How to hire and pay employees in Canada
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Before hiring
Before hiring employees in Canada, there are a few important things you’ll need to know. Firstly, each province and territory in Canada has its own legislation when it comes to employment standards, and the intertwined federal and provincial legislation can make it challenging to understand which to meet.
Employees in Canada will typically expect an extended health benefits plan that goes beyond the free public healthcare they receive as residents, and if your organization employs Canadians directly, you will be liable for the day to day management of employee health and safety, including Worker’s Compensation.
We know this might sound overwhelming—but it doesn’t have to be. A solution like Oyster eliminates the barriers for you. With Oyster, you can automate compliance across 180+ countries, easily managing HR and payroll—all in one, easy-to-use platform.
Get an overview of what you need to know when hiring in Canada below.
At a glance
CURRENCY
CAD
OFFICIAL LANGUAGE
ENGLISH, FRENCH
PAYROLL FREQUENCY
BI-WEEKLY
EMPLOYER TAXES
7.5%
13th / 14th SALARY
N/A
Good to know
- Employment laws, including benefits and minimum wages, may differ significantly across provinces. It’s important to check the local laws governing employment contracts.
- Employees are entitled to a minimum of two weeks’ paid leave each year. However, some employers provide annual vacation benefits up to three to four weeks.
- All employment documents in Québec are in French, which is also the official language of work.
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Labor laws in
Canada
Working hours and overtime
Employees typically work eight hours a day, 40 hours per week. Overtime is paid for every hour after 44 hours weekly in Ontario and 40 hours weekly in Québec. In most jurisdictions, overtime is paid at a rate of at least 150% the regular pay (or “time and a half”).
Minimum wage
Employment contracts
Employment contracts should be written in English in most provinces. However, all employment documents in Québec should be written in French.
Typically, the probationary period lasts three months for most provinces.
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Benefits and leave in
Canada
Vacation time
While paid vacation time varies across provinces, typically employees that have been working for less than five years are entitled to a minimum of two weeks’ paid leave each year. However, some employers provide annual vacation benefits up to three to four weeks.
Sick leave
Policies around sick leave, including its duration and whether or not employers are required to pay for it, vary by province.
Maternity and paternity leave
Parental leave
Parents who are caring for a newborn or newly adopted child may qualify for maternity and parental benefits. Those who qualify for Employment Insurance maternity benefits are entitled to receive up to 55% of their earnings (up to a maximum of $573 a week) for 15 weeks.
Maternity benefits can be followed by parental benefits (which can also be used by fathers):
- Standard parental benefits can be paid for up to 40 weeks, but one parent cannot receive more than 35 weeks of standard benefits.
- Extended parental benefits can be paid for up to 69 weeks, but one parent cannot receive more than 61 weeks of extended benefits.
In Québec, fathers are entitled to paternity leave for five weeks. In all other jurisdictions, fathers can use parental leave.
Holidays
View a list of recognized public holidays in Canada here.
Employer tax
Employers of Canadian employees are required to deduct income tax, Canadian Pension Plan contributions, and Employment Insurance contributions. Canadian Pension Plan and Employment Insurance taxes are subject to a maximum contributions cap for employee and employer contributions combined, after which no additional taxes in these categories will be collected for the year. Current rates can be found here.
Individual tax
Employees in Canada are taxed federally from 15% to 33% depending on their income bracket. Provincial taxes are applied on top of these taxes with significant variations between provinces.
Termination in
Canada
In Canada, employees are entitled to termination pay if they don’t receive a written notice of their termination. Termination pay is a lump sum payment equal to the regular wages that the employee would otherwise have been entitled to during the notice period. An employee earns vacation pay on their termination pay. For the employee to qualify for severance pay:
- They must have completed at least five years of employment with the employer
- The company has a payroll in Canada of over 2.5 million CAD annually or has terminated over 50 employees in Canada in the past six months due to all or part of the company closing.
The severance pay amount is usually equal to the weekly wages multiplied by the number of years the employee has been employed (to a maximum of 26 weeks).
If an employee has been employed for at least three months, the employer is obligated to provide them with a written notice of termination or termination pay. The notice period for an employer dismissing an employee depends on how long the employee has been employed and can range between one and eight weeks.
Start hiring employees in
Canada
Setting up a business entity everywhere you want to hire a new employee isn’t scalable—it takes too long and the legal fees are high. At the same time, understanding and adhering to the local labor laws and employee expectations can be complex and time consuming. And it’s hard to find reliable information on up-to-date employment information for all the countries where you’re considering hiring. Not to mention tracking down invoices and managing employee contracts over email and spreadsheets—that gets messy fast.
We can’t afford to take risks when it comes to compliance—we need to make sure we follow the local guidelines, especially when it comes to taxes and legalities.
With Oyster, you can manage HR and payroll, and automate compliance across 180+ countries—all in one, easy-to-use platform.
Disclaimer: The information provided in this resource is for general educational purposes only and shall not be construed as legal advice. While Oyster strives to provide current and accurate information, Oyster makes no warranties or representations as to the correctness of the content provided and accepts no liability or responsibility for any errors or omissions in the content provided. By using this resource you acknowledge and agree that you do so at your own risk. The content of this resource is subject to change without notice.
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