Employer of Record in Canada: Complete Guide 2026

How to onboard employees in Canada?

To onboard employees in Canada, the business has to provide an employment contract. This is followed by registering with the federal and provincial tax authorities, collecting statutory government documents, such as TD1 tax forms, and a SIN. Adding to the payroll and benefits entitlement is also an important part of onboarding. 

Important onboarding tasks to complete before their start date include:

• Drawing up the contract: The employment contract must outline the employee’s role, compensation, working hours, benefits, and so on. 
• Running an employee background check: With the employee’s consent, verify anything necessary for the role, like their employment history, education, references, etc.
• Gathering the tax documentation: To stay compliant with both federal and provincial tax regulations, employees must submit Federal TD1 and Provincial/Territorial TD1 forms along with information for direct deposits. 
• Adding them to payroll: The employer must set up the payroll deductions account with the Canada Revenue Agency (CRA). Employees are likely to be paid in Canadian dollars into a Canadian bank account. 
• Enrolling them in benefits: The employees must be enrolled in standard Canadian benefits, such as Employment Insurance (EI), Canada Pension Plan (CPP), and provincial workers’ compensation, like WSIB or WCB. 
• Ordering their devices: Provide a work phone or laptop, or any other necessary equipment.

Important onboarding tasks to complete on or after their start date include:

• Providing an employee handbook: This should contain helpful details about their role and the company. 
• Scheduling an orientation: Book meetings with their team and manager to help them get settled in.
• Providing training: Offer training as needed to ensure success.
• Scheduling check-ins: Monitor their progress through regular check-ins with their manager or HR. 

How to run a smooth payroll in Canada?

To run a smooth payroll in Canada, employers must calculate, withhold, and remit mandatory source deductions, such as income tax, Employment Insurance (EI), and Canada Pension Plan (CPP), to the Canada Revenue Agency (CRA) on time. The payroll also includes maintaining compliant payroll cycles and minimum wages for employees in the country. 

Here are some details when running payroll in Canada:

• Pay date: 15th and last day of the month.
• Minimum wage: From 1st April, 2026, the federal minimum wage in Canada is set at $18.15 per hour. 
• Bonuses: Both discretionary and non-discretionary bonuses are common and must be documented.

Income tax, public health insurance, and social security

Maintaining a compliant payroll in Canada is mandatory for all businesses. Along with minimum wage and the right payroll cycle, employers must ensure proper deductions for income tax, public health insurance, and social security in the country. Here are the details:

• Income tax: The Government of Canada imposes federal income tax rates for individuals. Individual provinces and territories in Canada have their own income tax rates. Individuals have to pay both taxes. 

Here is the federal income tax rate of Canada in 2026. These rates apply to the taxable income after application of various credits, deductions, and exemptions. 

Tax rate	Taxable income threshold
14%	On the portion of taxable income that is $58,523 or less
20.5%	On the portion of taxable income over $58,523.01 up to $117,045
26%	On the portion of taxable income over $117,045.01 up to $181,440
29%	On the portion of taxable income over $181,440.01 up to $258,482
33%	On the portion of taxable income over $258,482.01

• Public health insurance: The publicly funded healthcare insurance is governed by the Canada Health Act, which is Canada’s federal legislation. Public health insurance is mandatory in Canada. Eligible candidates can access publicly funded health care services through the provincial or territorial government’s health insurance plan. 
• Social security: Employees are entitled to social security benefits in Canada. The Canada Pension Plan (CPP) is an important part of the social security program, along with Old Age Security (OAS). 

What are the prominent employment laws in Canada?

The key employment laws in Canada include the Canada Labour Code, the provincial Employment Standards Acts, the Canadian Human Rights Act, and the Employment Insurance Act. The main aim of these laws is to cover employee rights and responsibilities, minimum wage, work hours, termination, prohibiting discrimination, and more. 

