Canada is a top destination for international employers thanks to its highly educated, bilingual workforce, strong legal protections, and advanced infrastructure. With major business hubs across provinces like Ontario, British Columbia, and Quebec, the country offers excellent opportunities for companies expanding into Canada. 

However, hiring in Canada comes with legal and administrative complexity. Labour laws, tax obligations, and employee entitlements vary between provinces and territories, making compliance more challenging than in countries with a single set of national rules.

In this article, we’ll help you understand how to hire employees in Canada the right way. We’ll cover your hiring options, what an Employer of Record (EOR) can do for you, how payroll and taxes work, what benefits and leave you’re expected to offer, and what to consider when ending employment. 

Whether you’re hiring one remote worker or building a remote team, this guide will equip you with the knowledge to get started smoothly and compliantly.

How to Hire Employees in Canada

Setting Up a Local Entity

Canada’s provincial labor laws vary widely, from CPP to EI rules and termination standards. A Canadian EOR keeps you compliant across all provinces. No local entity needed.

Working with a Canada Employer of Record (EOR)

Canada’s provincial labor laws vary widely, from CPP to EI rules and termination standards. A Canadian EOR keeps you compliant across all provinces. No local entity needed.

Learn more about Employer of Record services

Hiring Independent Contractors

Hiring contractors can offer flexibility and reduce administrative costs, but Canada closely scrutinises whether a worker is truly an independent contractor or an employee. The CRA assesses contractor status using multiple factors, including the level of control (who decides how, when, and where work is done), ownership of tools and equipment, chance of profit and risk of loss, integration into the business, and the worker’s ability to subcontract.

Misclassification can be expensive. If a contractor is reclassified as an employee, employers may face retroactive CPP and EI contributions (both employer and employee portions), interest charges, and penalties of up to 10% of unpaid amounts. There can also be employment-law exposure, including potential common law wrongful dismissal claims. If status is unclear, employers can request a CRA determination by filing Form CPT1 for a worker status ruling.

Learn about hiring contractors in Canada

Hire in Canada

Province-by-province employment rules with CPP/QPP, EI premiums, varying statutory minimums, and federal/provincial compliance obligations.

We handle employment contracts, payroll, social contributions, and full Canadian compliance.

No local entity needed. Your team can start in days.

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Using an Employer of Record in Canada

Using an EOR is  often the most efficient way to compliantly hire employees in Canada. The EOR assumes the legal responsibility for employment and manages all aspects of HR administration, including:

  • Drafting compliant employment contracts
  • Running payroll and managing statutory deductions
  • Filing federal and provincial tax reports
  • Enrolling employees in social security and public health systems
  • Managing vacation, sick leave, and paid time off
  • Ensuring compliance with labor laws in each province
  • Handling employee onboarding and offboarding

Handling payroll and taxes in Canada isn’t just about cutting checks; it’s about navigating a complex web of federal and provincial regulations. For companies expanding into the Canadian market, getting payroll right and staying compliant with labor and tax laws can quickly become a major burden.

A Canada-based Employer of Record (EOR) takes that weight off your shoulders. The EOR manages salary payments, calculates and withholds the correct taxes, and handles all required filings with the relevant authorities. This ensures your employees are paid accurately and on time, while your business stays fully compliant and free to focus on growth.

2026 Update — Legal Changes Which Affect Canada EOR Services

Some legal changes in 2025 and 2026 which affect the provision of EOR services include:

1

Mandatory Pre‑start Employment Disclosure in Ontario

Since July 1, 2025, Ontario employers with 25+ employees must give new hires written terms before or shortly after starting. This includes wage, hours, pay cycle, and employer details.

Some provinces allow for averaging agreements, where hours are calculated over a longer period, such as two to four weeks, to manage workloads more flexibly.

As the formal employer in Ontario, Canadian EORs must update offer letters and onboarding processes to recognize this change. 

2

New Leave Entitlements in Ontario

As of June 2025, workers with 13+ weeks’ service get up to 27 weeks unpaid illness leave and extended parental leave for adoption or surrogacy. Canada EOR payroll and HR systems must reflect these expanded entitlements.

