Employer of Record (EOR) in Canada

Employment Laws and Regulations in Canada

Employment Contracts

Canadian employment law recognizes both written and verbal employment contracts, but best practice always involves a written agreement. Employment contracts should clearly define the job title, compensation, job responsibilities, reporting structure, and conditions of employment.

In Canada, employment contracts cannot waive statutory rights granted under provincial employment standards legislation or the Canada Labour Code. For example, a contract cannot reduce vacation entitlements below the statutory minimum or eliminate notice period requirements upon termination.

The contract should specify whether the role is permanent, temporary, or fixed-term, as this affects notice period and severance obligations. If you hire through an EOR, the EOR typically provides a compliant employment agreement template tailored to your employee’s province of work.

Working Hours and Overtime

Canada’s employment standards vary between federally regulated industries and provincial jurisdiction. In Ontario, the standard workweek is 44 hours, and overtime compensation at 1.5 times the regular rate applies to hours worked beyond this threshold.

Federal employees are covered under the Canada Labour Code, which establishes a 40-hour standard workweek with overtime at 1.5 times after 8 hours in a day or 40 hours in a week. Employees can be asked to work up to 48 hours per week in Ontario without overtime if no agreement is in place, but written agreements can extend this to 60 hours in exceptional circumstances.

Minimum Wage

Minimum wage in Canada is set by province and by the federal government for federally regulated industries. For a complete breakdown, see our guide to minimum wage in Canada. Ontario’s minimum wage stands at CAD 17.60 per hour in 2026, with a scheduled increase to CAD 17.95 per hour on October 1, 2026 (Ontario ESA).

The federal minimum wage is CAD 17.75 per hour (Canada Labour Code). Employers must pay the higher of the applicable minimum wage or the employee’s agreed wage. Some provinces and the federal jurisdiction offer lower minimum wages for certain groups (such as homeworkers or liquor servers in specific roles), but these exceptions are narrowly defined.

Probation Period

Canadian employment law does not establish an automatic probation period. While many employers use probationary arrangements to evaluate new hires, there is no statutory “probation period” that eliminates notice requirements or limits protections. If you have established a formal probation period in the employment contract, statutory notice requirements under provincial law still apply once the employee has been employed for 3 months or more.

Some employers use a 90-day informal evaluation window, but this does not override the legal requirement to provide notice of termination after 3 months of employment. For a more detailed explanation, see our guide to probation periods in Canada.

Leave Entitlements

Annual Leave

In Ontario, employees are entitled to a minimum of 2 weeks of vacation leave per year during the first 5 years of employment, and 3 weeks per year thereafter. Vacation pay is calculated at 4% of gross earnings for years 1–5, and 6% for years 5 and beyond. Federally regulated employees receive 2 weeks of annual leave in the first year of employment, 3 weeks after 5 years, and 4 weeks after 10 years of service, with similar vacation pay calculations.

Sick Leave

Ontario’s Employment Standards Act provides 3 unpaid sick leave days per year, which must be paid by the employer if the employee qualifies under the Health Care Accessibility Act. Federally regulated employees are entitled to 10 paid sick leave days per year as of 2022, a major improvement over provincial minimums (Federal labour standards).

Maternity Leave

Ontario provides 17 weeks of unpaid pregnancy leave, during which an employee may receive maternity benefits through Employment Insurance (EI), which covers approximately 55% of insurable earnings up to a maximum of CAD 695 per week. The employee must have accumulated sufficient insurable hours to qualify for EI maternity benefits.

Paternity Leave

While Ontario does not have a dedicated paternity leave, employees may use parental leave following maternity leave or following the birth of a child without using maternity leave. Parental leave in Ontario provides 61 weeks of unpaid leave if taken after maternity leave, or 63 weeks if taken without using maternity leave. Federally regulated employees receive similar entitlements under the Canada Labour Code.

Other Statutory Leave

Both Ontario and federal jurisdictions provide unpaid leave for bereavement, jury duty, and voting. Some employees may also be entitled to unpaid leave for family violence purposes, or for the adoption of a child. Employers must accommodate these absences without penalty or loss of seniority.

