How to Hire Employees in Canada: Process, costs, and more in 2026

Hiring talent in Canada compliantly requires an employer to set up a legal entity, open a bank account, learn about local employment laws, payroll, statutory benefits, and more. This typically takes a few months or even a year. However, you can use an EOR platform as a quicker alternative to employ Canadian talent.

An Employer of Record (EOR) is a third-party company that legally employs workers on your behalf in a country where you don’t have a registered entity. They handle payroll, taxes, benefits, and regulatory requirements, while you manage the employee’s day-to-day work. For Canada specifically, this means you can hire a Canadian employee within days instead of the 4-8 weeks it typically takes to incorporate and register for payroll remittances.

This speed can be a game-changer, especially since Canada has a strong talent pool that global companies don’t wish to miss out on. The country has built deep, specialized expertise in growing industries like AI, machine learning, technology, and media, which is exactly why many global businesses, including U.S. companies, are racing to hire employees in Canada. 

At the same time, one cannot turn a blind eye to the country’s strict federal and provincial employment regulations, including mandatory contributions to the Canada Pension Plan (CPP), Employment Insurance (EI), and varying income tax rates across different provinces. Employers may also face rising legal exposure in areas such as wrongful dismissal claims, where compensation obligations can exceed standard notice periods based on tenure and jurisdiction. 

All these factors make hiring a growing operational challenge for foreign companies looking forward to expanding into Canada. 

This guide explains how U.S. companies can hire Canadian talent, the legal and tax requirements they must follow, and how an Employer of Record (EOR) like Payoneer Workforce Management helps simplify compliant hiring without setting up a local entity.

Book a demo to understand how we can support the employment function in Canada. 

How to hire employees in Canada?

To hire employees in Canada, you can either register a local entity and run CRA payroll yourself, use an Employer of Record like Payoneer Workforce Management to act as a legal employer on your behalf, or engage workers as independent contractors for short-term work. 

However, it is notable to mention that each route has to comply with the federal tax rules, like CPP/QPP and specific employment standards of the province in which an individual is employed. 

Have a look at the three different ways in which employers can hire employees in Canada. 

1) Set up a legal entity in Canada

By registering your business in Canada, you can hire Canadian employees directly, manage payroll, and operate legally and efficiently within the country. 

This is a feasible option for established businesses looking to expand operations into Canada, but it will be time-consuming and expensive. 

It may also require a specialized team to handle Canadian payroll, tax regulations, and other legal issues.

With these requirements in mind, setting up a legal entity in Canada isn’t ideal for companies looking for fast or flexible solutions. 

2) Hire contractors in Canada

Another option is to hire independent contractors. 

This works best if you want to hire in Canada for a limited-scope project. However, if your independent contractor works more like an employee, your business could face employee misclassification fines and penalties.

3) Using an employer of record in Canada

An Employer of Record (EOR) in Canada is a third-party entity that acts as a legal employer on behalf of internationally based businesses without a local entity. 

EORs can help take care of the complex aspects, like 

• Employee onboarding & offboarding
• Payroll & taxes
• Benefits administration (Localized insurance, etc.)
• Legal obligations
• Work visas & permits
• Talent discovery
• Background checks
• Device procurement
• Office space facilitation

If you’re wondering how to engage Canadian talent for a U.S. company simply and flexibly, partnering with an EOR can help you streamline the process. 

Let’s say that a U.S. company wants to hire a skilled Software Engineer in Toronto, Canada without setting up a local entity due to the complexity in law and cost involved. To simplify the process, it can partner with an Employer of Record in Canada. 

After choosing the candidate, the EOR issues a locally compliant employment contract. It handles everything ranging from the payroll to income tax deductions, Canada Pension Plan (CPP), Employment Insurance (EI), and other statutory benefits. 

Meanwhile, the U.S. company manages the employee’s day-to-day work, thereby easing the stress. This makes it easy for employees to start within days so that companies can hire in Canada quickly without having to set up a local subsidy. 

Book a demo today to see how our EOR can help you hire in Canada.

Where to find employees in Canada?

To find employees in Canada, you have to choose the right channels to access qualified talent. Employers can explore online job platforms, tap into local recruitment networks, or partner with external bodies in order to reach candidates efficiently. Their choice is based on their hiring goals, scalability plans, timelines, and the support level needed throughout the recruitment process. 

1) Popular job boards in Canada

Some of the most popular job boards in Canada include:

• Indeed 
• Monster 
• Glassdoor 
• Ziprecruiter
• Job bank
• Jobboom

2) Work with local recruitment agencies

Alternatively, local Canadian recruitment agencies are a good way to find specialized talent. They usually have a readily available talent pool and can fill vacancies quickly. 

In French-speaking Canada, a recruitment agency can also help with language barriers. 

However, working with recruiters can carry significant fees. They also only help with the recruitment process, not with onboarding or anything beyond recruitment.

