Employer of record in Canada

Canada presents a compelling opportunity for businesses seeking a skilled and diverse workforce. Its strong economy and favorable immigration policies make it an attractive option. However, working through the intricacies of Canadian employment law can be challenging, especially for international companies.

The challenge lies in the complexities and the need to comply with laws that vary across time zones and numerous provinces, each with its regulations.

An employer of record (EOR) in Canada offers a smart solution. By partnering with an EOR, companies can handle the administrative burden of hiring in Canada. The EOR manages everything from payroll and taxes to work permits and compliance, allowing businesses to focus on core activities and attracting top talent.

Canada at a glance

• Population: 38.2 million people.
• Working hours: 37.5-40 hours per week.
• Education level: 50%+ have post-secondary education (world’s most educated).
• Major business hubs: Toronto, Vancouver, Montreal, Calgary.
• Remote workers: 4.7 million people.
• Provinces/territories: 10 provinces, 3 territories with varying labor laws.

An employer of record in Canada helps international companies access this highly skilled talent pool without the complexity of establishing entities across multiple provinces or dealing with varying provincial regulations.

» Expand operations and streamline payroll in Canada

Key considerations for hiring in Canada

When expanding to Canada, companies face several unique challenges that make partnering with an employer of record in Canada essential for success.

Diverse time zones and work culture

Canada stretches across six time zones, from Newfoundland and Labrador in the Atlantic to British Columbia on the Pacific coast. This vast geography means there are regional variations in work culture, so be mindful when scheduling meetings with employees across different time zones.

Your employer of record in Canada provides expertise in managing distributed teams across multiple time zones and helps you understand regional work culture differences.

They guide you on scheduling best practices and regional communication preferences that vary from the Maritime provinces to Western Canada.

Cost of living pressures on compensation

As the cost-of-living crisis continues to escalate in Canada, with inflation rates reaching multi-decade highs, employers must be mindful of the increasing financial pressures their current and prospective employees face.

Offering competitive compensation packages that account for the eroding purchasing power of wages has become a crucial factor in attracting and retaining talent.

Companies should conduct thorough market research to ensure their salary ranges and benefits align with the rising costs of essential expenses such as housing, groceries, and transportation.

Failure to address these concerns may result in higher employee turnover, decreased productivity, and difficulties in hiring top candidates who prioritize financial security in the face of mounting economic challenges.

The EOR in Canada provides current market salary data and helps you adjust compensation packages to reflect regional cost-of-living differences. They monitor inflation impacts and guide you on competitive benefits that address employee financial pressures in expensive markets like Vancouver and Toronto.

Favorable immigration and hiring policies

Canada has a well-established immigration system with clear paths for skilled workers to obtain work permits and visas. This streamlined process makes it easier for companies to recruit talent from outside the country, expanding their applicant pool.

• Global Talent Stream: Canada’s Global Talent Stream (GTS) program expedites the process for employers to bring in highly skilled foreign workers for in-demand occupations. This program allows employers to obtain work permits and visas for qualified candidates within two weeks.
• Labor Market Impact Assessment (LMIA) exemption: Under the GTS program, employers hiring for certain high-skilled positions, such as software engineers, computer programmers, and data scientists, are exempt from the requirement to obtain a Labor Market Impact Assessment (LMIA).
• Facilitated immigration pathways: Programs like the Express Entry system and provincial nominee programs allow skilled technology professionals to obtain permanent resident status, ensuring the long-term retention of valuable talent.

An employer of record in Canada handles all immigration complexities, including Global Talent Stream applications, LMIA exemptions, and Express Entry processes. They work with immigration experts to ensure quick work permit processing and help you access Canada’s skilled worker programs efficiently.

Canada employer of record (EOR) vs. entity

Employer of record

An employer of record (EOR) in Canada is a third-party organization that becomes the legal employer of workers on behalf of another company (the client company). The EOR is responsible for all employment-related tasks, such as payroll, taxes, benefits, and compliance with labor laws.

