EMPLOYER OF RECORD IN CANADA
Hire in Canada quickly and compliantly
Velocity Global helps you save time and reduce costs by allowing you to hire in Canada without establishing an entity. Our Employer of Record (EOR) solution handles onboarding, payroll, immigration, and benefits so you can hire your employees faster and grow your business compliantly.
What is an employer of record in Canada?
An employer of record (EOR) in Canada is a strategic partner that serves as the legal employer of your employees living in Canada. An EOR assumes all employment duties and liabilities on your behalf, managing payroll, benefits, taxes, and compliance.
Partnering with an EOR allows you to hire employees in Canada without the burden of setting up a local entity in Canada or navigating intricate labor laws.
Employment Guide to Hiring in Canada
Explore the topics below to learn everything you need to know about hiring employees in Canada.
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Hiring in Canada
Employment Agreements in Canada
According to Canadian employment law, a written employment agreement is not mandatory. However, most employers enter into a written employment agreement as best practice. Employment agreements must include the following information:
- Duration of contract
- Remuneration, payment schedule, and overtime pay policy
- Probationary period, if applicable
- Employee duties
- Notice period for termination of contract
- Statutory leaves
Probationary periods in Canada
Probationary periods in Canada vary by province, ranging from three to six months. Employers may dismiss their employees without notice and without payment in lieu of notice during the probationary period.
Average working hours in Canada
The Canada Labor Code designates standard working hours to be eight hours daily and 40 hours weekly.
How an employer of record helps you hire in Canada
An employer of record (EOR) allows you to hire in Canada without the headache of setting up a legal entity in Canada. Because most companies don’t have the resources or extensive knowledge to compliantly hire in international markets, an EOR helps you engage top talent from anywhere and support them based on their local needs.
As an industry-leading EOR in Canada, Velocity Global is a trusted partner in hiring in Canada. By acting as the legal employer, we hire your new team members through local, compliant employment contracts—and you get back the time and flexibility to focus on your growing business.
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Payroll in Canada
Payroll Cycles in Canada
The payroll cycle in Canada is usually biweekly, where payments are made twice a month.
Wages in Canada
In Canada, minimum wages vary by province and annually increase based on the Consumer Price Index.
Bonus Payments in Canada
Employers have no legal obligations to reward employees with a contractual or discretionary bonus. However, bonuses are common. Employers have absolute discretion to decide if an employee receives a bonus. Employees have a legal claim to a bonus if it’s stated in the work contract or enterprise agreement.
How an EOR helps you run payroll in Canada
An employer of record (EOR) in Canada helps you compliantly manage your global team payroll, ensuring consistent and accurate pay and tax withholdings for employees living in Canada. Think of an EOR as your international HR team that understands the complex labor laws and payroll regulations of different markets.
Partnering with a trusted EOR partner like Velocity Global for global payroll administration in Canada offers numerous benefits, like access to a centralized platform for payroll data and reporting, secure data privacy and protection, and time and cost savings.
Taxes in Canada
Tax due dates in Canada
In Canada, the tax year is the calendar year. Tax returns must be filed no later than April 30. The tax filing deadline is June 15 for the self-employed.
Tax thresholds in Canada
The Canadian federal government considers individuals residents when they stay in the country for at least 183 days in a year.
Canadian residents are lawfully required to pay income tax on their worldwide income, while non-residents are taxed solely on Canadian-sourced income.
As of 2023, the Canadian federal income tax brackets are:
- Up to CAD 53,359: 15%
- CAD 53,359 to CAD 106,717: 20.5%
- CAD 106,717 to CAD 165,430: 26%
- CAD 165,430 to CAD 235,675: 29%
- Above CAD 235,675: 33%
Income tax brackets also vary by Canadian province.
Health insurance in Canada
Canada’s healthcare system, Canadian Medicare, is decentralized, universal, and publicly funded. The country’s healthcare is funded and administered by province, each with its own insurance plan. All residents receive hospital and medical services for free.
Pension in Canada
Employees in Canada are subject to eligibility requirements for the country’s old-age retirement pension, the Canada Pension Plan (CPP). The CPP is a monthly benefit that retirees receive for the rest of their life. Qualifying conditions for the CPP include the following:
- Being at least 60 years of age
- Making at least one valid contribution to the CPP
The pension is calculated based on the following:
- An insured employee’s average earnings throughout their career
- An insured employee’s CPP contributions
- The age at which an insured employee decides to start their CPP
How an EOR helps you calculate taxes in Canada
Payroll taxes are taxes imposed on employers and employees. They vary between countries, making compliance a hurdle for businesses that may not have the expertise or resources to navigate payroll taxes in Canada.
As an employer of record (EOR) with a tenured global footprint in Canada, Velocity Global is knowledgeable in handling all aspects of payroll for you, including calculating and filing payroll taxes, withholding and remitting taxes, and issuing tax forms.