The following table summarizes the main statutory leave entitlements across Canadian jurisdictions. Leave pay and requirements vary by province and by whether the employee is federally or provincially regulated. An EOR tracks leave usage against the correct provincial or federal standard, preventing over-allocation and missed entitlements.

Statutory Employee Benefits

Canada’s statutory employee benefits are primarily delivered through mandatory social insurance programs rather than employer-provided benefits. All employees contribute to the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP), Employment Insurance (EI), and in Ontario, the Workplace Safety and Insurance Board (WSIB).

CPP, EI, and provincial workers’ compensation programs provide retirement income, unemployment insurance, disability coverage, and workplace injury protection. Some provinces, such as Ontario, also operate employer health tax programs.

Beyond statutory social insurance, Canada does not mandate employer-provided health insurance, dental, or life insurance. However, many employers offer these benefits as part of competitive compensation packages. An EOR can administer voluntary benefits on your behalf if you choose to offer them to your Canadian employees.

Recent Regulatory Updates (2026)

For 2026, several regulatory updates affect Canadian payroll. The Canada Pension Plan contribution rate remains at 5.95% for both employer and employee on earnings between the basic exemption (CAD 3,500) and the Year’s Maximum Pensionable Earnings (YMPE) of CAD 74,600.

An additional CPP2 rate of 4.00% applies to earnings between CAD 74,600 and CAD 85,000 (YAMPE) for both employer and employee (CRA CPP rates). The EI premium rate for 2026 is 1.63% for employees and 2.282% for employers on insurable earnings up to CAD 68,900 (ESDC EI announcement).

Ontario’s Employer Health Tax (EHT) remains graduated between 0.98% and 1.95% of payroll depending on annual payroll levels, with a CAD 1 million exemption for eligible employers. Quebec employers must remit QPP contributions at 6.30% each (employer and employee) and QPIP (parental insurance) contributions of 0.692% for employers and 0.494% for employees (Quebec pension plan).

Work Permits and Visas in Canada

Work Permit Requirements

For a detailed overview of all visa categories and eligibility requirements, see our guide to work visas in Canada.

Who Needs a Work Permit

Foreign nationals must obtain a valid work permit before beginning employment in Canada, with limited exceptions. Canadian citizens and permanent residents do not require work permits. Temporary Foreign Worker Program (TFWP) participants, International Mobility Program (IMP) applicants, and individuals entering under specific trade agreements all have different requirements.

Eligibility and Required Documents

Work permit eligibility depends on the program category. For the Temporary Foreign Worker Program, the employer must demonstrate a genuine recruitment effort to hire Canadian workers and receive a positive Labour Market Impact Assessment (LMIA) from Employment and Social Development Canada (ESDC).

The LMIA process requires documentation of recruitment activities, job description, salary details, and proof that no suitable Canadian candidate is available. Processing takes 2–3 months, and the LMIA application fee is approximately CAD 1,000 per position.

The International Mobility Program (IMP) offers an LMIA-exempt pathway for intra-company transfers (such as relocating an existing employee from your US office to a new Canadian office), or for positions covered under trade agreements like USMCA, CETA, or CPTPP. IMP applications require a work permit application fee of approximately CAD 155 and a compliance fee of roughly CAD 100. Processing time is typically 2–4 weeks.

Processing Time and Validity

Work permit processing times vary by application stream. TFWP applications take 2–3 months from LMIA submission through work permit issuance (IRCC work permits).

IMP applications process faster, typically within 2–4 weeks. Work permits are generally valid for the same duration as the employment contract, typically 1–3 years, and can be renewed if the employment relationship continues and conditions are met.

Renewal Process

Work permit renewals follow the same application pathway as initial permits. If the employee is renewing under an LMIA-exempt stream, a new LMIA may not be required if conditions have not substantially changed. If renewing under the TFWP, a new LMIA is typically required, though some employers qualify for streamlined processing under the Global Talent Stream (GTS), which targets fast-track LMIA approvals within 10 business days for specific occupations.

Common Visa Types for Foreign Workers

Canada offers several work permit programs for foreign nationals, each with different eligibility criteria, processing times, and requirements. The table below compares the main pathways, including the Temporary Foreign Worker Program, International Mobility Program, Global Talent Stream, and trade agreement categories (IRCC).

