Hire and Manage Employees in Canada
Table of contents
Key takeaways
Canada has no single federal employment law for most workers. Each province and territory has its own Employment Standards Act. Federally regulated industries (banking, telecoms, interprovincial transport) fall under the Canada Labour Code. Employers must comply with the standards in each province where they hire.
The federal minimum wage is CAD 17.30 per hour (April 2025). Provincial minimums vary: Ontario CAD 17.20, British Columbia CAD 17.40, Alberta CAD 15.00, Quebec CAD 16.10. Employers must pay whichever is higher.
Employers must contribute to the Canada Pension Plan (CPP) at 5.95% of pensionable earnings (up to CAD 71,300) and Employment Insurance (EI) at 1.4x the employee rate of 1.64% on insurable earnings up to CAD 63,200. Quebec employees contribute to QPP instead of CPP.
Termination notice in Canada has two layers: short statutory minimums under provincial law and longer common law “reasonable notice”, which courts regularly award based on age, seniority, and role. Common law notice frequently exceeds 1 month per year of service for senior employees.
Employees are entitled to a minimum of 2 weeks of paid vacation after 1 year (increasing to 3 weeks after 5 years in most provinces), plus 9 to 11 statutory holidays per year depending on the province.
Foreign companies can hire Canadian employees without a local entity using an Employer of Record (EOR). An EOR handles CRA registration, CPP/EI remittances, provincial payroll taxes, and compliance with each province’s employment standards.
Employer of Record (EOR) vs. entity
Before you can begin the hiring process in Canada, you need to decide whether to hire Canadian employees through an EOR or set up your own entity.
Legal entity in Canada. Setting up a legal entity from scratch usually requires registering with local authorities, opening a local bank account, and consulting with local experts to ensure compliance with tax and labor laws.
Canadian EOR. An EOR is a third-party service that operates as an employer on a company’s behalf. As well as allowing you to hire full-time and part-time Canadian employees, EORs handle all the legal requirements for complying with Canadian laws for payroll, contracts, and benefits.
Choosing between an EOR and your own entity? Here are the pros and cons:
- | EOR | Legal Entity |
|---|---|---|
Cost and implementation | Quick to set up Start hiring within days Cost per employee grows as your headcount does | Can take months, with registration and advisory fees along the way More cost-effective once your Australian headcount is large enough |
Hiring | Onboard new hires quickly, often within days depending on the provider | Supports large-scale, long-term expansion in the market |
Compliance | Provides localized employment contracts, manages compliance work, and assumes liability. Can't tailor certain policies, and other HR/legal processes, to the needs of your business. | Requires expert knowledge of local laws and tax regulations and internal legal resources, as your company is liable for all legal and compliance infractions. Can tailor certain policies, and other HR/legal processes, to the needs of your business. |
Payroll & Benefits | Pay and insure employees quickly Taxes are filed for you | You track statutory deductions and entitlements for every hire |
Once you’ve chosen an EOR, you can start the onboarding process by gathering your employee’s information. In our guide to hiring through an EOR in Canada, you can learn the steps involved and how Rippling can help you hire and onboard Canadian employees in 90 seconds.
Classifying Canadian workers: employees vs. contractors
The early stages of hiring come with many questions. How do you classify your new Canadian workers? Are they employees or contractors? Getting the right answers can be the difference between easily managing your international team and being exposed to significant legal penalties.
Contractors | Employees |
|---|---|
High level of control over work. Contractors are generally given more autonomy to determine how to complete the work and when to do it. | More direction from the employer. Employees are generally subject to more control and direction from their employer, who will provide guidance on how to perform the work and may set specific hours of work. |
Equipment and tools are owned by the contractor. The employer doesn't provide a laptop or any other equipment to the contractor. | Equipment and tools are typically provided by the company. |
Less integrated. Contractors tend to be independent, they're more likely to work remotely, and they use their own tools and equipment. | Highly integrated. Employees are typically more integrated into the employer's organization, for example, they may work at the employer's premises. |
No entitlement to benefits. Contractors are not entitled to the same benefits and protections as employees, and they are responsible for paying their own taxes. | Entitled to benefits. Employees are entitled to certain employment benefits and protections, such as minimum wage, overtime pay, and vacation pay. They may also be entitled to benefits like health insurance, retirement plans, and paid sick leave. |
Time-bound engagement. Contractors are typically engaged for a specific project or period of time. | Indefinite engagement. Employees are generally hired for an indefinite period of time. |
Risk of loss. Contractors may assume more risk and liability for the work they perform. | No risk of loss. Employees are generally protected from liability for work-related issues. |
Non-exclusive services. Contractors can provide the same services to more than one organization. | Exclusive services. Employees must only work for the business they are employed by. Should they choose to get a second job, it must be performed outside the hours of the first and cannot be the same role. |
You can learn about classifying workers correctly to help you stay compliant with Canadian labor and employment laws in our classification guide.