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Leave entitlements in Canada
Workers in Canada are entitled to several types of leave, including time off granted by employers and national holidays.
Annual leave in Canada
Employees in Canada are entitled to annual leave based on their years of service, as follows:
- Two weeks of annual leave after completing one year of continuous service
- Three weeks of annual leave after completing five consecutive years of service
- Four weeks of annual leave after completing 10 consecutive years of service
Parental leave in Canada
Canadian residents who are pregnant, have recently given birth, have newly adopted a child, or are newly caring for a newborn qualify for employment insurance maternity benefits.
Employment insurance maternity benefits include up to 15 weeks’ leave and 55% of an employee’s earnings, with a maximum of CAD 650 per week.
Parental benefits are available to both parents of the newborn or newly adopted child. Parents can receive their benefits simultaneously or one after the other.
There are two options for parental benefits: standard or extended. Employees must apply for standard parental benefits within 52 weeks of childbirth or adoption and extended parental benefits within 78 weeks.
Standard parental benefits include the following:
- Up to 40 weeks of leave shared between two parents, where one parent cannot receive more than 35 weeks of benefits.
- 55% of an employee’s earnings, with a maximum of CAD 650 per week.
- Up to 69 weeks of leave shared between two parents, where one parent cannot receive more than 61 weeks of benefits.
- 33% of an employee’s earnings, with a maximum of CAD 390 per week.
- New Year’s Day (January 1)
- Good Friday (March or April; the specific day fluctuates each year)
- Canada Day (July 1)
- Labor Day (first Monday of September)
- National Day for Truth and Reconciliation (September 30)
- Christmas Day (December 25)
Extended parental benefits include the following:
Sick leave in Canada
Employment insurance sickness benefits in Canada provide employees with up to 15 weeks of financial assistance, including 55% of earnings, with a maximum of CAD 650 per week. Employees must provide a medical certificate to show illness, injury, quarantine, or a medical condition that prohibits them from working.
Regional and national holidays in Canada
Canada has six federal statutory holidays in a calendar year, which are not included in the minimum paid leave entitlement and are taken in addition to annual leave. The following are national holidays recognized by all of Canada:
Some Canadian provinces and territories observe regional-specific holidays in addition to federal holidays.
How an EOR helps you manage leave and PTO in Canada
An employer of record (EOR) supports companies by managing annual leave, paid time off (PTO), and even local holidays worldwide—including Canada. When it comes to handling a company's annual leave requirements, an EOR ensures compliance with local labor laws in Canada at every step.
Some EOR partners, like Velocity Global, provide a platform that helps you oversee employee time off in Canada. By outsourcing leave and time-off management to Velocity Global, you can ensure accurate tracking, compliance, and seamless administration, freeing up valuable time and resources for other business priorities.
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Employment Benefits in Canada
Federal benefits in Canada
Federal employee benefits in Canada are administered by Employment and Social Development Canada (ESDC). The ESDC is a coalition of government departments, including the Ministry of Labor, Ministry of Employment and Workforce Development, Ministry of Seniors, and Ministry of Families, Children, and Social Development.
The ESDC provides and administers general health benefits, medical procedures, and labor force needs to Canadian residents. Health maintenance organizations collect contributions from employers and employees to maintain the Canadian Social Security scheme, which includes pensions, survivor benefits, short-term and long-term disability insurance, healthcare, and paid leave entitlements.
Supplemental benefits in Canada
Supplemental benefits are additional benefits an employer provides to boost their workers' benefits package. Examples include:
- Health insurance
- Retirement contributions
- Extended time off benefits
Employers may offer secondary health insurance plans, extending coverage beyond the basic medical and hospital care the Canadian Medicare scheme provides. Employers enhance retirement benefits by contributing a higher percentage to employee pension funds. With Group Registered Retirement Savings Plans (GRRSP), employers match a tax-deductible portion of the employee's contributions. It's common for employers to offer paid time off beyond Canada's statutory minimums to bring in top talent. This includes bonus vacation time, extra paid sick days, paid personal days, or flexible leave policies.
How an EOR helps you administer benefits in Canada
As the legal employer for your employees living in Canada, an employer of record (EOR) administers statutory benefits and ensures they are enrolled and contributing to the appropriate government benefits. Additionally, an EOR partner manages the administration of supplemental benefits, including ensuring employees in Canada receive tailored, expert-vetted, and competitive supplemental benefits packages.
Velocity Global makes understanding foreign statutory and supplemental benefits easy and offers your workforce competitive benefits packages tailored specifically to Canada and beyond.
Terminations in Canada
Notice periods in Canada
Employers must provide employees who have three consecutive months of employment with at least two weeks of written notice to terminate their employment agreement. Employers may provide payment in lieu of notice.
The Canada Labor Code does not require employees to notify their employer to terminate their employment agreement. However, if the employment agreement explicitly states a notice period, employees must adhere to it.