How an EOR Handles Work Permits

Most Canadian EOR providers offer work permit application support as part of their service. The EOR typically coordinates LMIA documentation, collects required evidence from you (job description, recruitment records, salary justification), and submits the LMIA and work permit applications to ESDC and IRCC on behalf of the employer.

Some EORs cover filing fees as part of their service, while others pass them through. Processing timelines remain dependent on ESDC and IRCC capacity, but a qualified EOR can ensure all documentation is complete and accurate, reducing the risk of application rejections or delays.

Payroll, Taxes, and Social Security in Canada

Employer Contributions

Canadian employers must remit social insurance contributions on behalf of their employees. These contributions are not deducted from the employee’s paycheck; they are an employer obligation in addition to the employee’s gross salary. For a deeper breakdown, see our guide to payroll and taxes in Canada.

Employee Contributions

Employees in Canada pay mandatory contributions to CPP (or QPP in Quebec) and EI. These amounts are withheld from the employee’s paycheck and remitted by the employer to the Canada Revenue Agency (CRA) or to Revenu Quebec in the case of QPP and QPIP.

Income Tax

Canada levies progressive income tax at both federal and provincial levels. Federal and provincial tax brackets are indexed annually for inflation. The federal tax system applies the same brackets to all residents, while provincial rates vary by province.

The following table shows 2026 federal and Ontario provincial tax brackets.

All employees receive a basic personal amount (BPA) that is not subject to tax, reducing overall tax liability. The 2026 federal basic personal amount is CAD 16,452 (CRA tax rates). Each province also provides its own basic personal amount.

Payroll Cycle

Canadian employers typically process payroll bi-weekly (every two weeks) or semi-monthly (twice per month on fixed dates such as the 15th and last day of the month). Some employers use monthly or weekly cycles, but bi-weekly is the most common standard.

Regardless of pay frequency, employers must remit payroll deductions (CPP, EI, income tax) to the CRA within specified timeframes. Most employers remit monthly or on a prescribed schedule based on the size of their payroll.

An EOR manages all payroll cycles and remittance schedules automatically, ensuring compliance with CRA deadlines.

13th Month Salary and Bonus Pay

Canada does not require employers to pay a 13th month salary or annual bonus. Unlike some countries, there is no statutory entitlement to a year-end bonus or 13th-month payment.

If an employer chooses to offer bonuses, this is entirely discretionary and must comply with any promises made in employment contracts or employee handbooks. If a bonus is promised but not paid, it may be treated as a breach of contract claim, depending on the language of the contract.

Cost of Hiring Through an EOR in Canada

EOR Service Fees

The employer of record cost in Canada typically ranges from $400 to $600 per employee per month, depending on the provider, service level, and size of your team. Larger teams often negotiate volume discounts.

Some EOR providers charge a one-time setup fee (typically CAD 500–1,000), while others include onboarding at no extra charge. Fees may vary based on whether you require work permit support, benefits administration, or additional compliance services.

When comparing EOR providers, clarify what is included in the base fee and what services incur additional charges.

Total Employment Cost Breakdown

The following table shows a realistic cost example for hiring a single employee in Canada with a gross monthly salary of CAD 6,500 (approximately USD 4,700 at 1 CAD = 0.72 USD). The example includes statutory employer contributions, EOR service fees, and total employment cost.

The example above demonstrates that total employer cost is typically 22–24% above the employee’s gross salary when accounting for statutory contributions and EOR fees. This calculation assumes Ontario location and an EOR fee of approximately USD 499 per month. Quebec-based employees would have different contribution rates due to QPP and QPIP, while other provinces have different EHT or provincial insurance requirements.

To estimate your total cost of hiring in Canada, take the desired employee gross salary, add statutory contributions (11–12% of gross depending on province), and add the EOR service fee (typically 10–15% of gross salary).

For a CAD 60,000 annual salary (CAD 5,000/month), you should budget approximately CAD 72,000–78,000 in total annual employer cost including the EOR fee.

Ready to hire in Canada? Contact Remote People with an EOR solution tailored to your team size and industry.

