How to hire and pay employees in Canada
Looking to hire remote workers to join your team? No matter where in the world your employees work, Oyster makes it easy for you to hire, pay, and take care of employees hassle and worry-free.
Before hiring
Before Hiring
Before employing your first Canadian team member, understand that Canada offers one of the most compelling talent markets for US-based companies, with its workforce's average scores in literacy and adaptive problem solving ranking above the OECD averages.
With high literacy and college graduation rates, you're accessing a highly educated workforce. In fact, more than half (54%) of Canadians have college or university qualifications, allowing Canada to rank first among OECD countries in this regard. This talent pool also shares time zones, cultural alignment, and business practices with the United States. This operational advantage means fewer scheduling headaches and smoother collaboration compared to other international markets.
Here's what catches employers off guard: Canada's employment law operates across both federal and provincial jurisdictions. About 90% of Canadian employees fall under provincial labor standards, while federally regulated industries (banking, telecommunications, interprovincial transportation) follow different rules. You'll also need to navigate contractor misclassification risks—Canadian authorities scrutinize independent contractor relationships closely, and getting it wrong can trigger back taxes, penalties, and benefit obligations. A solution like Oyster eliminates these barriers, automating compliance across all provinces and handling the complexity of classification, contracts, and local labor law—all in one platform.
Recent News
If you're trying to hire employees in Canada, the hard part isn't finding talent—it's staying current as wages, statutory deductions, and hiring rules shift underneath you. These changes can hit your offer letters, job ads, payroll setup, and even your headcount plan. Keeping up is how you avoid "surprise" compliance issues after someone's already accepted.
Payroll cost changes you need to budget for (CPP and EI)
Statutory deductions aren't optional—and they move every year. For 2025, Employment Insurance (EI) is $1.64 per $100 of insurable earnings, with a Maximum Insurable Earnings (MIE) of $65,700. For 2026 (announced), EI drops slightly to $1.63 per $100, the employer rate is $2.28 (1.4×), and the MIE rises to $68,900, increasing total payroll costs for many employees. CPP ceilings also keep climbing, which matters most for higher-paid roles. For 2025, the YMPE is $71,300 and the CPP2 band (YAMPE) is $81,200, with CPP2 applying at 4% on earnings between the two ceilings (employee and employer).
Practical takeaway: Confirm your payroll system is configured for CPP2 and that your employer-cost model includes matching contributions.
Minimum wage updates that can break your "standard" offers
Minimum wage is still one of the fastest ways to fall out of compliance—especially if you're hiring across provinces. For federally regulated private-sector employers, the federal minimum wage increased to $17.75/hour on April 1, 2025, and you must pay the higher of the federal rate or the applicable provincial/territorial rate. If you're hiring remote employees, don't assume one national floor covers you. Provinces continue to adjust their own rates, which impacts payroll, overtime calculations, and some vacation/stat holiday pay scenarios. For example, British Columbia increased its minimum wage to $17.85/hour effective June 1, 2025.
Action item: Build a minimum-wage review into your compensation cycle so you're not scrambling after a rate change.
Ontario is raising the bar on hiring workflows (pay transparency, AI disclosures, recordkeeping)
Ontario is making hiring more structured—and less forgiving for "we'll fix it later" processes. Effective July 1, 2025, employers with 25+ employees must provide specific written details to new hires:
- Legal employer information
- Work location
- Starting wage
- Pay period/pay day
- Initial hours
If your onboarding is spread across email threads and templates, this is where errors happen. Starting January 1, 2026, Ontario employers with 25+ employees have new requirements for public job postings, including:
- A compensation range
- Disclosure of AI use in screening
- Added rules around vacancies and "Canadian work experience" requirements
There are also retention requirements—think 3 years of keeping postings and certain recruitment records.
Practical move: Update ATS fields now so recruiters aren't improvising disclosures later.
Economic conditions and policy signals that can change your hiring plan mid-year
Workforce planning isn't just a budgeting exercise—it's an economic one. The Bank of Canada held the policy rate at 2.25% on January 28, 2026, citing uncertainty (including U.S. trade policy) and noting that relatively few businesses plan to hire more workers. If your CFO is pushing for a hiring freeze, this is the context they're reacting to—so you'll need a tighter business case and clearer compensation bands. On the "what if demand drops" side, EI Work-Sharing rules have temporary special measures for tariff-impacted employers from March 7, 2025 to March 6, 2026. This can influence whether you reduce hours instead of doing layoffs, which affects payroll planning and employee communication. HR should know this option exists before a downturn forces rushed decisions.