3

Job Ad Requirements & Canadian Experience Ban

From January 1, 2026, job ads in Ontario must include pay ranges, state if AI is used, and cannot ask for Canadian experience. Canada EORs handling recruitment must ensure postings follow the new standards.

4

OHSA Now Covers Remote Work

Ontario’s Occupational Health & Safety Act (OHSA) now applies to telework, with minimum fines for repeat violations. EORs must extend safety policies and reporting practices to include remote work setups and compliance documentation.

How Does a Canada Employer of Record Service Help with Benefits Administration?

In Canada, employees are entitled to both mandatory and optional benefits such as:

  • Pension contributions (Canada Pension Plan or Quebec Pension Plan)
  • Employment Insurance
  • Various forms of paid leave (vacation, maternity, and parental) 
  • Health and dental plans

An EOR allows your business to focus on team development and performance, while they take care of the legal and operational complexity of hiring in Canada.

Employment and Labor Laws in Canada

Canada’s Employment Law Complexity
Canada operates under a dual federal-provincial system. Only ~6% of workers fall under federal jurisdiction (banking, telecommunications, transportation). The remaining ~94% are governed by provincial employment standards, which differ significantly on vacation, overtime, termination notice, and leave entitlements. A Canada EOR ensures full compliance with Canada labor laws and regulations, including those that related to: 

Working Hours and Overtime

Canada’s provincial labor laws vary widely, from CPP to EI rules and termination standards. A Canadian EOR keeps you compliant across all provinces. No local entity needed.

Public Holidays

  • New Year’s Day (January 1)
  • Good Friday (April 3)
  • Victoria Day (May 18)
  • Canada Day (July 1)
  • Labour Day (September 7)
  • National Day for Truth and Reconciliation (September 30)
  • Thanksgiving Day (October 12)
  • Remembrance Day (November 11)
  • Christmas Day (December 25)

Provincial additions can include Family Day (AB, BC, NB, ON, SK, February), National Patriots’ Day (QC, May), Saint-Jean-Baptiste Day (QC, June 24), Civic Holiday (ON and many provinces, August), and others. In practice, the total paid public holidays is commonly 9 federal plus 0 to 4 provincial, or roughly 9 to 13 per year, depending on the province and whether the role is federally or provincially regulated.

Breaks and Rest Periods

Canada’s provincial labor laws vary widely, from CPP to EI rules and termination standards. A Canadian EOR keeps you compliant across all provinces. No local entity needed.

Probation Period

Probation periods in Canada are widely used, but they are not set out as a single standard rule across the country. In practice, many employers use a probation period to assess performance and fit early in the employment relationship, and the most common duration is three months (90 days).

In Ontario, the ESA does not require termination notice within the first three months of employment. Under the Canada Labour Code, employees with less than 12 months of continuous service are generally not entitled to notice of termination under the Code’s termination notice rules.

Probation does not automatically remove common law risk. Courts can still award damages if an employee is terminated during probation without good faith, fair dealing, or if the contract language does not clearly limit notice entitlements. For employers, the safest approach is to use clear probation clauses, document performance concerns, and follow a consistent process even during the early months.

Remittance and Reporting Requirements

All employers in Canada must open a payroll account with the CRA or, in Quebec, Revenu Québec. Through this account, they are required to:

  • Remit withheld amounts for tax, CPP/QPP, and EI
  • Submit regular payroll tax filings
  • Provide year-end summaries and tax slips such as T4s or RL-1s

Remittance schedules vary depending on the size of the employer’s payroll. Small businesses may remit monthly, while larger companies may be required to remit semi-monthly or even weekly.

Accurate payroll records must be kept for a minimum of six to eight years depending on the jurisdiction. These records should include timesheets, pay statements, vacation accruals, tax forms, and benefit enrollment documents. In the event of a government audit, detailed records will be required to demonstrate compliance.

Record of Employment

An ROE must be issued every time an employee experiences an interruption in earnings. This includes situations such as resignation, dismissal, layoff, or parental leave. The ROE is a crucial document used by employees to apply for Employment Insurance (EI) benefits.