3) Get support from an Employer of Record

Partnering with an EOR may allow your business to streamline the recruitment process, supporting your efforts to find a suitable person for the role. 

Then, an EOR helps with the employment contracts, local administration, onboarding employees, localized employee benefits, and regulatory requirements related to labor and tax laws.

How to onboard employees in Canada?

To onboard employees in Canada, you shall have to complete some core steps like running a background check, drafting a compliant employment contract, setting up a payroll, enrolling the employee in all statutory benefits, providing equipment and IDs, scheduling orientation, and delivering role-specific training. 

Hence, onboarding employees is not confined to following introductions and paperwork. Employers have to make sure that the process aligns with the local employment standards while also creating a structured and engaging experience for the new employees. 

Here’s an onboarding checklist for your Canadian employees:

1. Carry out an employee background check: Otherwise known as a pre-employment screening, it helps verify that the prospective employee will be right for the role.
2. Draw up the employment contract: This agreement defines the working relationship and contains other information mandated by Canadian employment laws.
3. Put them on payroll: This helps facilitate employees getting paid in Canadian dollars, on time, with the right contributions and deductions.
4. Enroll them in benefits: Statutory benefits in Canada include the Canada Pension Plan (CPP), Employment Insurance (EI), and different types of leave.
5. Get them set up: Ensure they’re set up with their devices, tools, IDs, a company handbook, and so on.
6. Plan their orientation: Schedule meetings with their manager, team, and anyone else they should meet. 
7. Provide training: To help them settle into their role, carry out any necessary training.

Onboarding an employee can be a demanding process, but working with an EOR helps streamline it.

What are the key employment laws and requirements in Canada?

The key employment laws in Canada cover all employment contracts and important aspects like statutory deductions (CPP/QPP and EI), provincial standards for employment like working hours, leave entitlements, etc., and termination requirements. These laws operate at both the provincial and federal levels. The standards that apply depend on the province where the employment works.  

There’s a lot to know when it comes to labor laws and regulations in Canada, but here’s an overview of the ones all employers should be aware of. 

1) Employment contracts

When employers issue employees a well-drafted contract, it helps ensure adherence to the federal and provincial employment laws. Employment contracts clearly define the terms of the employment, including job responsibilities, working relationships, legal protections, compensation, etc. Therefore, it can be said that employment contracts help set clear expectations for both parties. 

In Canada, employment contracts should include clear definitions of:

• Position and duties: The activities the employee is expected to carry out in their role
• Compensation: The payment amount, method, and frequency, as well as details regarding overtime pay, bonuses, commission, etc
• Benefits: Any benefits the employee will receive, such as vacation time, pension, health insurance, etc
• Working hours: The employee’s usual working hours
• Probation period and termination clauses: The duration of the probation period and details around termination, including severance pay, notice periods, and so on

For more information on employment contracts and other governing regulations, read our guide to employment laws in Canada.

2) Employee benefits

Employers have to provide a wide range of statutory benefits to employees in order to ensure their welfare, allow income protection, and help maintain a decent work-life balance. It is important that you, as an employer, understand these entitlements so that you can offer your employees competitive and locally aligned employment packages. 

In Canada, employees are entitled to several statutory benefits, including:

• Vacation leave: On a federal level, employees receive 2 weeks’ vacation after 1 year of employment, 3 weeks after 5 years, then 4 weeks after 10 years. Vacation leave entitlements can vary by province.
• Sick leave: Federal regulations stipulate that employees receive 10 days of paid sick leave.
• Maternity leave: Employees receive at least 17 weeks of unpaid maternity leave in Canada.
• Pension/social security: Both employers and employees must contribute monthly to the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP).

For further info on leave regulations, read our guide to leave policy in Canada.

3) Working hours and holidays 

The standard working hours in Canada are 8 hours per day and 40 hours per week. 

Employees may work an additional 8 hours per week, though this should be classed as overtime with overtime pay (Overtime applies to hourly employees; salaried employees are generally exempt). 

For more information on working hours and overtime, explore our guide to Canadian employment law.

4) Tax obligations 

Incorrect payroll tax handling in Canada can result in compliance risks, penalties, and ultimately lead to administrative burden for employers. It is important that businesses carefully withhold, calculate, and remit employee taxes so that they align with federal and provincial requirements. This also helps businesses avoid costly errors in payroll operations. 

Mandatory tax contributions and deductions include:

• Income tax: Employees will be taxed at different rates based on their annual income threshold and the province in which they’re based. 
• Pension plan: Both employers and employees must contribute to pension plans in Canada, including the Canada Pension Plan (CPP) and CPP2 for additional contributions, or the Quebec Pension Plan (QPP). 
• Employment Insurance: Canada has an Employment Insurance (EI) program that receives contributions from employers and employees. EI covers financial support during unemployment or leave. 

