How to use an Employer of Record in Canada

Research has shown that hiring a distributed team has distinct long-term benefits for your employees — productivity, engagement, and retention — and hence, your business.

A robust economy, a highly skilled workforce, and the ease of doing business — all make Canada a favorable place to hire remote workers. If you’re interested in expanding your remote workforce to Canada but don’t quite know where to begin, you’re in the right place. 

To begin employing in Canada, you’ll need to open your own legal entity, which can take a significant amount of time and resources. Moreover, Canadian provinces have their own set of employment and labor laws that you’ll have to be compliant with. Navigating the multiple challenges of global hiring can seem daunting.

But you can simplify the hiring process if you use an employer of record (EOR) to hire and pay workers on your behalf. An EOR acts as the documented employer, which means that you don’t have to establish a new entity to hire Canadian workers. You manage staff performance while the EOR takes care of payroll and human resource functions. An EOR is a cost-effective solution to global expansion without the headache of creating and managing a new facility in a different country. 

Want to discover more about how to use an employer of record in Canada? Keep reading. 

5 steps to hiring employees in Canada using an employer of record:

1. Research and weigh the pros and cons of each potential employer of record. Identify your business needs and make a list of potential EOR providers on the market that suit your requirements. The ideal EOR must maintain compliance and manage global employees in alignment with local labor laws. 

2. Determine the best fit for your business. Ask the right questions before selecting an employer of record in Canada. Does the EOR own its own entity in Canada, or does it rely on third-party vendors? Does it have experts on hand to manage payroll, compliance, and contracts? Does the EOR understand worker classification guidelines? Does it offer competitive benefits for Canadian employees? 

3. Check what other customers say.  Take a look at the potential EOR’s website, and read client testimonials, online reviews, and discussion boards to learn more about what the EOR’s clients and customers are saying about its services. 

4. Get insight into the kind of employee experience the EOR will provide your team. You want your employees to have a positive experience, so make sure the EOR will provide a high-quality employee experience. Is the EOR platform easy to use? Does it offer employees a seamless onboarding process? What hours are they available to handle employee queries? Do they pay salaries on time?

5. Work with the EOR to provide an equitable compensation package. To attract top talent, work alongside your EOR to create a competitive compensation and benefits package for your workers in Canada. Additionally, make sure that the EOR has high-level protections in place for your intellectual property rights while keeping your information and employee data safe and secure.

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What are the benefits of using an EOR in Canada? 

Global employment can be overwhelming and costly to most businesses. An EOR allows your company to expand operations beyond borders without needing to establish a local entity in Canada to legally employ workers.

If you decide to establish an entity in Canada, your business could be looking at thousands of dollars in expenses. Not only would you have to establish another entity, but you would have to learn the local labor laws and requirements. An employer of record handles all of this for you so you can focus on managing and developing remote workers into exceptional team members. 

In addition to giving you the legal resources to hire internationally, an EOR in Canada can also help you manage human resource functions because they’re experts in Canadian hiring practices. They can advise you on what compensation structure is required, what employee benefits are expected, and what payroll taxes to submit for your organization. You can use an EOR to help with the following aspects of your business:

• Remuneration

• Termination

• Labor compliance 

• Employment law compliance 

• Payroll service

• Benefits

• Payroll tax

Canada has 10 provinces and three territories; each one of them has its own set of labor laws and requirements. With an EOR, you do not have to learn or understand them all. The EOR will apply the appropriate requirements to employees based on where they are located.

A reliable employer of record like Remote can make it simple for you to hire and pay remote workers in Canada. We handle the legal requirements, create compliant employment contracts, set up payroll, and can onboard your workers in Canada within nine working days. 

For more guidance on how an employer of record service works, read our helpful article on how to choose the right EOR for your business.

How much does it cost to use an EOR in Canada? 

There are different kinds of EOR service providers and pricing for each, varies depending on the location of the worker, the complexity of doing business in their specific country, and the number of workers you want to hire. Some companies offer additional services, such as contractor management and special pricing for social purpose organizations. 

Generally speaking, costs can be as low as $599 to upwards of $2,000 per employee, per month. It might be tempting to select a low-cost provider, but make sure you do a proper check on what their services include, as they might not offer a high level of security or compliance. Many EOR providers may also charge hidden fees, especially if they work with third-party vendors.

