Best less hassle way for both parties is to have them run your payroll through a Canadian payroll company who will do the payroll deductions and issue a T4 year end. Many U.S. Companies do this for their remote employees.
It looks like you're right - you can have a Professional Employer Organization act on behalf of the employer in regards to payroll, HR and other compliance matters:
http://www.salesforcesearch.com/bid/147571/How-Does-a-U-S-Co...
Just don't try and pay employees without doing the proper paperwork with the Canadian government (or use a PEO to do it for you):
http://www.pwc.com/ca/en/services/tax/tax-tracks/episode-59-...
If an employer only has one or two Canadian employees though, they may want to go via the self-employed route I mentioned in an earlier reply.