Benefits of Using an EOR in Canada

Hiring through an EOR in Canada gives companies a practical way to enter the Canadian market without setting up a local subsidiary. The main advantages include:

• No local entity required: You avoid the cost and complexity of incorporating a subsidiary or branch office in Canada. The EOR is the legal employer, eliminating the need for directors, corporate registration, and annual filings.
• Rapid market entry: You can hire your first Canadian employee in 1–2 weeks rather than waiting 3–6 months for entity setup. This accelerates business expansion and allows faster testing of new markets.
• Complete compliance: The EOR handles all employment law compliance, from drafting contracts to managing leave entitlements, termination notices, and severance pay. You reduce legal risk and avoid costly employment disputes.
• Simplified payroll: The EOR processes payroll, calculates deductions, files tax returns, and remits contributions to the CRA, WSIB, and provincial authorities. You receive one consolidated invoice monthly.
• Managed work permits: The EOR guides you through LMIA applications, work permit processing, and renewals, coordinating with ESDC and IRCC on your behalf.
• Flexible scaling: You can hire and terminate employees without legal impediments. If you decide to exit the Canadian market, you can do so without dissolving a corporation or managing complex liquidation.
• Cost-effective for small teams: An EOR is typically most cost-effective for teams of 1–15 employees. Above that size, establishing a local entity may become more economical.

Discover how an EOR can simplify your Canadian hiring. get in touch today.

Termination and Offboarding in Canada

Notice Periods

Canadian employment law requires employers to provide notice of termination to employees, except in cases of just cause. The notice period is calculated based on length of service and varies by province and by whether the employee is federally or provincially regulated.

In Ontario, employees hired after January 1, 2022, are entitled to notice of 1 week per year of service, calculated on a prorated basis (for example, 6 months of service = 0.5 weeks notice). Notice requirement increases to a maximum of 8 weeks for employees with 8 or more years of service. If the employer fails to provide written notice, the employer must pay the employee “pay in lieu of notice” equal to the wages the employee would have earned during the notice period.

Severance Pay

Severance pay in Canada is distinct from notice pay and is not mandatory in all circumstances. In Ontario, severance pay is triggered only when an employee has completed 5 or more years of service AND the employer’s payroll is CAD 2.5 million or greater in a calendar year.

Severance is calculated as 1 week of pay per year of service, with a maximum of 26 weeks. Severance is paid in addition to notice pay (not instead of it).

Calculation Method

Severance pay is calculated as regular wages for the period, including overtime if applicable. “Regular wages” means the employee’s normal hourly rate or salary, excluding bonuses, discretionary payments, or benefits. For example, an employee earning CAD 60,000 per year (CAD 2,884.62 bi-weekly on a 26-pay cycle) with 8 years of service at a company with CAD 3 million payroll would receive 8 weeks of severance pay = CAD 23,077.

Caps and Exceptions

Ontario’s severance pay is capped at 26 weeks. Employers with fewer than 5 employees, or employers with payroll below CAD 2.5 million, do not have a statutory obligation to pay severance under the Employment Standards Act.

However, courts may award “common-law notice” (damages in lieu of notice) based on age, tenure, position, and re-employability, which can range from 1 to 24 months of pay. This is distinct from statutory notice and severance and is determined by courts in litigation.

Grounds for Termination

Canadian employment law recognizes two primary grounds for termination: termination for cause and termination without cause. Termination for cause means the employee has committed serious misconduct (theft, violence, willful disobedience, gross negligence) that breaches the employment contract. If termination is for cause, the employer may be entitled to terminate immediately without notice or pay in lieu.

Termination without cause is a termination not attributable to employee misconduct. In this case, the employer must provide statutory notice or pay in lieu of notice, and severance pay if applicable.

Employers cannot require employees to waive statutory notice or severance entitlements, and any severance offer below the statutory minimum may be unenforceable. An EOR manages all termination documentation and calculations to ensure compliance and reduce the risk of wrongful dismissal claims.

Public Holidays in Canada

Canada observes 10 federal statutory holidays that apply to federally regulated employees. Employees in other provinces follow their provincial holiday schedules, though most provinces observe similar holidays.

In Ontario, there are additional statutory holidays such as Family Day in February. The following table lists federal holidays in 2026 and indicates which provinces follow the same calendar.

