Become an insider!
Get our latest payroll and small business articles sent straight to your inbox.
In this Article:
Remote work has opened the doors to hiring anywhere in Canada, giving employers more flexibility than ever. But they’ve also introduced new complexity into payroll and year-end reporting. Should payroll follow the employee’s province of employment, or the province where the employer is established? If only the answer were that simple.
At the centre of these challenges is one critical requirement: employers must determine each employee’s Province of Employment (POE). Once the POE is correctly established, employers can apply the proper payroll rules, including:
- How payroll deductions are calculated (ex. taxes, CPP/QPP, EI/QPIP)
- Which employment standards apply (ex. vacation, statutory holidays, and overtime)
- Which employer provincial taxes apply (ex. EHT, WSIB/WCB, Health levies)
- How year-end reporting is managed (ex. T4/RL1, Summaries)
This guide breaks down the core rules for managing remote employee payroll in Canada, so you can stay compliant, accurate, and confident—no matter where your team logs in from.
How to Determine Province of Employment (POE)
So how do you actually determine an employee’s province of employment? It depends on how the employee works—on-site, hybrid, or fully remote. Each scenario triggers different rules, and choosing the wrong one can create downstream issues in payroll and year-end reporting. Let’s walk through how POE is determined for Canadian remote type workers.
POE Based on Work Arrangement
For Hybrid Employees
Hybrid employees—those who work both remotely and onsite—are treated similarly to in-person workers. If they report to an establishment of the employer, at any point during the year, even once, that office generally determines their POE.
For Fully Remote Employees
For employees who never report to an office and work under a full-time remote arrangement, determining POE requires additional qualifiers. The main one is that employers must assess whether the employee is still “attached” to an establishment.
A useful test is: If the full-time remote agreement didn’t exist, which employer location would the employee reasonably report to in order to perform their duties?
This assessment ensures that a remote employee’s POE still reflects their underlying employment connection to the business and aligns with CRA guidance.
When Employer Has No Physical Address
If the company is fully virtual (and byproduct, all employees are as well), POE is usually the province where the employee(s) receive direction and control from or where the payroll is processed from.
Pro Tip: The CRA has designed a tool to help determine an employee’s POE 🔗 Determine the Province of Employment (POE)
POE When Employee Circumstances Change
Employee moves to another province mid-year
POE does not change unless the employee begins reporting to a different office.
Their personal tax return will reflect their new province of residence, but payroll calculations continue to follow the original POE unless the work arrangement changes.
Employee temporarily working in another province
Short-term travel or temporary relocation generally does not change POE.
Employee regularly works in multiple provinces
If an employee works in more than one province during the year, they may have more than one POE. This could require you to track the provincial earnings separately as they will need to be reported to each respective province.
Pro Tip: To support accurate POE decisions, employers should keep written documentation of each employee’s work arrangement, including any remote or hybrid expectations. CRA may request this information if a POE determination is reviewed.
How POE Impacts Taxes, Deductions, and Year-End Reporting
Once an employee’s province of employment is established, it influences nearly every aspect of payroll, from onboarding to year-end reporting. Understanding these impacts helps ensure accurate deductions, compliance with provincial regulations, and smooth year-end reconciliation.
TD1 Forms and Onboarding
Employees must complete the correct provincial TD1 form based on their POE. This form instructs the employer how to determine the amount of provincial taxes to deduct.
Tax Tables
Income tax rates differ with each province, so using the correct tables for payroll is essential. Using payroll software, like Wagepoint, automates these tax table calculations, ensuring accuracy without manual intervention.
Employment Standards
Provincial legislation governs many aspects of payroll including vacation, statutory holidays, overtime, and other workplace rights. These rules apply to the employees POE, not necessarily where the employee lives.
CRA/Revenue Quebec Payroll Account Registration
If you have any employees with a POE of Quebec, you are required to register for a separate payroll account with Revenue Quebec. For other Canadian provinces and territories, employers are required to register with CRA for their payroll account.
CPP/QPP, QPIP, and EI Contributions
As noted above, most provinces follow federal rules for CPP and EI, but Quebec has its own system: QPP replaces CPP, and QPIP replaces EI. Payroll must reflect these provincial differences where applicable.