Pros

• You get simplified employment processes.
• There is compliance with local labor laws and regulations ensured.
• You have flexibility in hiring and managing a workforce.
• You have access to expertise across all provinces and territories.
• You get quick market entry without entity setup.

Cons

• There are additional costs for the EOR services.
• You have a potential loss of direct control over employees.
• There is a dependency on the EOR provider for compliance.

Legal entity

A legal entity is a company or organization registered and recognized under Canadian law. It can hire and manage its employees directly, taking full responsibility for all employment-related matters.

Pros

• Direct control over employees.
• No additional cost for third-party services.

Cons

• You face an increased administrative burden for employment-related tasks.
• You have responsibility for ensuring compliance with labor laws and regulations.
• There are potential challenges when hiring and managing employees in multiple jurisdictions.
• You must handle provincial variations in labor laws.

» Explore global immigration laws for successful employee relocation

Work permits

In Canada, most foreign nationals need a work permit to be legally employed. Various work permits are available, depending on the situation and the nature of employment.

• Employer-specific work permit: This is the most common type of work permit. You’ll need a job offer from a Canadian employer who has gotten a labor market impact assessment (LMIA) to prove that they couldn’t find a Canadian citizen or permanent resident to fill the position.
• Open work permit: This allows you to work for any employer in Canada. It’s available for specific situations, such as recent graduates from Canadian universities or spouses of people with valid work permits.
• Work permits for specific groups: Workers, including agricultural workers, caregivers, business visitors under trade agreements, and participants in the International Experience Canada program for working holidays, can obtain work permits tailored to their needs.

Processing requirements:

• Valid job offer from a Canadian employer.
• LMIA approval (unless exempt through programs like GTS).
• Educational credentials and work experience verification.
• Medical examinations and security checks.
• Proof of financial support and ties to the home country.

Your employer of record in Canada handles all work permit complexities, including LMIA applications, Global Talent Stream processing, and documentation requirements. They work with immigration specialists to ensure your employees get proper work authorization quickly and efficiently.

Using an EOR for payroll and taxes in Canada

Payroll cycle: Bi-weekly, monthly

13th salary: No

Employers in Canada must deduct and remit statutory deductions such as federal and provincial income tax, Canada Pension Plan (CPP) contributions, and employment insurance (EI) premiums from employees’ pay.

• Federal income tax: Progressive rates from 15% to 33%.
• Canada Pension Plan (CPP): 5.45% to 5.9% (employer contribution).
• Employment Insurance (EI): 1.6% to 2.2% (employer contribution).
• Provincial health taxes: 0.98% to 4.3% (varies by province).

Detailed tax breakdown:

1. Federal income tax: Progressive rates up to 33%.
2. Provincial income tax: Varies by province (addition to federal).
3. CPP contributions: Maximum $3,867.50 annually (2024).
4. EI premiums: 1.58% employee, 2.212% employer.
5. Workers’ compensation: Varies by province and industry.
6. Provincial health taxes: Ontario 1.95%, Quebec varies.

Statutory deductions employers must handle:

1. Federal and provincial income tax withholding.
2. Canada Pension Plan (CPP) or Quebec Pension Plan (QPP).
3. Employment Insurance (EI) premiums.
4. Provincial payroll taxes, where applicable.

An employer of record in Canada handles all payroll calculations, tax withholdings, CPP/EI contributions, and provincial tax filings, ensuring accurate and timely payments while maintaining full compliance with federal and provincial tax authorities.

Minimum wage

Canada does not have a single federal minimum wage. Each province and territory sets its minimum wage rates, which are updated regularly based on inflation and cost of living.

