Employer of record in Canada

Canada is a leader in many fields, including technology, manufacturing, and healthcare. Hiring employees in Canada is a smart choice for international businesses. However, navigating local employment rules can be tricky. 

Employers, even those based outside of Canada, must comply with the evolving Canadian labor and employment laws. Adding to the challenge, Canada is governed by a mix of federal and provincial regulations, each with its legal requirements. 

That’s where an Employer of Record (EOR) like Payoneer Workforce Management (WFM) makes things easier. Canada EORs simplify hiring and paying Canadian employees, helping global companies run smoothly. 

Looking to expand into Canada? Find out more about Payoneer WFM or keep reading to learn how an Employer of Record in Canada can help. 

How to hire employees in Canada

There are three main ways to legally employ workers in Canada:

• Set up a legal entity: Registering your business in Canada allows you to hire directly, but it involves navigating complex labor laws and tax systems. It can be both time-consuming and expensive.
• Hire independent contractors: Hiring contractors is suitable for short-term projects, but comes with risks related to misclassification and limited control. 
• Partner with an Employer of Record: An EOR in Canada enables compliant hiring without establishing a Canadian entity and handles everything from onboarding to payroll. 

Using an Employer of Record in Canada

An Employer of Record in Canada is a third-party organization that legally employs and manages workers on your behalf. 

While the employee works for your company day-to-day, the Canada EOR handles the compliance and related administrative tasks, saving you from having to set up a local entity.

Some key Employer of Record services in Canada include:

• Creating and sending employment contracts
• Running payroll in local currency
• Benefits administration 
• Running employee background checks
• Handling visa and work permit applications
• Issuing and managing work devices
  

Payoneer WFM’s Employer of Record services in Canada help businesses scale quickly and compliantly, managing the entire employment lifecycle on their behalf. 

How to onboard employees in Canada

Onboarding, especially for new remote workers, is about more than making sure your new employee has the tools to complete their tasks. 

Important onboarding tasks to complete before their start date include:

• Drawing up the contract: Outline the role, compensation, working hours, benefits, and so on. 
• Running an employee background check: With the employee’s explicit consent, verify anything necessary for the role, like their employment history, education, references, etc.
• Gathering the tax documentation: Ensure you stay compliant with both federal and provincial tax regulations. 
• Adding them to payroll: They’ll most likely be paid in Canadian dollars into a Canadian bank account. 
• Enrolling them in benefits: Provide the required statutory benefits and offer additional ones to remain competitive. 
• 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. 

Leave compliance to an Employer of Record in Canada so you can focus on welcoming your new employee and making them feel like part of the team.

Pay employees in Canada

There are some key considerations when running payroll in Canada, including:

• Fiscal year: This runs from April 1st to March 31st.
• Minimum wage: This is set at CAD 17.75 per hour for federally regulated jobs, though the minimum wage varies across provinces.
• Bonuses: Both discretionary and non-discretionary bonuses are common and must be documented.
• Income tax: Income tax rates vary by annual income and province.
• Pension plan: Employers and employees must contribute to the Canada Pension Plan (CPP) and (CPP2). If the employee is based in Quebec, then they contribute to the Quebec Pension Plan (QPP). 
• Employment insurance: Employers and employees contribute to Employment Insurance. In Quebec, they use the Quebec Employment Insurance program.

The easiest way to pay employees in compliance with Canadian tax, pension, and social insurance regulations is to partner with a Canada Employer of Record. 

Employment laws in Canada

In Canada, federally regulated employees are protected by the:

• Canada Labour Code
• Canadian Human Rights Act
• Canada Occupational Health and Safety Regulations

However, most Canadian employees are governed by provincial regulations. For instance, as the most populated province, Ontario has the:

• Employment Standards Act
• Ontario Human Rights Code
• Labour Relations Act
• Workplace Safety and Insurance Act

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: Employees can work an additional 8 hours per week, for which they should be compensated with overtime pay at 1.5 times their regular wages. 
• Probation period: All Canadian provinces permit employers to use probationary periods for employees. The standard is 3 months, although some provinces allow for longer periods.
• Other key rights and protections: Canadian workers are also protected by regulations regarding discrimination, harassment, and privacy. 

With such complex rules, it’s often best to use an EOR in Canada.

Minimum wage in Canada

Each province sets its own minimum wage. The lowest provincial minimum wage is CAD 15 per hour, which is around CAD 2,400 per month. That’s equivalent to about US$10.98 per hour, or US$1,756.27 per month.

The minimum wage is reviewed and adjusted periodically to align with factors such as the Consumer Price Index. That’s why it’s crucial for employers to stay updated and make budgets in advance to ensure they remain compliant. 

A Canada EOR regularly reviews Canadian labor regulations like the minimum wage, keeping things simple for their partner businesses.

Employment contracts in Canada

Though verbal contracts are technically legal in Canada, having a written contract helps to prevent or settle any disputes.

