Planning to hire employees in Canada? Here’s a quick guide

Canada’s talent pool boasts skilled workers with specialized knowledge in growing industries such as AI, machine learning, technology, and media. So, it’s no surprise that many global businesses, like U.S. companies, are looking to hire employees in Canada. 

Hiring in Canada may be more cost-effective than hiring within the U.S. Moreover, Canada operates in similar time zones and has no language barriers.

This guide explains how U.S. companies can hire in Canada, what legal considerations employers need to observe, and how an Employer of Record like Payoneer Workforce Management can help simplify the hiring process. 

How to hire employees in Canada

If your company is based in the U.S. but you’re looking to hire in Canada, you have a few options, including setting up your own Canadian entity, hiring contractors, or using an EOR 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-demanding 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 of hiring, like 

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

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

Where to find employees in Canada

You can find skilled talent in Canada by using specialized job boards, recruitment agencies, or EORs. 

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) Recruit through an EOR

Hiring through an EOR allows your business to control the recruitment process, supporting your hiring process with recommended practices to find the right person for the role. 

Then, an EOR helps manage the paperwork and compliance. They help draw up the necessary documentation and contracts, assist with onboarding employees, facilitate localized employee benefits, and compliance requirements related to labor and tax laws.

Onboarding employees in Canada

When hiring Canadian employees for a U.S. company, the onboarding experience is critical. Not only does it impact the employee’s engagement with your business, but it also involves a lot of compliance. 

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.

Key employment laws and requirements

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

Employment contracts outline what duties the employee will carry out and how they will be compensated.

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

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 

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

Employers must withhold their employees’ taxes in Canada. 

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. 

Learn more about tax obligations and payroll in Canada. 

5) Termination and severance

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. 

Hire employees in Canada with Payoneer Workforce Management

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

Before you hire 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. 

This sounds like a lot, because it is a lot.

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

Our platform helps companies hire 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 new hires efficiently without needing a Canadian entity 
• Run payroll seamlessly
• Stay compliant with Canadian employment laws with our support
• Navigate taxes with our guidance

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

Talk to our experts to see how we can make hiring on a global level simple. 

FAQs about how to hire employees in Canada 

1) Can I hire Canadian employees for a U.S. company?

Yes, U.S. companies can hire employees based in Canada. There are several ways to do so, ranging from setting up a local entity to working with an Employer of Record. 

2) How do I hire a Canadian for a U.S. company?

There are three ways to hire employees in Canada:

• Setting up a legal entity in Canada
• Hiring independent contractors, or
• Working with an Employer of Record (EOR) in Canada. 

Creating a local entity is an expensive and time-consuming process, which is why very few companies do it. Many prefer to hire contractors or full-time employees through an EOR, like Payoneer Workforce Management. 

3) How can an EOR help U.S. companies hire in Canada?

An Employer of Record helps companies hire in Canada by becoming the legal employer for Canadian workers and managing onboarding, payroll, taxes, and offering compliance support.