Here are the employment laws in Canada, explained briefly:

• Canada Labour Code: The Canada Labour Code governs workplace relations, occupational health and safety, and labor standards for federally regulated industries. The Code mainly covers sectors such as banking, telecommunications, and interprovincial transportation. 
• Provincial Employment Standards Act: Each province and territory in Canada has its own employment standards legislation. There are some minimum legal requirements, such as minimum wage, statutory holidays, vacation and leaves, notice of termination, and severance pay, that employers must follow.
• Canadian Human Rights Act: The Canadian Human Rights Act prohibits discrimination in employment and services within federal jurisdiction. It prohibits discrimination based on race, age, sex, and a variety of other categories, and covers only federal jurisdictions. 
• Employment Insurance Act: The Employment Insurance Act provides temporary income support for unemployed workers and special benefits covering illness, maternity, and parental leave. Both employers and employees contribute premiums. 

Some key labor regulations in Canada include:

• Working hours: Standard working hours in Canada are 8 hours per day and 40 hours per week.
• Overtime: Overtime is mandatory for hourly employees and is typically paid at 1.5 times the regular wage. Salaried employees are generally exempt from overtime pay. 
• Probation period: All Canadian provinces permit employers to use probationary periods for employees. The standard is 90 working days, although some provinces allow for longer periods.
• Other key rights and protections: Canadian workers are also protected by regulations regarding discrimination, harassment, and privacy. 

What is the minimum wage in Canada?

The federal minimum wage in Canada is set at $18.15 per hour, from 1st April 2026. The minimum wage varies by province and territory in the country. The federal minimum wage rates apply to certain specific industries, such as banking and telecommunications. On the other hand, provincial rates are applicable for a broader workforce. 

What are employment contracts in Canada?

Employment contracts in Canada are agreements between the employers and the employees, establishing the various rights, roles, and obligations that both parties must follow. Employment contracts are governed by a combination of federal and provincial/territorial legislation. Though verbal contracts are technically legal in Canada, having a written contract helps prevent or settle any disputes.

Here are the common employment contract types in Canada:

• Indefinite-term (permanent) contracts: These contracts do not have a fixed end date. The contract ends when either party terminates the agreement. 
• Fixed-term contracts: These contracts are for a specific time period, with a predetermined start and end date.

Whatever the type of employment contract, it is best practice to include the following information:

• Details of the employee and the employer
• Contract type and date of commencement of the contract    
• Job title and description
• Employee compensation, including salary, benefits, bonuses, etc. 
• Working hours and overtime rule 
• Leave entitlements
• Length of probation and notice period 

Working with an Employer of Record in Canada helps you create employment contracts that follow the relevant federal and provincial laws and regulations. Book a demo today!

What is the leave policy in Canada?

The leave policy in Canada offers job-protected time off through a combination of federal and provincial labor laws. For federally regulated workers, there is the Canadian Labour Law. The provinces and territories set their leave entitlements for the majority of workers. While there are fixed leaves for federally regulated employees, provincial standards vary by jurisdiction. 

Here is a list of the leaves that employees in Canada are entitled to:

Name of the leave	Details
Annual leave	Common practice is 21 days, but this varies by province. Employers should refer to provincial legislation for exact entitlements.
Sick leave	Medical leave is granted with pay for up to 10 days for serious illness or injury, attending medical appointments, organ or tissue donation, etc.  The employee can get 27 weeks of unpaid medical leave for the same criteria mentioned above.
Public holidays	There are 5 public holidays nationwide. Some of the public holidays also vary according to the province in which the employee works.
Maternity leave	Female employees are entitled to 17 weeks of unpaid maternity leave. The leave begins 13 weeks before the expected birth date and ends 17 weeks after the actual birth date.
Parental leave	As an adoptive or natural parent, an employee is eligible for up to 63 weeks of unpaid parental leave.
Bereavement leave	This leave can be both paid and unpaid. Employees are entitled to up to 10 days of bereavement leave in case of the death of an immediate family member.

Who needs a work permit in Canada?

Foreign nationals require work permits to work in Canada. Though there are some exceptions, the majority of foreign nationals will need an employer-specific or open work permit to work legally in Canada. It is the employer’s responsibility to check if candidates are authorized to work in Canada. They often support the permit application process if required. 

Obtaining work permits can be a time-consuming process, but EORs may offer Immigration assistance as an additional service for EOR clients. 

Both employers and candidates should refer to official government sources to verify the specific rules, documentation, and procedures involved.

What is a background check in Canada, and what does it cover?

Background checks or screenings in Canada usually take place before employment is finalized and often cover areas such as criminal records, verification of past employment and education, and, in some cases, online or social media reviews.