Whether it’s an independent contractor agreement or a full-time employment agreement, it’s best practice to include the following information:

• Contract type: Whether it’s fixed term or indefinite
• Start date: The date the employee will start work
• Employee compensation: Including salary, benefits, and eligibility for a bonus
• Work hours and allocated leave: The standard working day, week, annual leave, and other types of leave
• Length of probation: Define the length of the probation period
• Termination requirement: Such as the notice period and severance pay

Working with an Employer of Record in Canada helps you create contracts that follow the relevant federal and provincial laws and regulations.

Leave policy in Canada 

Employees in Canada are entitled to various types of leave, though note that this can vary by province:

• Vacation: Federal employees are entitled to 2 weeks’ annual leave after being employed for 1 year. This increases to 3 weeks after 5 years, then 4 weeks after 10 years. 
• Sick leave: Federal employees are granted 10 days of paid sick leave.
• Parental leave: Parents of a newborn or newly adopted child are entitled to 63 weeks of unpaid parental leave, or 71 weeks if it is shared. They may combine parental leave with unpaid maternity leave (up to 17 weeks), though the total cannot exceed 78 weeks. 
• Other leave: Canadian employees are also entitled to bereavement leave, compassionate care leave, personal leave, and several other types of leave. 

Make sure to check provincial regulations, as leave policies may vary. 

Work permit in Canada

Foreign nationals require work permits to work in Canada. It’s the employer’s responsibility to check if candidates are authorized to work in Canada and should support the permit application process if required. 

There are two main types of work permits:

• The employer-specific permit ties the permit to the employer and job role for a defined period. 
• An open work permit allows individuals to work for any eligible employer in Canada. 

Obtaining work permits can be a time-consuming process, but Canada EORs like Payoneer WFM streamline the process and manage work permits efficiently. 

Background check in Canada

Employee background checks in Canada must be compliant with regulations such as The Privacy Act and The Personal Information Protection and Electronic Documents Act (PIPEDA). 

These laws stipulate that employers must disclose to the candidate which background checks they’ll run and obtain their explicit consent.

Some of the most common background checks include:

• Education verification
• Professional license verification
• Employment history verification
• Criminal record check
• Credit check
• Social media background checks
• Reference checks

However, some background checks are illegal to run in Canada, including checks on:

• Medical information
• Genetic information
• Protected characteristics
• Arrest records

Although necessary to protect your business, background checks can be complicated and time-consuming, especially when you have to negotiate both federal and provincial laws. The simplest way to carry them out is through an Employer of Record in Canada.

Employment termination in Canada

A Canadian employee can be terminated with or without cause. 

Termination without cause entitles employees to a minimum of 2 weeks’ written notice or severance pay in place of notice. They should receive 2 days’ regular pay for each year of employment, or 5 days of pay, whichever is greater. 

Termination with cause does not require a notice period or pay in lieu of notice from employers. However, employers must clearly demonstrate just cause.

Provincial rules may apply. Always consult local regulations.

How to setup a Canada employer: Company registration in Canada

To register an entity in Canada, you’ll need to know:

• Where your registered office will be
• Which other provinces you plan to operate in
• The proposed business name 
• The business type (a corporation, sole proprietorship or partnership, or cooperative). 

For full details on registering a business, see the Government of Canada website.

Global PEO in Canada

Professional Employer Organization (PEO) services differ from those of an Employer of Record. 

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, your company would need to set up a legal entity and assume the full liability for compliance.

An EOR, on the other hand, helps employers hire and pay candidates abroad, taking on the local laws and compliance. Like a PEO, they also handle HR and workforce tasks, but on a global scale.

If you’re seeking an HR and payroll team in the country where you’re already based, a PEO may be the option for you. But if you’re looking to hire global talent, your best bet is to partner with an EOR. 

Payoneer WFM: Leading employer of record services in Canada

Working with an Employer of Record like Payoneer WFM 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 ever having to set up a local entity. 

An EOR streamlines your global payroll, compliance, and employee management, all in one platform. From the onboarding process to background checks, paying your employees, and even filing taxes, EORs take out the headaches of compliance. 

Instead of focusing on Canadian tax regulations and labor laws, you can focus on finding the best talent and growing your business operations. 

Try Payoneer WFM for expert EOR support in Canada.

FAQs about Employer of Record Canada

1) What is the Employer of Record in Canada?

An Employer of Record acts as the legal employer for Canadian employees on behalf of foreign companies. A Canada employer of record for a U.S. company takes care of aspects like payroll, taxes, and statutory benefits, making global hiring efficient for international employers. 

2) How much does an Employer of Record in Canada cost?

Most Canada EORs charge a monthly fee per employee. The average monthly fee for standard Employer of record services in Canada per employee ranges from around $400 to $800+ depending on the provider. For instance, Payoneer WFM’s Employer of record services in Canada starts from USD 199/month per employee.

3) Are there PEOs in Canada?

Yes, there are PEOs in Canada and they offer HR and payroll services to businesses with a local legal entity in Canada.