Immigration tightening that can shrink your candidate pool
If your Canada hiring strategy depends on work permits, the rules are getting tighter—not easier. Recent Temporary Foreign Worker Program changes continue to ripple through 2025/2026, including:
- A higher "high-wage" threshold (now provincial/territorial median wage + 20%)
- Stricter low-wage stream constraints like a 10% cap in many cases
- 1-year max duration
Translation: Wage strategy and location choices can determine whether a hire is feasible at all.
There's also more operational risk to manage after onboarding. New federal authority to cancel work permits and other temporary resident documents took effect January 31, 2025, which makes ongoing status tracking more than an admin task—it's business continuity. If you're hiring in Quebec, note that the province announced closure of PEQ pathways effective November 19, 2025, which can affect retention expectations for candidates counting on a specific PR route.
Hiring employees in Canada can be straightforward—right up until it isn't, and then you need real expertise, not a help-center article. If you want a partner that combines software with humans who will stay in it with you (payroll setup, compliance questions, and the messy edge cases), Start hiring globally with Oyster.
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
Good to know
.avif)
Top countries hiring in
Canada
.webp)
Labor laws in
Canada
Working hours and overtime
Employees in Canada work a standard 40-hour week (eight hours per day, five days per week), but can work up to 48 hours per week. Employees can opt out of the 48-hour limit through written agreement, known as an "excess hours" provision in their contract. Overtime pay (1.5x regular rate) applies after eight hours per day or 40 hours per week for most provincially regulated employees, though thresholds vary by province—for example, some provinces calculate overtime only on a weekly basis.
Federally regulated employees follow different standards: overtime applies after eight hours per day or 40 hours per week. Employees must receive a minimum 30-minute unpaid break after every five consecutive hours of work. Rest period requirements between shifts (typically eight hours) also apply, though exceptions exist for specific industries.
Minimum wage
Employment contracts
Employment contracts in Canada must be in English (or French in Quebec). While written contracts aren't legally required in most provinces, they're strongly recommended to establish clear terms and protect both parties. Contracts should explicitly include:
- Job title and duties
- Compensation and benefits
- Work location
- Probationary period terms (if applicable)
- Termination provisions that meet or exceed statutory minimums
- Any restrictive covenants (non-compete, non-solicitation)
Provincial variations matter here—some provinces (like British Columbia) have specific requirements for termination clauses. The most common mistake? Using termination language that doesn't meet provincial standards, which can void the entire termination clause and trigger common law reasonable notice obligations. This can turn a two-week termination into a multi-month severance obligation.
Probationary period
Canada has no statutory probationary period length—it's entirely contractual. Most employers establish three to six-month probationary periods in the employment contract. During this time, termination obligations are significantly reduced: you can terminate with minimal notice (often none for the first three months) without triggering wrongful dismissal claims, though you must still meet provincial statutory minimums after 90 days in most provinces.
Probationary periods also affect benefits eligibility—many employers delay full benefits enrollment until probation ends. If you extend a probationary period, document it in writing and ensure it doesn't exceed reasonable limits (typically no more than six months total, extended periods may be challenged). Provincial rules vary on how probation affects termination rights and statutory entitlements.
Pensions
Estimate your savings when using Oyster
Use this calculator to get an estimate of employment costs using Oyster.
(Spoiler alert: It’s much cheaper than setting up entities around the world!)
- Taxes, and social security20,602
- Net annual salary29,389
- Taxes & contributions12,885
- Social Tax11,875
- Occupational Health fee35
- Labor Accident Insurance375
- Fct (Wage Guarantee Fund)0
- Allowances600
- Fct (Wage Guarantee Fund)600
Benefits and leave in
Canada
Vacation time
Employees in Canada are entitled to a minimum two weeks (10 days) of vacation annually under federal standards, but provincial minimums vary. Vacation typically increases to three weeks after five years of service in some provinces. Here's where it gets tricky: "vacation pay" (typically 4% of gross earnings) is separate from "vacation time" (the actual days off)—employees must receive both.
Vacation accrues throughout the year but can only be taken with employer approval on timing. Most competitive employers offer three to four weeks from day one to attract talent. Some provinces require vacation to be taken within a specific timeframe and prohibit indefinite carryover.
Sick leave
There's no federal sick leave requirement, but provincial mandates vary widely. Ontario requires three unpaid sick days per year, while Quebec mandates two paid days and other provinces have different standards. Employers can request a medical certificate after three consecutive days of absence, but some provinces restrict this practice.
