Employment laws in Canada: What employers must know in 2026

In Canada, employment law includes both the federal Canada Labour Code and 13 separate provincial and territorial rules, each with its own standards for minimum wage, overtime, vacation, and termination notice. There are also laws governing CRA remittance deadlines, T4 filings, and CPP and EI contributions that apply across the country, regardless of where an employee is based. 

Canada has become a top destination for companies building global teams. It offers a highly skilled, bilingual workforce and strong talent hubs in cities like Toronto, Vancouver, and Montreal. It has a business environment that aligns closely with the United States. 

However, hiring in Canada is complex. Getting these details right is what allows companies to hire confidently and move fast. To make things simpler, businesses can hire through an Employer of Record like Payoneer Workforce Management. 

An EOR in Canada acts as a legal employer and handles tasks like hiring, payroll, and compliance navigation without a local entity. 

Book a demo now to understand how you can bring on Canadian talent in days instead of months. 

What are the key employment laws in Canada?

There is no single national labor code in Canada. Canada has federally regulated industries such as banking, telecommunications and broadcasting, interprovincial transportation, shipping and navigation, and so on, which abide by the Canada Labor Code. Apart from this, the vast majority of workers fall under the province’s employment standards legislation.

Before drafting employment contracts, employers should develop an understanding of which framework applies to the kind of employment relationship. When foreign employers hire employees based in Canada, they need to comply with the country’s regional and national labor laws. This helps them determine all other aspects like paying wages, handling terminations, etc. 

Here’s an overview of some of the key employment laws in Canada, including employment contracts, statutory rights, and more.

What are the employment contracts in Canada?

Employment contracts in Canada fall into two main types: open-ended contracts, which have no end date and can be terminated by either party with notice, and fixed-term contracts, which specify a set duration and often limit early termination rights.

Choosing the right contract type and correctly classifying workers as full-time, part-time, or fixed-term helps employers stay compliant with Canadian labor laws and avoid fines or penalties. A clear, well-drafted contract protects both the employer and the employee by defining the terms of the working relationship upfront.

How can employees be classified?

Here’s how Canadian employees may be classified:

• Full-time employees: Full-time employees work a standard work week. Employers are required to provide statutory benefits.
• Part-time employees: Under the Canada Labour Code, part-time employees have no clear definition, though they work shorter hours than full-time employees. They may not be entitled to the same benefits as full-time employees. 
• Fixed-term or temporary employees: These workers are usually employed for a fixed period and not given the same treatment as full-time employees. 

What are the different types of contracts?

Canadian workers are usually hired under two types of contracts:

• Open-ended: An open-ended contract is a common type of employee contract. There is no set end date, so either party can give notice to terminate the agreement. 
• Fixed-term: A fixed-term contract defines its duration. In some cases, employees may not have the right to terminate their fixed-term contract. 

What are the essential contract terms?

To adhere to the local labor laws and avoid disputes, Canadian employers should ensure every employment contract covers the core elements: job title and responsibilities, compensation and benefits, working hours and leave, and termination provisions. A written contract isn’t just a formality; it acts as a legal foundation that protects both parties throughout the employment relationship.

When drawing up a contract for a Canadian employee, it should include:

• The job title and description, with a detailed explanation of the duties and tasks they are expected to perform
• Compensation, including the amount, frequency, method of payment, and currency, as well as the potential for bonuses, commissions, raises, or overtime pay
• Benefits such as pension, health insurance, and so on
• Working hours and leave, including overtime, vacation days, and other leave entitlements
• Terms of employment and termination, including the probationary period, notice period, and severance pay
• Non-disclosure and confidentiality to protect sensitive business information

What are the statutory rights that employees in Canada are entitled to?

Canadian employees are entitled to several statutory rights during their employment tenure, such as a 40-hour standard work week, overtime payment at 1.5 times their usual pay, a full day’s rest every week, at least 2 weeks of paid vacation which rises with tenure, etc. Some other mandatory benefits include provincial healthcare, CPP/QPP pension contributions, and several paid and unpaid leaves.

Both federal and provincial employment laws dictate employee rights, but here are the key ones to be aware of:

Working hours

The standard federal working hours in Canada are 40 hours a week, with overtime paid at 1.5 times the normal wage to hourly employees. Canadian employees are also entitled to 1 full day of rest, typically on a Sunday. However, there may be provincial differences.

Let’s say employee X works in Ontario and earns CAD 20 per hour. One week, he works 48 hours instead of his usual 40. Since Ontario’s overtime threshold is 44 hours, only the last 4 hours count as overtime. He is paid his normal rate for the first 44 hours, and 1.5 times his rate, CAD 30 per hour, for the remaining 4 hours. His total pay for that week comes to CAD 1,000. 

They have at least 2 weeks of paid vacation annually, though this varies between provinces and increases with their length of service.

Tenure of service	Annual vacation
1 year of employment	2 weeks
At least 5 years with the same employer	3 weeks
10 consecutive years	4 weeks

Find out more about the leave policy in Canada.

Minimum wage and overtime

The federal minimum wage in Canada is CAD 18.15. However, it may vary based on the region.

If the provincial minimum wage where the employee usually works is higher than the federal minimum wage, the employer may have to pay the higher minimum wage. 

These are subject to change, so we recommend checking them regularly.

