The true costs of hiring top tech talent from abroad
Author/ Daniel Mandelbaum
Before an employer contracts with a foreign national for remote work, good business planning involves considering the future costs a worker may have on your business. Some employers (wrongly) believe that the biggest challenge with bringing a skilled foreign worker to Canada is obtaining a work visa for the foreign worker. However, the real challenge is finding a low wage foreign worker who, when brought to Canada, can be brought to work locally for a comparably low wage. This is possible, but it requires early and strategic business immigration human resource planning.
Let’s start with why an employer would want to hire top foreign tech talent. Remote workers in foreign jurisdictions may demand less pay, initially. So it makes good business sense to look to foreign markets for tech talent when the work can be done remotely. However, when you plan to bring the worker to Canada, wages are dictated not by what is demanded in the foreign location’s labour market, but instead by what is demanded by Canada’s immigration programs.
Many of us have heard the supposed horror story of the immensely talented foreign software engineer who just could not obtain his/her immigration papers for Canada because she/he “didn’t have the points”, or the employer was “unable to demonstrate a labour shortage”. “Doesn’t have the points” or “unable to demonstrate a labour shortage” are an immigration lawyer’s and Service Canada’s polite ways of saying, respectively, that an employer didn’t consider the true immigration costs for the position. In truth, the immigration costs are often neither reflected in points nor the labour market. There are ways to score more points for foreign workers after they set foot in Canada, and the immigration department has recognized a country-wide skills deficit for IT workers and the benefits of attracting top foreign talent. Moreover, it shouldn’t cost an employer a division of a company in legal fees to obtain a work visa for a foreign worker.
So what are the true immigration costs of bringing foreign talent to Canada?
Some employers (wrongly) assume that the costs for bringing foreign workers to Canada is the same irrespective of the worker’s nationality because they (wrongly) believe that Canada’s immigration rules are the same for persons of all nationalities. In reality, the immigration rules are different for different nationalities, so, therefore, an employer should not assume that the costs for bringing foreign workers from all parts of the world are the same.
When bringing foreign workers to Canada, the available immigration programs obligate employers to pay workers certain predetermined, fixed rates. There are different immigration programs available to different nationalities and there are different predetermined, fixed rates for different immigration programs. Therefore, there are different predetermined, fixed rates for different nationalities.
This means that if an employer is paying a foreign worker a low wage for remote work, the budget hit when the employer bring that person to Canada can vary depending on the worker’s nationality.
Thus, the first step is to choose a nationality for which the available immigration programs allow an employer to offer the foreign worker a comparably low wage rate, as opposed to the much higher prevailing wage rate of a certain “default” immigration program known as the LMIA.
To illustrate the disparity between the low rate and the prevailing wage, let’s examine the Job Bank’s reported wages for Software Engineers. This first report displays the low, median and high wage hourly rate statistics for software engineers in Toronto. This second report displays the same breakdown across Canada.
Immediately, the difference in the reported low wage and median wage hourly rates should strike an employer as significant.
For some LMIA-exempt programs, the low wage rate is an acceptable wage rate to pay a foreign national. There is no need to adjust this wage by increasing the minimum work hours required or otherwise adjusting for similarly skilled employees already working for the company. However, for the “default” immigration program, the prevailing wage rate is the required rate. To calculate prevailing wage, an employer starts with the median wage rate, adjusts upward for position experience, upwards some more if the lowest paid Canadian software engineer on payroll is earning more, and then upwards even more by adding a few more working hours per week to avoid a labour market needs test.
Given this information, let’s run a hypothetical scenario comparing the impact hiring a Chilean national would have on an employer’s payroll budget to hiring an Indian national. Suppose that an employer’s starting annual budget for the remote position was about $20,000.00, and the employer wanted to bring the worker to Toronto to work as a software engineer.
A special program allows an employer who is paying a Chilean remote software engineer, say, $25.00 per hour for 20 hours per week in Chile, to bring them to work in Canada for a fairly similar wage in Canada. To bring this worker to Toronto, a work permit can be obtained with an offer of $28.85 per hour for the same 20 hour work week to the Chilean. What’s more, the Chilean worker can obtain this work permit at the time they fly into Toronto Pearson International Airport by applying at its rather predictable immigration office. The wait at the airport can be as little as 20 minutes.
However, no special program exists that would allow an employer paying a remote Indian software engineer a comparably low wage. In this instance, the “default” immigration programs prevails. This means that the wages of an Indian remote software engineer for $25.00 per hour for 20 hours per week in India balloons to a minimum of $46.15 per hour for 30+ hours per week in Toronto. Moreover, the employer must apply in advance for an eligibility opinion for this position, after which point in time the Indian worker must apply for advanced approval of a work visa at an unpredictable overseas visa post. The total processing time is typically at least 4 weeks (and the final work permit is still not issued until the worker presents him/herself to the immigration officers at Toronto Pearson International Airport, who have the final say).
Therefore, a remote worker from Chile brought to Canada would impact a Toronto employer’s annual payroll budget by about $4,000. However, to bring a remote worker from India to Canada, the Toronto employer’s annual payroll budget for the position would have to increase by about $46,000. That’s a big bite out of any budget, and it is even greater when you factor in related costs of having to wait for the position, professional fees and potential headaches of dealing with an unpredictable overseas visa post.
It is therefore exceptionally important when planning to recruit foreign talent to consider how the immigration costs may impact your budget and business when the time comes for you to bring this person to Canada. A good immigration lawyer can help your business plan ahead and save money.