Hiring a UK employee from Canada: what Canadian companies need to know

For a Canadian company, UK payroll is recognisable (source deductions, real-time-ish reporting, year-end summaries), but the on-costs, pensions and entity question all work differently. Here's the practical version for Canadian founders, finance and HR teams.

The five differences that surprise Canadian employers

• PAYE is your source deductions, with stricter timing. Income tax and National Insurance come off at source like CPP/EI/income-tax remittances, but the report to HMRC (an RTI submission) is due on or before every payday, not on a monthly remittance schedule.
• The T4 equivalent is the P60, and year-end is lighter. Employees get a P60 by 31 May; there's no T4 Summary season because HMRC already received everything in real time.
• Employer on-costs sit in a similar range, shaped differently. You'll pay a 3% minimum pension, plus employer NI of 15% on pay above £5,000/year where it's due (on a DPNI for an employer with no UK presence it usually isn't), against the Canadian stack of CPP + EI premiums. Run the numbers per salary rather than assuming either is cheaper.
• Holiday is far more generous. UK statutory paid holiday is 5.6 weeks (it can include public holidays) versus the 2 weeks after a year's service that the Canada Labour Code sets for federally regulated employers (3 weeks after 5 years), so price it into the offer.
• No provincial layer. One national system: no provincial payroll taxes, no workers' comp boards, no Quebec variant. The UK system is genuinely simpler once it's set up.

Your three routes, and the one most Canadian companies miss

However you hire, UK payroll runs one of three ways: your own UK PAYE scheme (an employer abroad can register one without a UK entity), a direct payment scheme (no UK entity needed, because you stay the direct employer), or an Employer of Record (a third party employs them for you, at a premium: see the Employer of Record cost comparison). The direct payment route, usually a DPNI for Canadian employers, is the one most Canadian companies have never heard of, and it is usually the leanest way to hire one to ten UK staff without incorporating. Compare the three routes side by side, or answer four quick questions to find yours.

Secondments and social security

If you're posting an existing Canadian employee to the UK rather than hiring locally, the Canada to UK social security arrangements are narrower than most treaty pairs, so whether contributions stay Canadian or move to UK NI needs checking for your specific posting.

UK payroll quick facts

Estimate the all-in cost of a UK hire with our free employer-cost calculator, or see what a UK employee really costs.

Common questions

Can a Canadian company employ someone in the UK without a UK entity?

In most cases, yes. A Canadian corporation with no UK presence can employ UK staff directly, usually through a DPNI scheme in the employee's name, or by registering for UK PAYE itself. The employee sets up a DPNI and pays both their income tax and their employee National Insurance to HMRC under one PAYE reference. HMRC's DPNI guidance includes employees of an overseas employer that has no UK address it pays wages from. We will ask HMRC for the scheme that fits your facts, and they may suggest a different one once they have the full facts.

Does a Canadian company pay UK employer's National Insurance?

Usually not, if it has no UK presence. Under HMRC's rules an employer owes UK employer's National Insurance if it is resident, present or has a place of business in Great Britain. HMRC list the UK's social security agreements that include employer obligations as those with the EU, the EEA EFTA states, Switzerland, the Isle of Man and Gibraltar. Canada's is not one of them. One exception: if your UK employee actually works for a UK business, such as a UK client you supply them to, that business may have to run PAYE and pay employer's National Insurance itself. For most employees, UK employer's National Insurance is 15% of pay above £5,000 a year.

Can a Canadian company run UK payroll in its own name instead?

Yes, that's the other route. A company with no UK presence doesn't have to run UK PAYE, but it can choose to run it in its own name. Then the company takes the employee's income tax off their pay through its own payroll, and our fees are the company's cost, not the employee's. The employee's National Insurance still has to be paid: the company can pay it through its payroll if it's willing to and HMRC agree, and if not, the employee pays it directly.

How soon can a Canadian company pay its UK employee?

We'd allow four to eight weeks for HMRC to set the scheme up, and that's our own estimate, not a figure from HMRC. Nothing goes to HMRC until the engagement is signed and our identity checks are done, so our four to eight weeks starts then, not today. The scheme should be registered before the first payday. If pay starts before the scheme is in place, payroll still runs every payday and is reported to HMRC late once the scheme exists.

Working across five to eight hours

Toronto is five hours behind the UK; Vancouver eight. The way we work absorbs it: approvals you send in your afternoon are processed in the UK morning, and we reply within one UK business day. If you want a live call, ask and we will fix a time.

This guide is general information, not tax, legal or immigration advice, and reflects our understanding of the rules as at June 2026. Your circumstances may differ, so please get specific advice before acting.