Remote offers low, flat-rate pricing for EOR services in Canada while maintaining watertight security measures against threats to data security and compliance.

Hiring in Canada 

Employers that want to hire in Canada should understand the specific labor laws and guidelines around employment for the province the worker resides in. Each province sets its own laws, but employers are also required to adhere to a layer of federal laws. 

Unions are common in Canada, especially in trade roles or manufacturing companies. Once a company has a union, the employees become members. Employees do not have a choice in joining, so it is important to understand how to speak to and negotiate with union representatives. 

When conducting interviews in Canada, you cannot ask certain questions about career history or experience. Drug testing is not a legal part of the job application process. Once you hire Canadian employees, random drug testing is not allowed unless you can prove to the courts that there is an ongoing drug issue at your organization. 

Additionally, employers cannot ask questions about gender, religious beliefs, or age. Other illegal topics include availability for working weekends, criminal history, and citizen status. The following sections will look into more detail about employment contracts, labor laws, employee benefits and compensation, terminations, and payroll in Canada.

Employment contracts and agreements in Canada

In Canada, an employment contract sets out the terms and conditions of the employer-employee relationship and has to outline key provisions such as compensation, benefits, and termination clauses. Contracts are not enforceable unless they meet minimum employment standards, human rights laws, and occupational health and safety requirements. 

Employment contracts generally cover details of remuneration, termination terms, notice periods, and probationary periods. Contracts often also outline rules around sharing sensitive information, establishing a competitive company, working for competitors, and how contract changes will be implemented. 

Fixed-term contracts are legal, but not popular due to the liabilities associated with them. Employers tend to feel more protected with open-term contracts. For fixed-term contracts with a specified end day, notice is not required, since both parties have agreed upon the duration of the contract.

The probationary period typically lasts three months in Canada; however, it’s not a mandatory requirement.

Labor law compliance in Canada 

Hiring in Canada can come with a few challenges. While there are a few labor laws enforced at the federal level, most provinces create and determine their own set of rules. That means laws will vary based on where your worker lives. Each province has laws around labor conditions, taxes, benefits, and payroll processes. 

Employers must provide a work schedule to employees four days before it is set to change. If an emergency or unforeseen event occurs, employees must have 24 hours' notice before coming to work. After an employee has been with an employer for six months, they can ask for flexibility and adjustments to their work schedule. Employers can reject requests for a legitimate reason. 

Each province has a set of workers’ compensation laws in place for employees who are injured on the job.  

Canada —

20 min

What are labor laws like in Canada?

Canada’s provinces enforce different amounts of paid leave, different tax rates, different minimum wages, and other contributions from employees and employers. Rather than cover every small difference, let’s take a high-level look at Canada’s labor laws to set expectations for what it’s like to employ Canadian workers.

Payroll and payroll taxes in Canada

Canadian employees are accustomed to biweekly payroll cycles. Employers can expect to pay a 5.25% contribution to the Canadian Pension Plan. Employers also have to pay an employment insurance tax that varies by province, but is generally 2.2%. 

Each province has its own income taxes in addition to federal income tax rates. Tax rates for 2023 are listed below (in Canadian dollars):

• 15% for incomes up to $53,359

• 20.5% for incomes between $53,359 and $106,717

• 26% for incomes between $106,717 and $165,430

• 29% for incomes between $165,430 and $235,675

• 33% for incomes more than $235,675

There are specific laws and additional taxes that are applicable while hiring in Quebec. Employers can expect to pay 1% for workforce skills and development, 0.07% for labor standards, 1.7% to 4.25% for the health services fund, and 0.736% for the Quebec parental insurance fund. Other taxes include 1.68% for employment insurance, 0.022% to 0.08% for CNESST (a labor rights organization), and 5.4% for the Quebec pension plan.

Employers must keep employment and payroll records for three years after they are created. Having processes and systems in place to protect your employees’ data is a must.  For more information on payroll deductions, read our helpful article on paying remote workers in Canada.

Canada —

7 min

How to pay remote workers in Canada

To pay remote employees in Canada, companies have two options. The first option is to open a local legal entity in the province where the employee works. The second option is to work with a global employment solution, or employer of record, like Remote.

Canada employee benefits and compensation 

Canadian benefits vary by province, but recent laws increased the amount of paid time off employers must provide to employees. Any employee with at least one year of tenure legally is required to get at least two weeks of paid time off. After five years of employment, time off increases to three weeks. Paid time off increases to four weeks after 10 years of employment. 

