenue Agency business help line, follow the prompts for payroll / source deductions accounts and ask the customer services representative for a business (or BN) number.
Step 2 – You have the BN set up in your name, so now you need the information on your one employee, your nanny. Gather from her on the contract her full name, SIN and live-out address. You’ll need this later…
Step 3 – Next you will need to figure out how much you will need to remit to the CRA each month. You can do this by entering the amount you have paid your nanny into the CRA payroll calculator; http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/tbls-eng.html. The calculator breaks down how much you will need to remit for taxes, EI and CPP. This link also provides other information on being an employer, rights and responsibilities. Read this if you have time or need something to help you get to sleep.
Step 4 – Monthly remittance of the held back funds (deductions of source pay). By the 15th of month you will be filling out the remittance voucher sent to you from the CRA – unless you sign up to remit online (check My Account). You remit on the 15th for the previous month, so on June 15th you are remitting for May 1st to 31st. On the form you need the gross pay, net pay, EI, CPP, month remitting for, number of employees and tax withheld. For me, the quickest is to take that to the bank on the 15th (16th if the 15th is a Sunday, 17th if the 15th is a Saturday, and 18th if the Monday is a holiday and the 15th is the Saturday. The bank stamps the form, takes the funds from my account and takes the remittance voucher. Done.
Step 5 - Keep the copy of the remittance voucher with the bank stamp in a file as you’ll need it when filing your personal income taxes (T1) each year and providing your nanny a T4 by February 28th of the following year.
4. Most often asked questions surround legal obligations, such as; when ending a contract with your nanny, if she gets sick, falls pregnant or gives notice. First off, be sure that the contract with your nanny establishes the length of notice needed if one of you wants to end your working relationship. Any penalties for not meeting that notice period should be spelled out in your contract too. As for the other things, just put your self in her shoes and change the employer from you to a large firm. Would your employer allow you to take short-term disability time off or long-term disability time off? Absolutely! By law they are required to and the same goes for your caregiver. If she falls pregnant you cannot fire her for the same reasons. If you need help, seek an employment lawyer.
But with all that being said, if the separation is mutually agreed upon, remember you will need to provide your nanny with a Record of Employment (ROE) within 8 days of her last day of work. Don’t wait! This is a controlled form to prevent EI fraud, so reach out to Service Canada right away and they will send you a kit with the details on how to do this.
5. Where can I get a contract? I recommend Googling “HRSDC approved nanny contract.” It will lead you to complete the key sections of the contract which cause the most headaches down the road, specifically; Overtime, training, duties she cannot legally perform for me, tracking of expenses – petty cash, and holiday pay.
I hope this provides some insight and helps clear up some lingering issues around what to do with live-out caregivers in Canada. All in all, just remember to treat your employee with the same respect you would want to be treated as an employee. Karma’s a bitch!