Year-End Reporting and T4/RL1s
Box 10 on T4 slips must reflect the correct POE, even if it differs from the employee’s home province.
If an employee worked in more than one province during the year and had more than one POE, earnings and deductions from each province must be reported on separate T4/RL-1s.
Each T4/RL-1 must show:
- The earnings for that province
- The deductions calculated using that province’s tax rules
- The correct POE in Box 10 for that portion of income
Provincial Employer Tax Reporting
POE also impacts which provincial tax agencies an employer may have to register with, report to, and pay. Depending on your employees locations, you may also have to register for:
- Provincial Workers’ Compensation (WCB/ WSIB)
- Ontario Employer Health Tax (EHT)
- British Columbia Employer Health Tax (EHT)
- Manitoba Health and Post-Secondary Education Tax Levy
- Newfoundland and Labrador (Health and Post Secondary Education Tax – HAPSET)
- Employer payroll tax levy for Northwest Territories and Nunavut
- Quebec employer contributions, including the Health Services Fund and other other labour-related contributions.
Home Office Expenses and T2200s
If working from home is part of an employee’s job, they may qualify to claim some of their work-related expenses on their personal tax return. The CRA sets specific criteria for this, which is where the T2200 comes in.
What is a T2200
A T2200 is a CRA form that employers complete to confirm that an employee was required to pay for certain work-related expenses to do their job. It supports the employee’s tax claim but does not guarantee that the CRA will approve or allow the deduction.
When an Employer Must Issue a T2200
A T2200 is needed when an employee meets these 2 conditions:
- Is contractually or operationally required to work from home
This requirement can be written in an employment agreement or clearly established through their work arrangement. For example, the employer does not provide a dedicated workspace at the office. - Pays for eligible expenses out of pocket
This includes costs that are necessary for performing their job and are not reimbursed by the employer. Examples of expenses:- Eligible: a portion of utilities, home internet used for work, basic office supplies
-
- Not eligible: furniture, rent (unless CRA criteria are met), mortgage interest, capital purchases
Hybrid employees may also qualify, provided their work-from-home arrangement is regular, recurring, and required by the employer–not simply optional or occasional. You can learn more about how the CRA defines hybrid eligibility here.
When a T2200 Is Not Required
You do not need to issue a T2200 if:
- The employee chooses to work from home but is not required to
- The employer provides a suitable workspace on-site
- The employer reimburses all related expenses
- The expenses are discretionary, not required for job performance
Employer Responsibilities Regarding T220os
Employers complete the T2200 and provide it to the employee. The employee keeps the form and does not submit it automatically; CRA may request it later.
Employers should avoid:
- Issuing blanket T2200s “for everyone”
- Guaranteeing that employees will receive a deduction
- Overstating or inaccurately describing the employee’s work conditions
The CRA can challenge incorrect forms, which may create compliance risk for the employer.
A Strong Foundation for Remote and Hybrid Payroll
Maintain Detailed Records
- Track remote, office, and cross-province workdays/hours for each employee.
- Document payroll adjustments, deductions, and communications.
- Maintain updated records of:
- Each employee’s work arrangement
- Their reporting location
- Workers’ compensation setup
- TD1 forms
- Employee contact information including current address
Communicate Requirements Clearly
- Explain how POE affects income tax, benefits, and T4 slips.
- Remind employees to review TD1 forms annually or if their location/tax status changes.
- Ensure remote work arrangement agreements are in place and in alignment with CRA guidelines.
- For employees with different POE from their province of residence, educate employees on their options to Increase or reduce income tax deducted at source.
Choose Payroll Software Built for Canada
- Automates POE determination and tax calculations
- Manages POE impacts for employment standards (vacation, stat, OT)
- Reduces errors and makes year-end reconciliation easier.
- Automates year-end form distribution and filing.
- Uses an employee portal for updating contact information and providing online access to paystubs, TD and year-end forms.
The Takeaway for Employers
Remote and hybrid payroll doesn’t have to be complicated. With the right tools and understanding, you can stay compliant, accurate, and prepared for year-end.
Wagepoint takes the guesswork out of multi-province payroll so you can spend less time on deductions and more time growing your business. Learn more and see if Wagepoint is the right fit for you.