Work permits for Canadian employees
Before continuing with the rest of the hiring process, make sure your prospective employee is allowed to work in Canada. Foreign nationals who are not Canadian citizens and do not have permanent residency usually need a work permit. Generally, there are two types:
Employer-specific work permits. These allow foreign nationals to work only for one specific employer for a specified duration.
Open work permits. These allow foreign nationals to work for any eligible employer in Canada.
For more details on applying for Canadian work visas, check out our guide to work permits in Canada.
New hire onboarding checklist
Once you’ve confirmed that your employee is legally allowed to work in Canada, you’re set to continue the onboarding process. A successful onboarding experience starts before your employee’s first day and continues well beyond it.
Before their first day
Complete a background check.
Send an offer letter.
Complete necessary paperwork (employment agreement, TD1 forms, etc.).
Enroll them in benefits and add them to payroll.
Order and configure their devices.
On Day 1
Ensure their workspace is ready.
Send a welcome email and give them an agenda.
Schedule a 1:1 with their manager.
During their first 90 days
Provide general and role-specific training.
Assign work and help them set goals.
Schedule consistent check-ins and offer regular feedback.
For a full onboarding checklist, see our guide on new hire onboarding in Canada.
What to include in an offer letter in Canada
The offer letter is a crucial part of hiring a new employee. Key items to include:
Position, job description, and start date
Working hours
Compensation and benefits (salary, equity, vacation, and insurance)
Termination policy
Confidentiality and non-disclosure agreements
Read our guide to sending a legally compliant offer letter in Canada for the full checklist.
NDAs and confidentiality agreements in Canada
A non-disclosure agreement (NDA) is a legal contract that prohibits one or more parties from sharing proprietary or confidential information with third parties. NDAs are legally enforceable in Canada but must be reasonable in scope and cannot be used to silence employees speaking out against harassment or abuse. NDAs can protect trade secrets, financial information, customer data, employee information, and intellectual property. Learn more in our guide to NDAs in Canada.
Running background checks on Canadian employees
Background checks are not mandatory in Canada but most employers choose to run them. You must obtain written consent from job applicants before conducting any background screening. Learn more about the different types of screenings in our guide to background checks in Canada.
Common background checks | Less common background checks |
|---|---|
Criminal record | Credit reports |
Employment history | Social media profiles (depends on role) |
Reference check | Driving records (depends on role) |
Work authorization | Medical records |
Education history | - |
Paying employees in Canada
Now that you’ve decided between an EOR or establishing your own entity, you’ll need a payroll solution. There are two types of international payroll solutions: global payroll processors and global payroll aggregators. You can read more about them in our guide.
Key payroll steps: determine your new hire’s employment status; collect their information including SIN and completed TD1 forms; choose to pay in Canadian dollars (default) or obtain written permission for another currency; and run payroll. Since employers are responsible for calculating payroll deductions, keep the following costs in mind:
Canada Pension Plan | 5.95% (capped at C$66,600 wages) |
Employment Insurance | 2.282% (capped at C$61,500 wages) |
Employment Health Tax | Varies by province—see our full guide |
Workers' Compensation | Varies by province and industry—see our full guide |
Mandatory employee benefits in Canada
Before finalizing your offer letter, understand the employee benefits you are required to provide. Mandatory benefits include:
Canada Pension Plan (CPP). Both employers and employees contribute a percentage of the employee’s earnings. Quebec employees contribute to QPP instead.
Employment Insurance (EI). Provides income replacement for maternity, parental, sickness, and compassionate care leave. Quebec employees are covered by the Quebec Parental Insurance Plan (QPIP).
Vacation entitlements. Minimum 2 weeks per year in all provinces, increasing to 3 weeks after 5 years in most jurisdictions.
Statutory holidays. Nationwide holidays include New Year’s Day, Good Friday, Canada Day, Labour Day, and Christmas Day. Provincial holidays vary.
Read our complete guide on offering employee benefits in Canada.
Managing remote employees’ computers and apps
If it’s your first time hiring in Canada, you’ll likely be employing remote workers. Rippling can help you instantly set up and secure employees’ accounts from day one. Read about setting up and managing remote employee devices overseas in our guide.