Employers generally may have to obtain the candidate’s consent and clearly outline what will be reviewed. It is essential to consult local laws and guidelines before initiating any checks.

What are the rules for employment termination in Canada?

The rules for employment termination in Canada are outlined in the Canada Labour Code. The termination can be initiated either by the employer or the employee. When the employee terminates employment, there is no need to provide a notice period to the employer, unless it is mentioned in the employment contract. 

However, when an employer initiates employment termination, the employee has to be given a minimum of 2 weeks’ written notice period. 

An employee who has completed a minimum of 3 years of service will have to serve a notice period equivalent to 1 week per completed year of employment, up to a maximum of 8 weeks of notice. The employer can also pay the employee instead of the notice period. 

In case an employee has completed 12 months of continuous employment, the employer must provide severance pay. They should receive 2 days’ regular pay for each year of employment, or 5 days of pay, whichever is greater. However, severance pay varies from one state to another in Canada. 

Here is an example to make the point clear: 

A Senior Marketing Manager in Ontario, Canada, had employment with a company for 7 years and drew an annual salary of CAD 90,000. The professional was terminated without cause due to company restructuring. 

As per the law, the employer must provide proper notice or pay instead of notice. As the professional has completed 7 years of service, the statutory notice period is 7 weeks. 

The weekly gross wage will be CAD 90,000 ÷ 52 = CAD 1731.

The pay instead of the notice period will be 7 weeks x CAD 1731 = CAD 12,117

The company decides to pay instead of the notice period. 

With 7 years of employment in Ontario, the professional is eligible for severance pay as well. Under Ontario’s ESA, severance applies only if the employee has more than 5 years of service and the employer has a global payroll of CAD 2.5 million or more. It is calculated at 1 week per year of service, up to a maximum of 26 weeks.

Severance pay calculation will be: 

7 completed years x 1 week x CAD 1731 = CAD 12,117.

The final pay summary, apart from the accrued vacation pay, stands at:

Component	Amount
Pay instead of notice (7 weeks)	CAD 12,117
Severance pay (7 weeks)	CAD 12,117
Total Final Payment	CAD 24,234

How to go about company registration in Canada?

To register a company in Canada, the business has to choose between federal and provincial incorporation, secure a business name, and file the Articles of Incorporation. Once registered, the business has to obtain a Business Number (BN) from the Canada Revenue Agency (CRA). Some businesses might need specific industry or municipal licenses to operate. 

Here are the steps to register a company in Canada:

• Choose the business structure if it will be a sole proprietorship, partnership, corporation, or cooperative. 
• Choose between federal and provincial registration. 
• Search for a proper name for the business.
• Prepare and file Articles of Incorporation. 
• Register for a Business Number (BN) with the CRA. 
• Register for GST/HST if annual taxable revenue exceeds the threshold, or opt for voluntary registration earlier. 
• Set up a CRA payroll account. 
• Open a corporate bank account. 
• Obtain any required business licences or permits at the provincial or municipal level. 

What is a PEO in Canada?

A Professional Employer Organization (PEO) in Canada is a third-party organization that co-employs your team and handles payroll management, HR, benefits, taxes, and compliance. However, the PEO requires the client company to have a local legal entity. PEO services differ from those of an EOR. 

While a PEO in Canada can handle some domestic HR and workforce tasks, it cannot assist with international hiring. To hire in Canada and use a PEO, the business would need to set up a legal entity and assume the full liability for compliance.

An EOR, on the other hand, helps employers engage and pay candidates abroad, with support to navigate compliance. Like a PEO, they also handle HR and workforce tasks, but on a global scale.

When businesses are looking to engage global talent, partnering with an EOR may be a more suitable option. 

Ready to explore the employer of record services in Canada by Payoneer Workforce Management?

Working with an Employer of Record like Payoneer Workforce Management enables you to build a team of top global talent in 160+ countries. You can expand your operations and recruit a highly-skilled international workforce, without setting up a local entity. 

An EOR helps you with global payroll, compliance, and employee management, all from one platform. From the onboarding process to paying employees, EORs can streamline workforce management. 

Book a demo today to learn how Payoneer Workforce Management can help.