Employees must be given five days of personal leave per year after three months of employment. Employers are only required to pay for the first three days. Canada has 20 public holidays, though only a few of them are national holidays. 

In Canada, you are required to provide 15 weeks of maternity leave and 27 weeks of parental leave. Parental leave can be used by either parent and does not have to be used consecutively, but it does have to be within the first year after the birth of the child. Parents get 55% of their normal wages, or $547 CAD during leave. Employers have the option of paying 100% of their wages. 

Employees get five days of bereavement leave, with employers paying wages for the first three days. Aboriginal employees get five days of leave to participate in ceremonies. 

Other leaves include 17 weeks of unpaid medical leave, critical illness leave to care for family members, and unpaid leave to serve on juries or act as witnesses during legal proceedings. Canada also offers unpaid leave for parents of children who go missing. 

Although Canada has state-sponsored health coverage, employers often provide additional health care benefits to cover items such as prescription medication, hospital visits, or supplemental health care.

If you are hiring contractors in Canada, you can provide benefits to those workers, too. Remote offers several options to provide benefits for contractors workers establishing an employer-employee relationship. 

The minimum wage varies by province, but typically ranges between $11.75 and $16 an hour. Overtime is paid at 150% of normal wages for hours worked beyond 40 hours. Employers can provide extra time off in place of overtime pay. Depending on the province, some overtime rules may have daily limits. 

Canada severance pay and terminations

In Canada, terminations are frowned upon. Canadian laws encourage employers to work with underperforming workers to develop skills and solve whatever issues they are having with their jobs. Termination is allowed for underperforming workers if those people are a danger to other workers. 

At-will employment is not allowed in Canada. If you have to terminate an employee, keep in mind that Canadian laws protect workers. If employees are terminated after more than two years on the job, those protections increase. 

Read Remote’s guide to hiring in Canada for more information on hiring remote workers in the country.

Canada —

12 min

Benefits to offer employees in Canada

Canada’s provinces and territories have a variety of differences in employment law, but statutory benefits remain mostly consistent across the country. Quebec can be an outlier in certain areas, but for the most part, employers of Canadian workers can prepare a standard benefits package that will be compliant throughout the country.

What are the risks of employee misclassification in Canada? 

Canada, like many other countries, has specific guidelines regarding the misclassification of workers. Whether it is intentional or accidental, the consequences could be disastrous for your organization. When you misclassify an employee as a contractor, you not only face penalties and fines, but it could also lead to legal disputes and loss of business in the country. Not only will the business have to pay back wages to the worker, but they could be responsible for back benefits. 

Using an employer of record in Canada can help you mitigate these potential risks for your organization. As experts in Canadian hiring practices, an EOR has in-depth knowledge of employment laws and can correctly classify your employees. 

It’s best to safeguard your company’s reputation and revenue by using Remote’s EOR services to avoid misclassification risks and stay in compliance with Canadian labor laws.

Contractor Management —

16 min

When should you convert a contractor to an employee?

Switching a contractor to employee status is an important decision. Discover the best time to convert a contractor to full-time work.

Get started with an EOR in Canada 

If you are ready to hire international employees without establishing an entity in Canada, an employer of record is the ideal solution for your organization! 

Remote’s employer of record services can help you hire workers in Canada quickly and compliantly. We handle payroll, labor, employment law compliance, and benefits packages. Remote has the infrastructure, expertise, and knowledge you need to hire Canadian contractors and employees. Whether you want to hire one worker or an entire team, Remote is set up to assist you. 

Not only do we provide a world-class experience for your employees, but we form a partnership with you to ensure your business needs are met.

With Remote, your business gets the benefits of hiring talented workers in Canada without any of the associated risks. Your organization can achieve global growth and expansion while remaining 100% compliant with laws and regulations. Our legal experts remain updated on local legislative changes, so you don’t have to worry about it. 

Remote’s global HR platform makes it simple to hire, onboard, and pay international employees in Canada. If you’re ready to begin your global expansion journey in Canada, get started with Remote’s employer of record services today!

Read Remote's expert guide to hiring in Canada

Use our expert hiring guide for information on local benefits, taxation, and compliance requirements to help you employ in Canada with ease.

Read now