Employers must issue the ROE within five calendar days of the employee’s last day of work or the interruption in earnings. The document can be submitted electronically through the CRA’s portal or filed as a paper form.

ROEs include important data such as:

  • Employee start and end dates
  • Total insurable hours worked
  • Reason for separation
  • Total earnings in the qualifying period.

Delays or inaccuracies in issuing ROEs can delay benefit access for employees and may result in employer penalties. Employers working with an EOR do not need to handle ROE submissions themselves, as the EOR manages this entire process in line with local rules.

Payroll and Employment Taxes in Canada

Minimum Wage

Canada does not have a single national minimum wage. Each province and territory sets its own rate, which is typically reviewed and adjusted each year. As of 2026, the federal minimum wage is C$17.75 per hour, but in many provinces, the rate is higher. For example, British Columbia’s minimum wage is C$18.55 per hour, while Ontario’s is C$17.20.

The federal minimum wage applies only to federally regulated workplaces, while provinces and territories set their own rates and update schedules.

JurisdictionMinimum Wage (Hourly)
FederalC$17.75
AlbertaC$15.00
British ColumbiaC$17.85
ManitobaC$15.80
New BrunswickC$15.30
Newfoundland and LabradorC$15.60
Nova ScotiaC$15.20
OntarioC$17.20
Prince Edward IslandC$15.40
QuebecC$15.75
SaskatchewanC$15.00
Northwest TerritoriesC$16.05
NunavutC$19.00
YukonC$17.59

Income Tax

Canada’s personal income tax is layered. Employees pay federal income tax plus provincial or territorial income tax, so the combined marginal rate depends heavily on where the employee lives. For 2026, the federal system uses progressive brackets, and the lowest federal rate is 14%, reflecting the reduction that took effect July 1, 2025.

Federal Taxable Income (2026)Federal Rate
Up to $58,52314%
$58,523 to $117,04520.5%
$117,045 to $181,44026%
$181,440 to $258,48229%
Over $258,48233%

The federal Basic Personal Amount (2026) is income-tested, with a maximum of $16,452 and a minimum of $14,829, meaning a portion of income is generally tax-free at the federal level. Provincial tax applies on top, and combined top marginal rates vary widely across the country.

Because take-home pay and total employment cost also depend on local wage floors, it’s useful to pair tax context with minimum wage, which is set by jurisdiction.

Employer Payroll Contributions

In Canada, employer payroll costs are driven by a few statutory programs with clear annual rates and caps. The core items are CPP (or QPP in Quebec), Employment Insurance (EI), and workers’ compensation. Some provinces also levy employer health related payroll premiums, depending on location and payroll size.

CPP and CPP2 (outside Quebec), 2026

Employers match the employee rate and stop once the annual maximum is reached.

ProgramEmployee RateEmployer RateEarnings BandAnnual Maximum (Each)
CPP5.95%5.95% (match)$3,500 to $74,600$4,230.45
CPP24.00%4.00% (match)$74,600 to $85,000$416.00

EI premiums, 2026

EI is capped at the Maximum Insurable Earnings (MIE). Employers pay 1.4 times the employee premium rate. Quebec has a reduced EI rate because of QPIP.

Province of EmploymentEmployee RateEmployer RateMIEMax Annual EmployeeMax Annual Employer
Outside Quebec1.63%2.28% (1.4x)$68,900$1,123.07$1,572.30
Quebec (QPIP contributors)1.30%1.82% (1.4x)$68,900$895.70$1,253.98

QPP (Quebec) note

If the employee’s province of employment is Quebec, CPP is replaced by QPP. For 2026, QPP’s first-tier contribution rate is 6.30% each (employee and employer) on earnings between the $3,500 exemption and $74,600, plus an additional 4% each on earnings from $74,600 to $85,000.

Workers’ compensation and other provincial employer costs

Workers’ compensation is mandatory in every province and territory, but the rate depends on the province, industry risk class, and claims experience (often roughly 0.5% to 5% of payroll as a planning range). Some provinces also require employer-paid health payroll premiums or similar levies, so total employer burden varies by location and payroll profile.