Mandatory benefits

Other mandatory benefits in Canada include:

• Provincial healthcare insurance: This ensures all Canadian residents can access basic medical care and hospital services.
• Pension: Employers and employees may have to contribute monthly to the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP). 
• Leave and PTO: Beyond vacation days and public holidays, Canadian employees are entitled to paid and unpaid leave, including medical or sick leave, personal leave, maternity, paternity, and parental leave, family violence leave, critical illness leave, compassionate care leave, leave for legal proceedings, and leave for the disappearance of a child.

What happens when you hire an employee in Canada without an EOR?

When you hire in Canada without an Employer of Record, you have to handle all the layers of compliance by yourself. You will be solely in charge of setting up the entity, drafting payroll, classifying workers, and administering the jurisdiction-specific rules across federal and provincial lines. 

Hiring with the help of an EOR helps eliminate this complexity. The hiring company carries the full responsibility and risk of global hiring. 

Have a look at the table below that breaks down how hiring with and without an EOR are different: 

Parameter	Without an EOR	With an EOR
Legal entity setup	The employer must register a Canadian business entity (or branch) before it can legally employ staff or run local payroll.	The EOR acts as the legal employer on behalf of the organization, enabling the company to hire employees in Canada without establishing a local legal entity.
Payroll and tax compliance	The employer must independently calculate and remit CPP/QPP contributions, EI premiums, and income tax withholdings, and issue correct T4 slips.	The EOR calculates, withholds, remits, and reports all required payroll taxes and statutory deductions, including CPP/QPP, EI, and income tax, and issues the required year-end tax forms (such as T4s and RL-1s, where applicable). This helps administer payroll in accordance with Canadian tax and employment requirements while reducing the employer’s administrative burden.
Jurisdiction determination	The employer must determine whether each role falls under the federal Canada Labour Code or a specific province’s employment standards legislation.	The EOR determines the correct employment jurisdiction for each employee and applies the appropriate federal or provincial employment standards, reducing the risk of jurisdictional errors and supporting compliance from the outset.
Employment contracts & statutory minimums	The employer is responsible for drafting jurisdiction-specific employment contracts that comply with statutory minimums for probation, notice, vacation, termination, and other employment standards.	The EOR prepares locally compliant employment agreements that meet applicable statutory requirements, including termination provisions, reducing the risk of unenforceable clauses and related legal exposure.
Termination and severance	The employer must calculate and administer statutory notice, severance pay, and final wages in accordance with the applicable jurisdiction. Errors in calculating entitlements are a common source of wrongful dismissal claims and can result in liabilities well beyond statutory minimums.	The EOR manages termination processes in accordance with applicable employment standards, calculates statutory notice and severance obligations, and helps minimize the risk of wrongful dismissal claims arising from non-compliance.
Ongoing regulatory changes	The employer has to continuously look for legislative changes across every province where employees are located, including updates to minimum wages, leave entitlements, overtime rules, and notice requirements.	The EOR continuously monitors federal and provincial employment law changes and updates employment practices, payroll, and statutory benefits accordingly.

You can use a leading EOR, like Payoneer Workforce Management, which has been recognized as a leader across global workforce categories in G2’s 2026 reports, spanning EOR, payroll, onboarding, and compliance. 

Book a demo today!

How does employee termination take place in Canada?

When terminating employment contracts, employers must abide by the relevant labor laws in Canada. Termination rules differ significantly depending on whether the employee is federally regulated or governed by provincial legislation, and notice requirements are separate from severance pay. 

Have a look:

Termination without cause

Notice requirements differ by province. 

Federally regulated employees get a minimum of 2 weeks’ notice after 3 months of service, rising by 1 week per year of service to a maximum of 8 weeks. 

On the other hand, provincial rules differ. For example, in Ontario, notice is 1 week per year of service (also capped at 8 weeks).

• Federally regulated employees (Canada Labour Code): After 3 consecutive months of service, employers must give at least 2 weeks’ written notice or pay in lieu. For employees with at least 3 years of continuous service, this increases by 1 additional week per year of service, up to a maximum of 8 weeks.

Notice	Tenure of service
3 months	2 weeks
3 years	3 weeks
4 years	4 weeks
5 years	5 weeks
6 years	6 weeks
7 years	7 weeks
8 years	8 weeks

• Ontario employees (Employment Standards Act): Employers generally must provide 1 week of notice per completed year of service, up to a maximum of 8 weeks. This notice scale is separate from severance pay.

Termination with cause

During probation, no notice is required for termination. After probation, employers may terminate employment without notice where there is willful misconduct, disobedience, or willful neglect of duty, as outlined in the employment guidelines.

The offboarding guidance also identifies grounds such as misconduct, performance issues, or absence without leave as possible reasons for termination with cause.

Protection from discrimination

Canadian employees are protected from hiring-based discrimination based on characteristics such as their race, gender, age, or sexual orientation. 

Sexual harassment

If notified of any sexual misconduct, employers are obligated to act. They must also protect the anonymity of a complaint. 

Disability

There are various regulations in Canada to protect employees with disabilities and provide equal opportunities in the workplace. For example, an employer must make adjustments if a disabled person is unable to perform their job effectively, such as modifying work schedules or implementing assistive technologies, as long as it does not cause undue hardship. 

How to navigate employment laws in Canada with trusted support? 

There are many Canadian laws to be aware of and to follow when hiring employees in Canada. If not, your business may face hefty financial penalties. Hiring in Canada comes with real responsibilities, but with the right support, it does not have to be complicated. 

Partnering with an Employer of Record in Canada may help lighten the administrative burden. Our unified platform offers guidance on navigating employment laws in Canada, onboarding, and paying full-time and contract workers.

Book a demo today!

Frequently asked questions (FAQs)