Provincial minimum wage rates (2025):

1. Nunavut: $19.00 per hour (highest in Canada).
2. Yukon: $17.94 per hour.
3. British Columbia: $17.85 per hour.
4. Ontario: $17.20 per hour (increasing to $17.60 in October 2025).
5. Northwest Territories: $16.70 per hour.
6. Quebec: $16.10 per hour.
7. Newfoundland & Labrador: $16.00 per hour.
8. Prince Edward Island: $16.00 per hour (increasing to $16.50 in October 2025).
9. Manitoba: $15.80 per hour (increasing to $16.00 in October 2025).
10. Nova Scotia: $15.70 per hour (increasing to $16.50 in October 2025).
11. New Brunswick: $15.65 per hour.
12. Alberta: $15.00 per hour.
13. Saskatchewan: $15.00 per hour.

Key minimum wage features:

1. Annual adjustments based on Consumer Price Index (CPI).
2. Northern territories generally have higher rates due to cost of living.
3. Some provinces have scheduled increases throughout 2025.
4. Rates range from $15.00 to $19.00 across Canada.

Average salary benchmarks by sector:

1. Technology: CAD $60,000-120,000+ annually.
2. Finance: CAD $50,000-100,000+ annually.
3. Healthcare: CAD $45,000-90,000+ annually.
4. Engineering: CAD $55,000-110,000+ annually.
5. Management roles: CAD $70,000-150,000+ annually.

Regional salary considerations:

• Toronto/Vancouver: 20-30% higher than the national average.
• Calgary/Edmonton: Competitive due to the oil industry.
• Atlantic provinces: Generally lower, but with a lower cost of living.
• Remote work: Increasingly common with competitive compensation.

Your employer of record in Canada provides current provincial wage data and helps you create competitive offers that meet minimum wage requirements while attracting top talent in Canada’s educated workforce.

EOR employment contracts

When drafting employment contracts for Canada, your EOR in Canada includes the following essential items:

• Job title and description.
• Start date and location.
• Salary and bonuses (if applicable).
• Benefits package details.
• Working hours.
• Any overtime expectations.
• Notice period.
• Severance pay.
• Confidentiality clause.

Employment contract requirements:

1. Written contracts are recommended (some provinces require written terms).
2. Must comply with provincial employment standards.
3. Probation periods: 29 days to 6 months (varies by province).
4. Working hours: Maximum 40 hours per week (some provinces 37.5).
5. Clear termination and severance provisions.
6. French language requirements in Quebec.

Your employer of record in Canada ensures all employment contracts meet provincial legal requirements while protecting your company’s interests through proper IP clauses and confidentiality agreements that comply with Canadian business practices.

Mandatory employee benefits

Federal, provincial, and territorial laws mandate certain employee benefits in Canada.

• Employment insurance (EI): EI provides temporary financial assistance to eligible workers who have lost their jobs through no fault of their own, as well as maternity, parental, sickness, and compassionate care benefits.
• Canada Pension Plan (CPP) or Quebec Pension Plan (QPP): CPP/QPP is a mandatory contribution plan that provides retirement pensions, disability benefits, and survivor benefits.
• Statutory holidays: Employers must provide employees with paid time off for federally recognized statutory holidays.
• Workers’ compensation: Each province and territory has its own workers’ compensation program that provides benefits and support to workers injured or ill due to work.
• Statutory leaves: Many provinces and territories have specific statutory leaves, such as maternity, parental, family responsibility, and sick leave, that provide job protection and, in some cases, benefits for eligible employees.
• Health insurance: Some provinces and territories may require employers to provide or contribute to their employees’ provincial/territorial health insurance plans.

An employer of record in Canada ensures all employees receive mandatory benefits while managing enrollments, contributions, and compliance with evolving federal and provincial benefit requirements.

Non-disclosure agreements

In Canada, non-disclosure agreements (NDAs) can be enforceable on employees, subject to certain conditions.

• Unilateral NDA: The most common type used with employees in Canada, the employee agrees to keep the employer’s confidential information secret, including trade secrets, customer lists, and financial information.
• Bilateral NDA: Used for collaborations or joint ventures where both sides exchange confidential information. In this scenario, the employer and the employee have legal obligations to keep the disclosed information secret.

Canadian NDA considerations:

1. Must be reasonable in scope and duration.
2. Should protect legitimate business interests.
3. Cannot prevent employees from earning a livelihood.
4. Must comply with provincial employment standards.
5. Subject to common law reasonableness tests.

