Global Payroll and Benefits — 6 min
To hire employees in Canada, companies must first know the laws of the province in which the prospective hire lives and works. While Canada does enforce some federal labor laws, individual provinces have a lot of say on Canadian labor laws, payroll processes, benefits, taxes, and other factors.
If you are looking to hire an employee in Canada or help a current team member move there, Remote’s guide on hiring employees in Canada can help you get started.
Every province in Canada has its own unique set of labor laws. The laws and regulations outlined in this guide are federal laws unless noted otherwise. For more information on laws specific to a province, contact Remote and let us know in which provinces your employees and prospective hires work.
Related: What are labor laws like in Canada?
Every Canadian province sets its own minimum wage. Most provinces have schedules designed to increase their minimum wages based on factors like inflation.
Current minimum wages can be found on the website for the Retail Council of Canada.
Canadian employees are eligible for overtime pay when they work over a certain number of hours per week. Overtime rates and rules can vary by province, but federal law mandates that employees may substitute overtime pay for extra paid time off, earned at a rate of a minimum of 1.5 hours for every hour of overtime worked.
Overtime rates in Canada vary by province. Typically, provinces mandate overtime pay of 150% regular wages beginning after 40-44 hours of work within a week. Some provinces also enforce daily overtime rates and caps on allowable amounts of overtime. Contact Remote to learn more about the rules in the provinces where your employees work.
For hourly workers and salaried workers with schedules that can change from one week to another, Canadian employers must provide at least four days’ notice for new shift schedules. If the schedule changes because of an unforeseen event, the company must provide at least 24 hours’ notice.
Employers in Canada cannot ask applicants questions that could introduce prejudice related to gender, religious beliefs, or age. Questions about pregnancy, for example, are not allowed in interviews for jobs.
Canada’s laws are stricter on interview questions than laws in the US. For example, Canadian employers cannot ask candidates whether they can work weekends, holidays, or evenings, because such questions could reveal a candidate’s religious beliefs. Employers also cannot ask candidates about their criminal records unless the question is specific and relevant to the job opening. While employers can run background checks and are required to collect paperwork for tax purposes, employers also may not ask about applicants’ status as citizens or permanent residency.
Although employers may want to know about candidates’ experience working in Canada, these questions may also expose employers to liability. Rather than ask about Canada-specific experience, interviewers should keep their questions specific to the duties and responsibilities of the position.
Employers in Canada may use probationary periods at the beginning of employment relationships. These periods typically last three months.
In some cases, provinces mandate a probationary period. British Columbia, for example, has a fixed three-month probationary period, even for companies that do not include probationary periods in their employment agreements.
While Canadian employers may hire workers on fixed-term agreements, Remote generally discourages this practice. Fixed-term agreements can expose employers to liability concerns that would be easier to avoid on open-term employment agreements.
Employers are required to maintain all employment records, including payroll records, for at least 36 months after the records’ creation. This law may clash with privacy laws, especially in an evolving regulatory environment.
Remote can help companies keep their employees’ data secure and compliant. We maintain a minimum holding period of 48 months for important documentation to protect our customers during compliance inspections or discovery processes.
Related: How to pay remote workers in Canada
No. Unlike the US, Canada does not practice the concept of at-will employment.
While Canadian employers can terminate employees for legitimate reasons (excluding any that could be construed as discriminatory), employers should be respectful of the employees being let go. That includes providing a reasonable notice period, which tends to be around one month. Factors such as the employee’s tenure at the company, job description, and age may necessitate longer notice periods. Different provinces enforce different standards.
Labor union membership is much more common among Canadian workers than US workers, especially in manufacturing and trade industries. Union rules vary by province, so employees in different provinces may have more or less voting power within their unions depending on where they live and work. Employees who work at unionized workplaces do not have a choice on whether to join the union.
After the legalization of marijuana at the federal level in Canada, employers generally agreed to treat the use of the substance the same way they do alcohol. In most workplaces, employees can do what they want on their own time, but they may not commit crimes (such as driving under the influence) or work while intoxicated, even when working from home.
Canadian laws generally forbid drug tests as a form of pre-employment screening. Employers also may not randomly drug test employees unless they can prove to a court that other efforts to curtail drug use at work have previously failed. Canadian companies may drug test workers after safety incidents if they have reason to believe the employee responsible for the incident may have been under the influence at the time of the event. Companies can also drug test employees who have recently returned from drug rehabilitation treatment.
Many companies with remote workers understand the need for flexible hours and asynchronous collaboration. That can come in handy in Canada, because workers in Canada gain the right to request adjustments to their working hours after six months of employment with a company. Employers can refuse these requests with legitimate reasons, and the standards of what makes a reason legitimate are not high. However, employers should consider the value that flexible work can offer employees and attempt to provide flexible arrangements when possible.
Employers in Canada usually provide their employees with the following benefits:
Recent changes to Canadian labor laws increased employee PTO entitlements. Employees who have worked for one year must receive at least two weeks of paid time off per year. After five years of consecutive employment for the same company, employees must receive a minimum of three weeks off per year. Mandatory leave allotment increases to four weeks after 10 years of employment.
The percentage of wages paid during paid time off varies by province. In Quebec, for example, employees with three years of service or more are guaranteed at least three weeks’ of paid vacation with pay equal to 6% of their annual wages. Quebec employees may legally take all their leave at once, if they desire.