Severance Pay in Canada
Employees who have completed at least 12 months of consecutive service qualify for severance pay. Severance pay includes two days’ pay for each full year of service, with a minimum of five days’ pay.
Employers must pay severance in all conditions except for the following:
- A layoff that does not result in employment termination
- An employment agreement that includes an end date and the contract has ended
- An employee that is dismissed for just cause
- An employee that terminates their own employment
How an EOR helps you process terminations in Canada
An employer of record (EOR) is responsible for processing terminations in the event you need to terminate an employee in Canada. This may include adhering to local labor laws and regulations regarding termination procedures, including notice periods, severance pay, and any other statutory requirements.
As an EOR with experience in terminations, Velocity Global helps businesses minimize the risk of legal disputes or liabilities in Canada.
FAQ
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How does Velocity Global’s EOR help businesses expand into Canada?
An experienced employer of record (EOR) partner like Velocity Global makes it easy for companies to quickly and compliantly build and support distributed teams in Canada without the time and effort of establishing an entity. Velocity Global hires, pays, and manages your team in Canada on your behalf, allowing you to quickly engage talent without setting up local entities or worrying about violating local employment regulations. Partnering with an EOR in Canada is ideal for companies that want to convert contractors in Canada to employees, streamline mergers or acquisitions, or simply test the Canadian market before making a long-term investment.
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Can I hire in Canada without an employer of record?
Yes. There are two options available for hiring in Canada without an employer of record (EOR): establishing a local entity or engaging contractors in Canada.
Establishing an entity in Canada allows you to create a local branch or subsidiary, giving your company full autonomy over hiring and onboarding. This is a good option if you plan to hire a large team or establish a long-term presence in Canada.
However, entity establishment is a costly and time-consuming process. It requires in-country expertise with local employment and tax regulations and can delay your ability to hire talent in Canada for many months. If you're not prepared for long-term investments in Canada or intend to hire a small team, setting up an entity can often be more trouble than it's worth.
Hiring contractors is a flexible, affordable alternative to hiring employees in Canada, though it involves unique misclassification risks.
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How are employees and contractors classified in Canada?
In Canada, employees and contractors are classified based on the determination of the employer-employee relationship. According to the Canada Labour Code, misclassification occurs when an employer fails to treat a person who meets the criteria of an employee as such, often by labeling them as an independent contractor—or vice versa.
Here are the factors used to determine the status of an employee in Canada:
- The intentions of the parties, communicated in the employment contract
- Integration into the business operations
- Duration and permanence of the working relationship
- Job responsibilities and duties
- Payment structure (salary, wages, benefits)
- Degree of autonomy and independence
- Supervision and direction received
- Control over work processes and methods
- Schedule of working hours
- Ownership of tools and equipment
- Degree of exclusivity in the relationship
- Degree of financial risk
- Opportunity for profit or loss
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What are the benefits and challenges of hiring in Canada?
According to the World Bank, Canada is one of the top countries in the world for ease of doing business. Canada's innovative business ecosystem, abundant natural resources, and unique status as the only G7 country offering preferential access to over 50 global markets contribute to its international appeal. Canada has a welcoming business climate and a competitive corporate tax rate of 15%. It has the lowest business costs in digital, research and development, manufacturing, and corporate services.
With six time zones, three oceans, 550 ports, and 18 airports, Canada is the second-largest country on Earth and holds a massive expansion in an interconnected global economy and free trade. Canada provides low risk to investors. The country is first among the G7 in political stability. Canada has the top six safest banks in the North American region, and those six are among the top 50 safest banks in the world.
However, hiring in Canada poses challenges too. Canada’s 10 provinces have separate governments and laws. Expanding businesses must consider how government regulations differ by province. Although Canada boasts attractive tax rates, paying and preparing taxes in Canada is an arduous process and takes 131 hours annually, according to the World Bank. Canada and the United States share one of the largest bilateral trade relationships in the world. Canada’s dependence on the U.S. comes with risks, requiring businesses to remain cautious of fluctuating economic trends. About 79% of Canadian goods exported to the U.S. are integrated into U.S. supply chains.
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What cultural nuances should businesses consider when hiring in Canada?
Canadian colleagues are generally reserved but warm up as conversations progress, and all are welcome to share their opinions regardless of business hierarchy. Canadian business culture doesn’t respond well to high-pressure or tough bargaining tactics. Canadian professionals prefer calm discussions and win-win outcomes. Although building professional relationships is important, Canadian colleagues prefer a clear boundary between personal and professional lives. Oversharing facets of personal life and expecting Canadian colleagues to give the same in return can make them uncomfortable.
There is no definitive hierarchy of age or gender in Canadian business culture. However, those with more experience generally hold more managerial positions than less experienced colleagues. Middle management behaves as a filter before reaching upper management.
Read more about hiring and paying in Canada
Payroll and Tax in Canada: An Overview for Global Employers
A Guide for U.S. Companies Hiring Employees in Canada