Protecting company IP in Canada
As you give employees access to apps and share sensitive information, IP protection should be at the forefront of your mind. Canadian IP rights vary by region and province. To govern your ongoing relationships with employees in Canada, you’ll typically need a Proprietary Information and Inventions Assignment Agreement (PIIA). These can cover copyrights, patent rights, and industrial design ownership. Read more in our primer on IP ownership and rights in Canada.
Complying with Canadian labor laws
Canadian compliance can be complex, especially when managing workers across 13 provinces and territories, each with their own rights and standards. Key points: at-will employment does not exist in Canada; federally regulated industries are subject to the Canada Labour Code; employers are responsible for maintaining health and safety standards and must protect employees from harassment and workplace violence. Read our guide on Canadian labor and employment laws for more details.
Terminating employees in Canada
In the unfortunate scenario that you need to terminate one of your Canadian employees, it is important to be well-versed in termination requirements. At-will employment does not exist in Canada, meaning you can only dismiss an employee without notice for just cause. For termination without cause, you must provide working notice or pay in lieu of notice. Read our full guide on terminations in Canada for what qualifies as wrongful dismissal and how to calculate notice obligations.
Frequently asked questions about hiring in Canada
Do I need a Canadian entity to hire employees in Canada?
No. Foreign companies can hire Canadian employees without setting up a local legal entity by using an Employer of Record (EOR). An EOR like Rippling acts as the legal employer on your behalf, handling CRA (Canada Revenue Agency) registration, CPP and EI remittances, provincial payroll tax obligations, and compliance with each province’s employment standards legislation. Setting up a Canadian entity (federally or provincially incorporated) typically takes several weeks and requires ongoing compliance with corporate, tax, and employment law across every province where you hire.
How does employment law differ across Canadian provinces?
Canada has no single federal employment standards law for most workers. Each of the 10 provinces and 3 territories has its own Employment Standards Act (or equivalent), governing minimum wage, vacation entitlements, termination notice, overtime, and leave. Federally regulated industries (banking, telecoms, broadcasting, interprovincial transport) are covered by the Canada Labour Code. This means an employer with employees in Ontario, British Columbia, and Quebec must comply with three separate sets of employment standards. Using an EOR simplifies this by handling province-specific compliance automatically.
What are the minimum wage rates in Canada?
Canada does not have a single national minimum wage for all workers. The federal minimum wage (for federally regulated employees) is CAD 17.30 per hour as of April 2025. Provincial minimums vary: Ontario is CAD 17.20/hour, British Columbia CAD 17.40/hour, Alberta CAD 15.00/hour, and Quebec CAD 16.10/hour, among others. Most provinces adjust their rates annually, typically on April 1st or October 1st. Employers must always pay the higher of the federal or applicable provincial minimum wage.
What are CPP and EI and how do they affect employers?
The Canada Pension Plan (CPP) and Employment Insurance (EI) are Canada’s mandatory payroll contribution programs. For 2025, employers must contribute 5.95% of an employee’s pensionable earnings to CPP (matched by the employee), up to the Year’s Maximum Pensionable Earnings (YMPE) of CAD 71,300. A second CPP tier (CPP2) applies to earnings between the YMPE and CAD 73,200 at 4%. For EI, employers pay 1.4 times the employee’s premium of 1.64% on insurable earnings up to CAD 63,200. Quebec residents contribute to the Quebec Pension Plan (QPP) instead of CPP. All contributions must be remitted to the CRA by the due date.
How much notice is required to terminate an employee in Canada?
Termination notice requirements in Canada vary by province and by the employee’s length of service. Statutory minimums under provincial employment standards are relatively short (for example, Ontario requires 1 week per year of service up to 8 weeks). However, Canadian common law entitles most employees to significantly longer “reasonable notice” periods based on their age, position, length of service, and availability of similar employment. Courts frequently award 1 month of notice per year of service for long-tenured employees. Employers can provide working notice or pay in lieu of notice (or a combination). Severance pay is required in Ontario for employers with a payroll of CAD 2.5 million or more when terminating employees with 5 or more years of service.
What statutory benefits must employers provide in Canada?
Canadian employees are entitled to several statutory benefits. All employers must contribute to CPP and EI (see above). Minimum vacation entitlements are set by province (typically 2 weeks after 1 year of service, increasing to 3 weeks after 5 years). Employees are entitled to statutory holidays (typically 9 to 11 days per year depending on the province). Maternity and parental leave are protected under both federal (EI) and provincial legislation, with EI providing up to 55% of insurable earnings for up to 15 weeks of maternity leave and up to 40 weeks of parental leave (or 69 weeks under extended benefits). While health insurance is not directly employer-mandated in Canada (covered provincially), most competitive employers supplement provincial coverage with group benefits plans.
Clause de non-responsabilité
Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.
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