The employer of record in Canada ensures all NDAs and confidentiality agreements are properly drafted to comply with provincial employment standards while protecting your intellectual property.

Paid & sick leave

• Vacation leave: Employees are entitled to at least two weeks of paid vacation time after one year.
• Statutory holidays: Employees are entitled to paid time off for federally and provincially designated statutory holidays
• Sick leave: Federally regulated employees are entitled to 3 days of paid personal/sick leave after three months. Several provinces have introduced paid sick leave requirements ranging from 3 to 10 days per year.
• Bereavement leave: Most provinces require employers to provide 3-5 days of unpaid leave for the death of an immediate family member.
• Maternity/paternity leave: Employees are entitled to up to 17 weeks of maternity leave and up to 63 weeks of parental leave, with job protection.
• Family responsibility leave: Several provinces mandate unpaid leave (typically 3-5 days) for employees to care for ill family members or attend to family responsibilities.
• Compassionate care leave: Federally regulated employees are entitled to up to 28 weeks of unpaid leave to care for a gravely ill family member.

The employer of record in Canada handles all statutory holiday compliance across provinces, ensuring employees receive proper holiday pay, managing provincial holiday variations, and calculating premium pay for employees who work on statutory holidays.

They maintain up-to-date holiday calendars for all provinces and ensure accurate payroll processing during holiday periods

Public holidays

• New Year’s Day – January 1.
• Good Friday – Friday before Easter Sunday – late March/early April.
• Easter Monday – Monday after Easter Sunday.
• Victoria Day – Monday preceding May 25.
• Canada Day – July 1.
• Labor Day – Monday of the first week in September.
• National Day for Truth and Reconciliation – September 30.
• Thanksgiving Day – Second Monday in October.
• Remembrance Day – November 11.
• Christmas Day – December 25.
• Boxing Day – December 26.

An employer of record in Canada handles all statutory holiday compliance across provinces, ensuring employees receive proper holiday pay, managing provincial holiday variations, and calculating premium pay for employees who work on statutory holidays.

They maintain up-to-date holiday calendars for all provinces and ensure accurate payroll processing during holiday periods.

Using an EOR to onboard new employees in Canada

Before the first day:

• The EOR in Canada ensures that all necessary employment documentation, such as employment contracts, tax forms, and regulatory requirements, is in order and complies with Canadian labor laws.
• The EOR sets up the payroll system for the new employee, ensuring accurate calculation and timely payment of salaries, taxes, and other statutory deductions.
• The EOR facilitates the enrollment of new employees in applicable benefit programs, such as health insurance, retirement plans, and other perks offered by the organization.
• If required, the EOR can assist with conducting background checks, verifying references, and ensuring the new employee meets the necessary qualifications and requirements.

The first day:

• The EOR can guide and support the organization in creating a welcoming environment for the new employees, including preparing an orientation package and introducing them to the company culture and policies.
• The Canadian EOR coordinates with the organization’s IT department to ensure the new employee can access necessary tools and resources, such as computer equipment, software, and email accounts.
• The EOR ensures that all required onboarding documentation, such as NDA and intellectual property agreements, is properly executed and filed.

The first week:

• The EOR can assist in coordinating any necessary training programs or onboarding activities to help the new employee quickly become productive and familiar with their role and responsibilities.
• The EOR in Canada can set clear performance expectations and establish a performance management plan for new employees.
• The EOR serves as a point of contact for the new employee, addressing any questions or concerns they may have during the initial onboarding period.

Beyond the first week:

• The EOR continuously monitors and ensures compliance with Canadian labor laws, tax regulations, and changes to employment policies or benefits.
• The EOR supports the organization throughout the employee’s lifecycle, handling tasks such as performance reviews, leave management, terminations, and offboarding when necessary.
• The Canadian EOR provides regular reports and analytics to the organization, enabling data-driven decision-making related to HR and workforce management.

