Employment laws in Canada

When hiring Canadian workers, employers need to be aware of the local employment laws. In Canada, this is particularly complicated, as only some part of the Canadian workforce is governed by the federal Canada Labour Code. Provincial employment laws and other national regulations govern the rest. 

This can cause various challenges for employers, especially those based abroad, who have to understand which labor laws apply to their Canadian employees. 

Hiring through an Employer of Record (EOR) may help streamline the process of building a Canadian team. Payoneer Workforce Management supports fast-growing startups, SMBs, and enterprise companies in onboarding workers in Canada. 

This guide walks through the key labor laws in Canada, covering contracts, termination rules, working hours, and employee rights to help your business hire and manage teams effectively.

Key labor laws in Canada

When foreign employers hire employees based in Canada, they need to comply with the country’s regional and national labor laws. Here’s an overview of some of the key employment laws in Canada:

Contract employment laws in Canada

It may be essential to classify your workers according to the labor laws in Canada to reduce fines and penalties. You may also need a clear contract in place that defines the working relationship and protects both the worker and employer.

Employee classification

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 Labor 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. 

Contract types

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. 

Essential contract elements

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

Statutory employment rights in Canada

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. 

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

Find out more about the leave policy in Canada.

Minimum wage and overtime

The federal minimum wage in Canada is CAD 17.30. 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.

Termination employment laws in Canada

When terminating employment contracts, employers must abide by the relevant labor laws in Canada. 

Termination without cause

Notice requirements differ by province. According to the labour standards, employees generally must receive at least two weeks’ notice after the probation period, though provincial rules may require more.

In some jurisdictions, such as Ontario, additional entitlements may apply. For example, certain termination scenarios may require providing one week of notice per year of service, with additional weeks required after five years of service.

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. 

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. 

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

Book a demo today!

FAQs

1) What is the standard probation period for employees in Canada?

The standard probation period in Canada is 90 working days. During probation, no notice is required for termination (though this may vary by province).

2) Are salaried employees entitled to overtime pay in Canada?

No. According to the employment laws in Canada, overtime is mandatory only for hourly employees. Salaried employees are classified as exempt and are not eligible for overtime, and their hours are not tracked.

3) What are employees entitled to when they voluntarily resign?

When an employee resigns voluntarily, they must comply with the required notice period, typically 2 weeks, although some provinces may require more. No severance is applicable for voluntary termination, and a resignation letter stating the last working day must be documented.