Sick leave differs from short-term disability—sick leave covers brief absences (days), while disability insurance provides income replacement for extended illness (weeks to months). Many employers offer paid sick days beyond statutory minimums as a competitive benefit. COVID-19 introduced temporary paid sick leave provisions in several provinces, some of which have become permanent.
Maternity and paternity leave
Parental leave
Pregnant employees in Canada are entitled to 17 weeks of maternity leave (18 weeks in Quebec), while both parents can share 63 weeks of parental leave for a total potential leave period of 78 weeks. Employment Insurance (EI) provides maternity benefits at 55% of average insurable earnings (up to a maximum) for 15 weeks, and parental benefits for up to 40 weeks (standard) or 69 weeks (extended at lower rate). Many competitive employers top up EI benefits to 80-100% of salary for several months.
Adoption leave provisions mirror parental leave entitlements—adoptive parents receive the same leave duration and EI benefits. Job protection continues throughout the entire leave period: employees must be reinstated to the same or comparable position upon return. The critical distinction: you're legally required to hold the job (job protection), but payment during leave comes from EI unless you voluntarily offer top-up provisions.
Holidays
View a list of recognized public holidays in Canada here.
Employer tax
Employers in Canada contribute 5.95% of employee earnings to the Canada Pension Plan (CPP), matched by the employee's 5.95% contribution (up to annual maximums). Employment Insurance (EI) requires employers to contribute 2.28% of insurable earnings (with an employee maximum contribution of $1.63 per $100, up to a maximum insurable amount of $61,500).
These federal payroll taxes apply to all employees except those in Quebec, which operates its own Quebec Pension Plan (QPP) and Quebec Parental Insurance Plan (QPIP) with slightly different rates.
Provincial employer health taxes add another layer:
- Ontario: 1.95% on payrolls over $490,000
- British Columbia: up to 1.95%
- Manitoba, Quebec, and Newfoundland: varying rates
Individual tax
Employees in Canada pay federal income tax at progressive rates:
- 15% (up to $53,359)
- 20.5% ($53,359-$106,717)
- 26% ($106,717-$165,430)
- 29% ($165,430-$235,675)
- 33% (over $235,675)
Provincial income taxes add another 4% to 21% depending on province and income level—Ontario ranges from 5.05% to 13.16%, while Quebec reaches 25.75% at the highest bracket. Combined federal and provincial rates can reach 53% for top earners.
Employees also contribute 5.95% to CPP (up to maximum pensionable earnings) and 1.63% for EI (up to maximum insurable earnings).
Termination in
Canada
Termination in Canada operates under two distinct frameworks: statutory minimums set by provincial employment standards, and common law reasonable notice developed through court precedents. "Just cause" termination (serious misconduct like theft, fraud, or gross insubordination) allows immediate dismissal without notice or severance, but the bar is high—you need documented evidence and must follow due process.
Most terminations are "without cause" and trigger notice or pay in lieu obligations. Here's what catches employers: statutory minimums are just the floor. Unless your employment contract explicitly limits termination obligations to statutory minimums (and the language meets provincial requirements), employees can claim common law reasonable notice—which can be significantly longer.
Common law awards consider:
- Age
- Length of service
- Position
- Availability of similar employment
These awards can potentially reach 18-24 months for senior, long-tenured employees. Wrongful dismissal claims are common when employers underestimate obligations or fail to document performance issues. Mass layoffs (50+ employees in four weeks in some provinces) trigger additional group termination notice requirements to government authorities.
The safest approach: build proper termination clauses into contracts from day one, document performance issues thoroughly, and get legal advice before terminating anyone beyond probation. Provincial variations in minimums and constructive dismissal rules make termination one of the highest-risk areas in Canadian employment law.
Statutory minimum notice in Canada starts at one week for three months to two years of service, then adds one week per additional year up to a maximum of eight weeks (federally). Provincial minimums vary—Ontario requires one week for three months to less than one year of service, and then increases up to a maximum of eight weeks for eight years or more of service. These are minimums, not maximums: common law reasonable notice can extend significantly longer based on individual circumstances.
Employers can provide working notice, pay in lieu of notice, or a combination of both. During working notice, all employment obligations continue (salary, benefits, vacation accrual). Pay in lieu of notice must include not just base salary but also the value of benefits, bonus eligibility, and other compensation that would have been earned during the notice period. Some provinces require notice to include vacation pay and statutory holiday pay calculations. Provincial variations matter: Saskatchewan requires more generous minimums, while British Columbia added length-of-service protections that can extend obligations. The critical mistake? Assuming statutory minimums are sufficient when your contract doesn't explicitly limit common law exposure—this leaves you vulnerable to wrongful dismissal claims for much longer notice periods.