Bonus Payments

Canada’s provincial labor laws vary widely, from CPP to EI rules and termination standards. A Canadian EOR keeps you compliant across all provinces. No local entity needed.

Work Permits and Visas in Canada

Foreign nationals require a work permit to be employed in Canada. For most positions, the employer must first obtain a Labour Market Impact Assessment (LMIA) from Employment and Social Development Canada (ESDC), demonstrating that no Canadian citizen or permanent resident is available for the role.



Exemptions include: CUSMA/USMCA professionals, intra-company transferees, and certain IEC (International Experience Canada) participants.



Remote People manages the LMIA and work permit process for EOR clients hiring foreign nationals.

Time Off and Leave in Canada

Mandatory Leave Entitlements

Vacation entitlements in Canada depend on whether the employee is federally regulated (covered by the Canada Labour Code) or provincially regulated. The federal rules set a clear progression based on years of service, while provinces can differ, especially on when employees become eligible for a third week. Vacation pay must be calculated and paid on or before the vacation period starts.

JurisdictionVacation EntitlementVacation Pay
Federal (Canada Labour Code)2 weeks (10 days) after 1 year4%
Federal (Canada Labour Code)3 weeks (15 days) after 5 years6%
Federal (Canada Labour Code)4 weeks (20 days) after 10 years8%
Saskatchewan3 weeks after 1 yearVaries by province rules
Ontario, BC, Alberta2 weeks after 1 yearVaries by province rules
Quebec2 weeks after 1 year; 3 weeks after 3+ yearsVaries by province rules

Parental Leave

Canada’s provincial labor laws vary widely, from CPP to EI rules and termination standards. A Canadian EOR keeps you compliant across all provinces. No local entity needed.

Maternity Leave

Canada’s provincial labor laws vary widely, from CPP to EI rules and termination standards. A Canadian EOR keeps you compliant across all provinces. No local entity needed.

Sick Leave

Sick leave in Canada depends on whether the employee is federally regulated (Canada Labour Code) or covered by provincial employment standards. Federal rules provide a paid sick leave minimum, while provinces vary widely in whether sick days are paid, unpaid, or a mix.

For longer absences, EI sickness benefits can provide income support if the employee meets eligibility requirements.

JurisdictionStatutory Sick Leave Minimum
Federal (Canada Labour Code)10 paid sick days per year
Ontario3 unpaid days per calendar year
British Columbia5 paid sick days + 3 unpaid days per year
Quebec2 paid days + up to 26 weeks unpaid leave
Alberta5 unpaid days (eligibility typically after 90+ days employment)

For extended illness, EI sickness benefits may apply, paying 55% of earnings for up to 26 weeks (effective December 2022, increased from 15 weeks).

Terminations and Severance in Canada

Termination

Termination rules in Canada depend on whether the employee is federally or provincially regulated, and whether the termination is with cause or without cause. Most terminations are handled as “without cause,” which triggers statutory notice (or pay in lieu) and final pay requirements.

Termination for cause may eliminate notice and severance obligations, but the bar is high. Employers generally need clear evidence of serious misconduct to rely on cause successfully. If the facts are borderline, employers often choose a without-cause termination with appropriate payments to reduce litigation risk.

Notice Period

Notice periods in Canada depend on whether the employee is federally regulated under the Canada Labour Code or covered by a provincial employment standards act. Federal rules set a baseline for individual terminations and add a separate requirement for large group terminations, while provinces like Ontario use a service-based notice schedule.

Federal (Canada Labour Code)Service Length / ScenarioNotice Requirement
Individual termination3+ months of service2 weeks’ written notice (or pay in lieu)
Group termination50+ employees16 weeks’ notice to the Minister of Labour

Provincial notice rules differ from the federal standard and are set under each province’s employment standards legislation. Below is an example of how notice is structured in Ontario under the Employment Standards Act (ESA).

