Your guide to Canada payroll

To hire Canadian workers and effectively manage Canada payroll, employers need to understand both federal and provincial labor laws, tax regulations, and Canadian T4 form requirements.

Or, there’s an easier option: using a payroll company in Canada or an Employer of Record (EOR) like Payoneer Workforce Management. 

We offer a simple and efficient way to handle payroll in Canada and 160+ countries without the hassle of setting up a local entity. 

Canada payroll: Wages and other payments

Even when working with an EOR, it’s still best practice for employers to familiarize themselves with the Canada payroll system, including the payment cycle, salary norms, minimum entitlements, and bonus structures.

1) Payroll cycle

In Canada, employees are typically paid in Canadian dollars (CAD). The standard payment cycle is typically fortnightly or monthly, although this can vary across different industries. 

Employee wages are typically paid via direct deposit into a Canadian bank account (most common) or by a paycheck (becoming less common).

Canada spans 6 time zones, ranging from Pacific Time (UTC-8) to Newfoundland Time (UTC-3:30). 

Employers should take these time differences into account when processing employee payments. The payment documentation should be in either English or French, depending on the employee’s location. 

2) Minimum wage

The federal minimum wage in Canada is CAD 17.75, as of April 1, 2025. However, if the minimum wage in their province is higher, employees should receive the higher wage. 

The current minimum wages by province are listed below. However, these can change, so we recommend checking the government website regularly.

Province	Minimum wage
Alberta	CAD 15.00
British Columbia	CAD 17.85
Manitoba	CAD 15.80 (CAD 16.00 from October 2025)
New Brunswick	CAD 15.65
Newfoundland and Labrador	CAD 16.00
Northwest Territories	CAD 16.70
Nova Scotia	CAD 15.70 (CAD 16.50 from October 2025)
Nunavut	CAD 19.00
Ontario	CAD 17.20 (CAD 17.60 from October 2025)
Prince Edward Island	CAD 16.00 (CAD 16.50 from October 2025)
Quebec	CAD 16.10
Saskatchewan	CAD 15.00
Yukon	CAD 17.94

3) Sick pay

As of December 2022, Canadian employees in federally-regulated industries are entitled to 10 days of paid sick leave per year. They earn the first 3 after the first month of work, then earn 1 extra day for every additional month worked.

Sick leave is paid at the normal wage for the usual working hours. Any unused medical leave can be carried into the following year, up to a maximum of 10 days. 

The rules are different on a provincial level, however. Most provinces do not mandate paid sick leave, though jobs are protected for up to 26 weeks of unpaid sick leave. 

Only British Columbia, Quebec, and Prince Edward Island offer paid sick leave:

• British Columbia: Up to 5 days of paid sick leave per year, available after 90 days of employment
• Quebec: Up to 2 days paid sick leave per calendar year, calculated the same as statutory holiday pay
• Prince Edward Island: Up to 1 paid day of sick leave after 12 months of continuous employment, 2 days after 24 months, and 3 days after 36 months

4) Maternity pay

Canada offers statutory maternity and parental benefits to employees with a newborn or a newly adopted child. 

Benefit	Maximum weeks	Pay
Maternity (for the person giving birth)	Up to 15 weeks	Up to CAD 695 per week
Standard parental	Up to 40 weeks (shared between parents) One parent cannot receive more than 35 weeks	Up to CAD 695 per week
Extended parental	Up to 69 weeks (shared between parents) One parent cannot receive more than 61 weeks	Up to CAD 417 per week

The person receiving maternity benefits is also entitled to parental benefits. For instance, they could combine the 15 weeks’ maternity pay with 35 weeks of standard parental pay, leaving 5 weeks of parental leave for their partner. 

While parental benefits don’t need to be taken consecutively, they must be used within 52 weeks (standard parental benefits) or 78 weeks (extended parental benefits) of when the child is born or placed in their care for adoption.

5) Severance packages

If a terminated employee has completed 12 consecutive months of employment, their employer must provide severance pay. 

Federally governed severance pay is the greater of:

• 2 days’ regular wages for each full year of employment, or
• 5 days’ regular wages

Severance pay is not required when:

• The lay-off doesn’t result in termination of employment
• The employment contract reached a defined end date
• The contract is terminated for just cause
• The employee terminates the employment contract. 