How EORs protect your company’s IP in Canada

• Compliance with Canadian IP laws: EOR providers are well-versed in Canadian employment law, including crucial aspects related to IP protection governed by the Patent Act, the Copyright Act, the Trademarks Act, and the Trade Secrets Act. They ensure employment contracts and agreements adhere to these regulations, minimizing the risk of IP infringement or misuse by foreign employees.
• Confidentiality and NDAs: EOR services can facilitate the creation and execution of NDAs between the client company and foreign employees. These NDAs, compliant with Canadian law, can include specific clauses safeguarding the client company’s trade secrets, proprietary information, and other IP assets.

Canadian IP protection framework:

1. Strong federal intellectual property laws.
2. Patent Act protecting inventions and innovations.
3. Copyright Act covering creative works and software.
4. Trademarks Act for brand protection.
5. Trade secrets protection through employment contracts.

Your employer of record in Canada ensures all employment contracts include comprehensive IP protection clauses, manages confidentiality agreements, and works with local legal experts to safeguard your intellectual property under Canada’s robust legal framework.

How EORs ensure compliance with labor laws in Canada

Firstly, EORs in Canada ensure compliance with data protection laws like PIPEDA. This involves handling employee data securely and respecting their right to access and control their data.

Additionally, EORs must monitor provincial employment standards to ensure proper wages, benefits, and termination procedures for foreign employees. They also handle tax withholding and remittances to ensure compliance with income tax, employment insurance, and pension contributions.

Employment law compliance areas:

1. Personal Information Protection and Electronic Documents Act (PIPEDA).
2. Provincial employment standards (varies by province).
3. Federal and provincial health and safety regulations.
4. Human rights legislation (federal and provincial).
5. Workers’ compensation requirements.
6. Immigration and work permit compliance.

An employer of record in Canada maintains expertise in all compliance areas, monitors federal and provincial regulatory changes, and ensures your company meets all legal obligations while building positive employee relationships across Canada’s diverse provinces.

» Consult a country expert on Canadian hiring regulations

Offboarding employees in Canada

• Notice of termination or pay in lieu: Employers must provide employees with either advance written notice of termination or pay instead of notice unless the termination is for just cause.
• Severance pay: Depending on the employee’s length of service and the size of the employer’s workforce, employees may be entitled to severance pay upon termination, as prescribed by the applicable employment standards legislation.
• Continuation of benefits: During the statutory notice period, employers may have to continue providing certain benefits, such as group insurance coverage, to the terminated employee.
• Mass terminations: In the case of mass terminations or layoffs involving many employees, additional notice requirements and potential obligations may apply under the applicable employment standards legislation or the federal labor code.
• Just cause: If an employer terminates an employee for just cause (e.g., serious misconduct or willful disobedience), the employer may not be required to provide notice or pay instead of notice, subject to certain exceptions and limitations.
• Human rights considerations: Employers must ensure that termination decisions are not based on prohibited grounds of discrimination, such as age, race, disability, or religion, as outlined in human rights legislation.
• Employment contracts: If an employee has an employment contract, the termination provisions and obligations in the agreement must be followed, provided they meet or exceed the minimum requirements under the applicable employment standards legislation.

Your employer of record in Canada manages all termination procedures compliantly, ensures proper notice periods, calculates severance accurately, and maintains documentation to minimize legal risks while protecting your company’s reputation.

Use an EOR to start hiring in Canada today

Navigating the complexities of Canadian employment laws across six time zones and numerous provinces can be a significant hurdle for businesses hiring in the country. However, partnering with Papaya Global provides a strategic solution.

Papaya’s local experts offer comprehensive HR, legal, compliance, and global payroll support to ensure your Canadian workforce remains fully compliant. With over 160 countries covered, Papaya shields your company from liabilities.

You can confidently expand into Canada using Papaya Global’s EOR solution without establishing entities in multiple provinces. Focus on growing your business while we handle complex regulations, immigration processes, and ongoing compliance requirements that make Canada expansion successful.

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