Remote helps companies ensure they provide a compliant leave package for all their Canadian employees. If you would like to provide your Canadian team with more time off or follow an unlimited PTO strategy, Remote can help with that as well.
Employees are also entitled to five days of personal leave each year after working in a position for three months, although employers are only required to pay for the first three. This personal leave applies when employees need to care for a sick family member or are compelled to attend to other important tasks. Personal leave time doubles to 10 days for employees who are victims of family and domestic violence. In cases of family violence, the number of paid days increases from three to five.
Recent changes to Canadian labor laws removed the 30-day minimum requirement for employees to collect holiday pay. Now, employees who have worked for a company for any length of time must receive holiday pay as long as they are employed on the day the holiday falls.
Employees who give birth in Canada are guaranteed at least 15 weeks of maternity leave, although some provinces provide for longer leave periods. Parents are entitled to a minimum of 27 weeks of leave (some provinces provide up to 35 weeks), regardless of gender. Parents can share this leave however they like. Time does not have to be used consecutively or together but must be used within one year of the child’s birth.
Parents who take parental leave receive the lesser of 55% of their regular income or CAD $547 per week, paid by government insurance. Quebec ups this weekly payment to CAD $900. Employers may, of course, pay their employees 100% salary during parental leave if they desire.
Federal law in Canada mandates a minimum of five days of leave for Aboriginal employees to participate in Aboriginal ceremonies, holidays, and cultural activities. These activities can include hunting and fishing. Aboriginal employees must work a minimum of three consecutive months before becoming eligible for this leave.
Canadian law provides employees in all provinces with at least five days of bereavement leave after a death of an immediate family member. Like personal leave, employers are only required to pay employees for three of the five days.
Employees in all provinces are entitled to statutory workers' compensation pay for injuries sustained on the job. Workers' compensation varies by province and is run by provincial governments. Remote can help businesses enroll in workers' compensation insurance programs in every province.
Although Canada does offer state-sponsored health coverage, employers commonly offer more robust health insurance to attract top talent. Private health insurance can provide access to faster care and cover a wider range of procedures. In addition, many employers choose to offer vision and dental insurance.
Some companies offer employees access to other types of insurance for financial security. These offerings typically include life insurance and long-term disability insurance, with premiums paid by the employee, to protect workers in the event of major disasters.
Canadian employers also increasingly offer health care spending accounts, or HCSAs, to employees. These accounts function similarly to HSAs in the US, allowing employees to spend pre-tax dollars on medical expenses.
Many employers provide retirement investment and savings options for their employees. The most common form of retirement investment in Canada is employer-matched contribution to a Registered Retirement Savings Plan, or RRSP.
All employers and employees are required to contribute to the Canada Pension Plan (if outside Quebec) or the Quebec Pension Plan (if in Quebec). The Canada Pension Plan requires both employees and employers to contribute 5.25% of the employee's salary (for a total of 10.5%) on earnings between CAD $3,500 and $58,700. In 2020, the maximum allowed combined contribution is CAD $5,798, or $2,898 apiece. Self-employed individuals are required to pay the full 10.5% of earnings between CAD $3,500 and $58,700, and their contribution maximum is CAD $5,798. Rates and maximums differ in Quebec.
Eligible individuals may begin drawing payments from the Canada Pension Plan at age 60. There is no minimum contribution amount or number of contributions to become eligible. Payments depend on income, amount contributed, and other factors.
The Employment Insurance (EI) program in Canada provides support to workers who become unable to work for a variety of reasons including temporary unemployment and pregnancy. Deductions vary in Quebec, but for most of Canada, employees who earn CAD $54,200 or more pay the maximum premium of CAD $856.36 per year. Employers must contribute 1.4 times the employee share of the EI premium but may qualify for a deduction by offering a short-term disability plan to workers.
Laws on terminating employees in Canada differ from one province to another, though most provinces establish similar guidelines. Because Canada does not have a legal concept of at-will employment, employers must have legally valid reasons to terminate employees and should usually default to attempting to keep an underperforming employee unless that employee’s behavior endangers others.
Notice periods for termination vary based on the employee’s age, length of employment, and job-specific factors, such as availability of comparable work. Generally, the older the employee and the more difficult it would be to find a similar position, the longer the notice period must be.
Quebec has a special rule on termination. After two years of employment, employees gain more protections, similar to those enjoyed by workers in the UK and France. An employee in Quebec with two years of service can only be terminated in a layoff or for serious infractions.
The US-Mexico-Canada agreement replaced NAFTA as the primary trade agreement connecting the three countries. This trade deal sought to provide more rights to workers while eliminating serious pay discrepancies for workers living in different places but performing similar duties.
Under the USMCA, an official process known as the Rapid Response Labor Mechanism sets a process through which investigators can evaluate claims of labor law violations more quickly. Any country found to be in regular violation of the new rules could be subject to penalties including loss of beneficial tariff treatments from the other two members.
The USMCA also introduced several new industry-specific protections, including those aimed at manufacturers and automobile makers. If you employ workers in Canada, Remote’s legal team will help keep you compliant no matter what your industry may be.
With so many different provinces and differences in laws, hiring employees in Canada can be a confusing and challenging task. Remote makes it easy for companies of all sizes to employ, pay, and manage Canadian employees for one low flat rate. Contact us today to learn more about our Canada employer of record solutions.
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