Entitlements to severance pay can vary by province. We recommend checking local government websites.

Canada payroll: Contributions and deductions

Employers must account for several mandatory taxes, deductions, and contributions when managing payroll in Canada. Again, these can vary by province, so check the local government websites for specific details. 

1) Income tax

Employers must withhold income taxes for their Canadian employees. In 2025, the federal indexing factor is 2.7%.

The federal tax rates and income thresholds are as follows:

Annual taxable income (CACAD)	Federal tax rate	Constant (CACAD )
0 – 57,375	0.1500	0
57,575.01 – 114,750	0.2050	3,156
114,750.01 – 177,882	0.2600	9,467
177,882.01 – 253,414	0.2900	14,803
253,414.01 and over	0.3300	24,940

For provincial tax rates and income thresholds, see the Government of Canada Income tax rates and income thresholds. 

2) Pension plan

There are two pension plans in Canada: The Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP). As of January 1, 2024, employers must deduct the second additional CPP contributions (CPP2) on earnings higher than the annual maximum pensionable earnings. 

Here are the CPP contribution rates, maximums, and exemptions for 2025:

• Maximum annual pensionable earnings: CAD 71,300
• Basic exemption amount: CAD 3,500
• Maximum contributory earnings: CAD 67,800
• Employee and employer contribution rate (%): 5.95
• Maximum annual employee and employer contribution: CAD 4,034.10
• Maximum annual self-employed contribution: CAD 8,068.20

Here are the CPP2 contribution rates and maximums for 2025:

• Additional maximum annual pensionable earnings: CAD 81,200
• Employee and employer contribution rate (%): 4%
• Maximum annual employee and employer contribution: CAD 396
• Maximum annual self-employed contribution: CAD 792

Here are the QPP contribution rates and maximums for 2025:

• Maximum annual pensionable earnings: CAD 71,300
• Basic exemption amount: CAD 3,500
• Employee and employer contribution rate (%): 5.4

3) Employment insurance

Canada’s Employment Insurance (EI) program provides temporary income support to unemployed workers while they seek employment or upskill. It also provides benefits to employees taking time off work for illness, pregnancy, providing care to a newborn or newly adopted child, and more. 

Both employers and employees contribute to Employment Insurance. In 2025, the federal EI premium rates and maximums are:

• Maximum annual insurable earnings: CAD 65,700
• Rate (%): 1.64
• Maximum annual employee premium: CAD 1,077.48
• Maximum annual employer premium: CAD 1,508.47

In 2025, the Quebec EI premium rates and maximums are as follows:

• Maximum annual insurable earnings: CAD 65,700
• Rate (%): 1.31
• Maximum annual employee premium: CAD 860.67
• Maximum annual employer premium: CAD 1,204.94

Payroll in Canada: Compliance and best practices

To pay employees compliantly, employers need to open a payroll program account with the Canada Revenue Agency (CRA). 

To set up and manage your employee payroll information, you’ll need:

• The employee’s social insurance number
• To determine the province of employment
• To complete TD1 forms 
• To determine how to increase or reduce the income tax deducted at source

At the end of each year, employers need to file payroll information returns that declare all payroll payments made within the year, including salaries, taxes, contributions, deductions, etc. 

This is done by filling out a Canadian T4 form (also known as a summary form) for each payroll program account held by the business, as well as T4 slips for each employee. 

How to pay remote employees in Canada

There are three ways to pay international employees:

1. Set up a legal entity: This is an expensive and time-consuming process that requires you to navigate the payroll and employment laws of Canada.
2. Using international payment platforms or doing a wire transfer. 
3. Through an Employer of Record (EOR) or other payroll companies in Canada: This is one of the easiest ways to hire and pay employees in Canada compliantly.

FAQs about payroll in Canada

1) How does payroll in Canada work?

1. The employer sets up an account with the CRA.
2. The employer pays their employees, deducting tax and benefits from wages.
3. At the end of the year, the employer files Canada T4 forms.

2) How are employees paid in Canada?

Canadian employees are usually paid fortnightly or monthly.

3) How do you pay employees in Canada?

The best way to pay Canadian employees if you’re a non-Canadian business is to partner with an Employer of Record (EOR) or similar payroll companies in Canada. An EOR handles the relevant compliance, including payroll and other critical components of legal hiring.