Ontario (ESA) ExampleService LengthNotice Requirement
Termination noticeLess than 1 year1 week
Termination notice1 to 3 years2 weeks
Termination notice3 to 8+ years3 to 8 weeks (increases by 1 week per year, capped at 8)

Beyond statutory minimums, Canadian courts can also award common law “reasonable notice”, which may reach up to 24 months depending on factors like age, tenure, role, and re-employment prospects. This is an important budgeting consideration for EOR clients. Common law notice is separate from ESA notice and can significantly increase total termination cost exposure.

Severance Pay

Severance pay in Ontario is separate from termination notice. Employees may be entitled to statutory severance if they have 5 or more years of service and the employer has a payroll of at least $2.5 million. The entitlement is 1 week’s pay per year of service, up to a maximum of 26 weeks. This is an Ontario-specific ESA entitlement and does not apply in the same way across all provinces.

Ontario Severance Pay (ESA)Requirement
Eligibility5+ years of service and employer payroll of $2.5M+
Amount1 week’s pay per year of service
MaximumUp to 26 weeks

In practice, termination cost planning often needs to consider both statutory entitlements (notice, severance where applicable) and potential common law notice exposure, especially for long-tenured or senior employees.

When Does a Canada EOR Make Sense?

If you want to hire in Canada without setting up a local entity, an EOR provides a practical and compliant solution. It allows you to:

  • Hire quickly and legally across provinces
  • Ensure proper contracts, benefits, and payroll setup
  • Avoid the administrative burden of tax filings and remittances
  • Scale up or down without legal complications

This is particularly valuable for remote teams, market entry, or companies exploring Canadian operations without long-term commitments.

Hire in Canada with Remote People’s Employer of Record

Canada is an attractive destination for global hiring, offering a highly skilled and diverse workforce, strong infrastructure, and a reliable business environment. However, the country’s decentralized legal structure, where employment rules differ between federal and provincial levels, adds complexity for employers unfamiliar with local obligations.

An EOR helps mitigate the risks of hiring in Canada by taking on the legal responsibilities of employment while allowing you to focus on building and managing your team. Whether you’re hiring in Ontario, British Columbia, Quebec, or elsewhere, a trusted EOR in Canada can ensure every hire is fully compliant, correctly paid, and well-supported.

If you’re ready to build your team in Canada, RemotePeople can help. Contact us today. We provide full-service EOR support, including employment contracts, onboarding, payroll, benefits administration, and termination handling so you can focus on growing your business with confidence.

Frequently Asked Questions

The CRA looks at the real working relationship, not just the contract title. Key factors include control over work, who provides tools, chance of profit and risk of loss, how integrated the worker is into the business, and whether the worker can subcontract.

In most cases, if you employ someone who is working in Canada, you will need a compliant Canadian setup to run payroll and meet employer obligations like tax withholding, CPP/QPP, EI, and workers’ compensation. A foreign entity often cannot simply put a Canada-based employee on payroll “as-is” without registrations, because Canadian withholding and remittance obligations are tied to having employees performing work in Canada.

 

That’s one of the common reasons companies use an Employer of Record (EOR) in Canada - the EOR is already set up locally, can employ the worker compliantly, and handles payroll registrations and remittances while you manage the employee’s day-to-day work.

Fixed schedules set by the company, close supervision, using company equipment, working exclusively for one client, and being treated like part of the internal team (company email, manager approvals, internal policies).

Yes, but be careful. If the role looks like employment from day one, calling it a contractor arrangement won’t protect you. If you plan to convert, keep the contractor phase genuinely project-based and independent.

An EOR hires the worker as an employee from the start and manages payroll deductions, statutory contributions, and compliant employment documentation, which avoids relying on a contractor structure where the relationship functions like employment.

Quebec uses QPP instead of CPP and has QPIP, which affects EI rates. Practically, Quebec often requires a slightly different payroll setup and budgeting approach compared to other provinces.

Yes. Notice requirements differ by province, and Ontario’s statutory severance is a special case with eligibility conditions. On top of statutory rules, common law reasonable notice can apply across provinces (especially outside Quebec), creating additional termination cost risk.

Usually the “province of employment” drives employment standards and payroll setup. A move can change minimum wage, leave entitlements, holiday rules, and workers’ compensation coverage. Many employers treat location changes as a compliance trigger to update payroll and employment terms.