Let us understand the salary breakdown of an employee working in Ontario and earning 7,000 CAD per month. You can take the help of our employee cost calculator for better understanding: 

If an employee earns 84,000 CAD annually, the cost breakdown is as follows: 

The amount the employer pays	The amount the employee gets
Gross monthly salary of employee: CAD 7,000 Employer cost: 514.89 CAD CPP (5.95%): CAD 352.54 CPP2 (4%): CAD 31.33 EI (2.282%): CAD 131.02 Total Monthly cost of employment: CAD 7,514.89	Gross monthly salary of employee: CAD 7,000 Taxes and contributions: CAD 2051.83 CPP (5.95%): CAD 352.54 CPP2 (4%): CAD 31.33 EI (1.63%): CAD 93.59 Federal Income Tax: CAD 1,118  Provincial/Territorial Income Tax: CAD 456.37  Total Monthly cost of employment: CAD 4,948.17

Payoneer Workforce Management EOR’s ability to handle cross-border multi-currency payments with ease makes it a suitable choice among businesses that are looking forward to scaling up.

5) Termination and severance

Termination in Canada is a highly regulated process. Non-compliance can expose employers to wrongful dismissal claims. These can eventually lead to financial penalties, legal disputes, and reputation loss. It is important that businesses carefully follow federal and provincial employment standards while dissolving an employment relationship. 

There are two types of termination in Canada: 

• Termination with cause
• Termination without cause 

If a federal employee is terminated without cause, they are entitled to written notice of at least 2 weeks’ of pay in place of notice. In some provinces, this notice period may vary. They are also entitled to 2 days’ severance pay for each year they’ve worked for the employer, or 5 days of severance pay, whichever is more.

If an employee is terminated with cause, employers are not obliged to provide notice or pay in lieu of notice. However, they must demonstrate just cause for the termination. 

What happens if you hire without an EOR in Canada?

Hiring in Canada without an EOR can be a high-risk operational decision for businesses. From errors in payroll taxes to wrongful dismissal liabilities, the cost of getting compliance in Canada can be high. 

These risks may slow down expansion and also create legal uncertainty across provinces. 

Have a look at the table to understand how hiring with an EOR is different from hiring without one. 

Parameter	Hiring without an EOR	Hiring with an EOR
Entity requirement	Setting up an entity is required, which is a time-consuming and expensive process	No need for setting up an entity
Payroll compliance	Employers must manage complex payroll systems, including federal/provincial tax calculations and remittances	The EOR handles payroll processing, tax deductions, and statutory filings in accordance with Canadian regulations
Employee benefits administration	Businesses must independently manage CPP/QPP, EI contributions, and provincial benefit variations	The EOR administers mandatory benefits such as CPP/QPP and Employment Insurance contributions
Worker misclassification risk	High risk of misclassifying contractors as employees, which can result in penalties and legal disputes	No misclassification risk, as employment is structured under compliant local contracts
Onboarding speed	Onboarding can take weeks or months due to entity setup and registrations	Employees can typically be onboarded within a few days through the EOR
Termination compliance	Employers must navigate complex federal and provincial termination rules, increasing exposure to wrongful dismissal claims	The EOR assures a seamless termination process that is aligned with Canadian employment standards

Ready to explore Payoneer Workforce Management in Canada?

U.S. employers can take several routes when they engage employees in Canada. Setting up a legal entity is the most complex, while employing through an Employer of Record (EOR) is simpler. 

Before you engage talent in Canada, you need to be aware of associated employee onboarding regulations, such as conducting employee background checks, creating compliant employment agreements, and setting up payroll. 

It’s also critical to understand key employment laws in Canada, including how many hours employees should work in a typical day or week, various leave entitlements, how much tax should be withheld, and so on. 

Payoneer Workforce Management helps with the burdensome parts of engaging Canadian employees for a U.S. company. 

Our platform helps companies onboard full-time employees and independent contractors in over 160 countries, including Canada, without setting up a legal entity. 

Our unified solution allows you to:

• Onboard talent efficiently without needing a Canadian entity 
• Run payroll seamlessly
• Navigate Canadian employment laws with our support
• Navigate taxes with our guidance

From onboarding international talent within a few days to managing a multi-currency payroll, Payoneer Workforce Management offers your business the tools to onboard, pay, and manage a global team, including talent in Canada. 

Book a demo today to understand how we can help you hire in Canada. 

Frequently asked questions (FAQs)

About the author

Martyna Krawczyk

HR and Immigration Lawyer, Global HR Operations 

Martyna Krawczyk is an HR and Immigration Lawyer and Associate within the Global HR Operations team at Payoneer Workforce Management (formerly Skuad). She holds an LPC LL.M. from the University of Law in the UK and an Associate CIPD certification. Martyna also serves as Vice President of the Labour Law Association of Poland and was recognized at the Wolters Legal Hackathon 2024. Her areas of focus include international employment law, cross-border workforce compliance, and global immigration, supporting organizations in managing international workforces.