Canadian statutory holidays are established under the Canada Labour Code for federally regulated employees and under provincial employment standards legislation for provincially regulated employees. Most statutory holidays require employers to pay regular wages or provide premium pay if the employee works on the holiday. When a statutory holiday falls on a day an employee normally works, the employee is entitled to either the day off with pay or premium pay (typically 1.5x to 2x regular wages) if required to work.

An EOR automatically tracks all applicable holidays based on the employee’s province and work schedule, ensuring correct holiday pay calculations and compliance with applicable legislation.

EOR vs. Other Hiring Models in Canada

EOR vs. Setting Up a Local Entity

Deciding between an EOR and establishing a local Canadian entity depends on your business timeline, team size, and long-term commitment to the Canadian market. The following comparison outlines key differences in setup time, cost, compliance responsibility, and best-fit scenarios.

A Canadian employer of record is the stronger choice for companies that need compliant, full-time employees in Canada without setting up a local subsidiary. The EOR handles every statutory obligation from CPP remittances to provincial employment standards, removing the legal exposure that comes with direct entity ownership.

Establishing a Canadian subsidiary only makes financial sense once you have a substantial local headcount, typically 15 or more employees, and a long-term commitment to the market. Below that threshold, the administrative overhead of maintaining a federal or provincial corporation, filing corporate taxes, and managing an in-house payroll function generally exceeds the EOR service fee.

EOR vs. Hiring Independent Contractors

Many companies consider hiring independent contractors to avoid the complexity of employment relationships. However, contractor misclassification carries serious legal and financial risk in Canada. The following table outlines the legal, tax, and operational differences between hiring employees through an EOR and engaging independent contractors.

The key risk with contractor misclassification is that Canada Revenue Agency and provincial labor boards may reclassify a “contractor” as an employee if the working relationship demonstrates control, integration, or economic dependence (the “control test” under common law). If reclassification occurs, the employer becomes liable for back-tax withholdings, CPP/EI contributions, penalties, and interest, potentially years of liabilities.

For more information on hiring contractors in Canada, see our guide to contractors in Canada.

EOR vs. PEO

PEOs (Professional Employer Organizations) are often confused with EORs, but they operate under a different legal model in Canada. The following table compares the legal structure, liability, and best-fit use cases for EORs and PEOs.

A PEO requires your company to already have a registered entity in Canada, because the PEO operates as a co-employer rather than the sole legal employer. For foreign companies without a Canadian subsidiary, this makes the PEO model impractical as a market-entry solution.

An EOR eliminates the entity requirement entirely. Remote People employs the worker through its own Canadian entity, bears the statutory employer obligations, and invoices you a single monthly fee. Companies that want full employment compliance from day one, without registering a corporation in Canada, should choose the EOR route.

How to Get Started with an EOR in Canada

Hiring your first Canadian employee through employer of record services in Canada is straightforward. Follow these steps to launch:

• First, evaluate your hiring needs. Determine how many employees you plan to hire, in which provinces they will work, and whether you need work permit support. This assessment helps you identify the right EOR provider and service level.
• Second, select an EOR provider and review their service agreement. Ensure their fees, service model, and compliance support align with your needs. Verify they offer support in the provinces where you plan to hire. Compare EOR pricing across providers to find the best fit for your team size.
• Third, prepare employee documentation. Collect personal information from your hire (full name, Social Insurance Number, address, birth date, direct deposit details). The EOR will use this to register the employee with CRA, CPP, EI, and provincial authorities.
• Fourth, finalize employment contracts and compensation details. The EOR typically provides a compliant employment agreement template. Confirm job title, salary, start date, work schedule, and any benefits you plan to offer.
• Fifth, complete payroll setup and first payment. Once all documentation is submitted and verified, the EOR processes your first payroll run. Most EORs can process first payroll within 1–2 weeks of receiving complete documentation.

Ready to expand your team in Canada? Contact Remote People today to discuss your hiring goals and explore EOR solutions tailored to your business.

Where companies hiring in Canada expand next

Teams hiring in Canada frequently expand across North America and into aligned English-speaking markets. Common expansion paths include a team in the Philippines (an established BPO and support-services hub) and operations in the United States (USMCA labor provisions and trade framework). Teams scaling further usually add the United Kingdom for shared Commonwealth business frameworks, with hiring in Ireland extending coverage through aligned English-language hiring dynamics.