Ontario is the only provincial jurisdiction that requires employers to provide statutory severance upon an employee's termination. In Ontario, an employee qualifies for severance pay if (1) they have worked for the employer for at least five years, and (2) their employer has a global payroll of at least CA$2.5 million annually or has terminated 50 or more employees in a six-month period because all or part of the business closed permanently.
Start hiring employees in
Canada
You have three paths to employing in Canada:
- Establishing your own Canadian subsidiary
- Hiring employees directly as a foreign entity (limited scenarios)
- Partnering with an Employer of Record (EOR) like Oyster
Setting up a subsidiary means:
- Incorporating federally or provincially
- Registering for business numbers with the Canada Revenue Agency (CRA)
- Registering for provincial employer accounts
- Setting up payroll systems
- Maintaining ongoing corporate compliance
Expect three to six months and $15,000-$40,000 in legal and setup costs, plus ongoing accounting and legal fees. Direct hiring as a foreign entity without local incorporation is possible for short-term assignments or specific treaty scenarios, but you'll still need to register for Canadian payroll obligations, withhold and remit taxes correctly, and navigate permanent establishment tax risks. This approach creates compliance exposure most companies want to avoid.
The timeline challenge is real: by the time you've navigated incorporation, bank accounts, payroll registration, and compliance setup, your top candidate has likely accepted another offer. An EOR like Oyster becomes your legal employer on paper, handling all compliance, payroll, benefits, and tax obligations while you maintain day-to-day management of the employee's work.
You employ compliant Canadian team members in 48 hours without entity setup, navigate provincial variations automatically, avoid permanent establishment tax risks, and access human support when software alone isn't enough—no copying data across systems, no decoding provincial labor standards at midnight. When you're ready to establish your own entity, we can help you transition employees smoothly. With Oyster, you're not choosing between speed and compliance—you get both.
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.
Explore other Country Guides
FAQs
Can a US company hire Canadian employees without a Canadian entity?
Yes, through an Employer of Record (EOR) like Oyster. The EOR becomes the legal employer, handling all compliance, payroll, taxes, and benefits administration while you manage the employee's day-to-day work. This allows you to employ Canadian talent in 48 hours without incorporating a Canadian subsidiary, registering for payroll accounts, or navigating provincial labor standards yourself.
What's the difference between hiring employees vs. contractors in Canada?
Employees receive statutory benefits (vacation, statutory holidays, termination protections), have taxes withheld by the employer, work under employer direction and control, and receive CPP and EI contributions. Contractors are self-employed, manage their own taxes and benefits, maintain independence in how work is performed, and invoice for services.
Canadian authorities scrutinize contractor relationships closely—misclassifying employees as contractors triggers back taxes, penalties, and retroactive benefit obligations. The key test is control: if you direct how, when, and where work is done, you likely have an employee.
How much does it cost to employ someone in Canada?
Beyond salary, expect employer costs of 8.5-11% for statutory payroll taxes (CPP, EI, provincial health taxes where applicable) plus Workers' Compensation premiums (0.5-3% depending on industry and province). Competitive benefits packages (extended health, dental, vision, disability insurance, RRSP contributions) typically add 15-25% of salary.
Total employment costs usually range from 125-140% of base salary when you factor in statutory obligations, benefits, vacation pay, statutory holidays, and administrative overhead—higher than US employment due to additional provincial obligations and longer vacation entitlements. Check out our interactive Cost Calculator for more information.
Do I need to provide health insurance to Canadian employees?
No, it's not mandatory—Canada's universal healthcare covers essential medical services. However, competitive employers offer extended health benefits covering dental, vision, prescription drugs, paramedical services (physiotherapy, massage, mental health), and disability insurance. These benefits are expected by candidates in professional roles and significantly impact your ability to attract talent, even though they're not legally required.
Guide: How to get started with hiring global talent
Hiring globally remote talent is easier than ever — learn how to get started.
Access Guide
_Leader_Leader%201%20(2)%20(3).svg)
_Leader_UnitedKingdom_Leader%201%20(1).svg)
_Leader_Europe_Leader%201%20(1).svg)
_Leader_Mid-Market_Leader%201%20(1).svg)
_Leader_Small-Business_Europe_Leader%202%20(2).svg)
_Leader_Small-Business_Leader%201%20(1).svg)
_FastestImplementation_Small-Business_GoLiveTime%201%20(1)%20(1).svg)