Employer of Record in Canada: A Comprehensive Guide for 2026

Introduction

An Employer of Record (EOR) in Canada is a service that lets you hire employees compliantly in any of the country's provinces without setting up a local entity. It acts as the legal employer, running payroll, Canada Pension Plan (CPP) and Employment Insurance (EI) deductions, and statutory leave on your behalf.

Hiring in Canada means navigating thirteen sets of employment rules. The Canada Labour Code governs federally regulated industries like banking and telecommunications, but most employees fall under their province or territory's Employment Standards Act, and those requirements vary by region.

Minimum wage, overtime thresholds, and probation periods all shift depending on where the hire is based, and Quebec runs its own payroll and parental insurance systems entirely.

This guide covers federal and provincial tax, CPP and EI contributions, minimum wage, working hours and overtime, statutory leave, termination rules, and the work permits foreign hires need before they start.

Canada at a glance

• Estimated Population: 40.1 million‍
• Currency: Canadian Dollar (CAD). The symbol used is $.
• Capital: Ottawa
• Official language: There are 196 officially recognized languages spoken, of which 2 are official languages, 128 are immigrant languages, and 66 are indigenous languages.
• Languages frequently used: English, French
• GDP: USD 2.16 trillion

How to hire employees in Canada?

There are two main ways of hiring employees in Canada.

• Hire directly by setting up your own local entity
• Partnering with Employer of Record services in Canada, like Skuad

How to hire employees in Canada directly?

Hiring employees directly in Canada means registering a legal business entity first, either a corporation, an extra-provincial corporation, or a partnership, then handling recruitment, contracts, and payroll on your own.

Three ways to register a business in Canada:

• Corporation: Incorporated as a legal entity, with no personal liability for shareholders on the company's debts. It can be registered at the federal or provincial level.
• Extra-provincial corporation: Incorporation happens at the provincial level only, and it must meet that province's specific requirements.
• Partnership: A general or limited partnership firm, which can later convert into a limited liability partnership.

Steps to incorporate a holding company or subsidiary in Canada:

• Register the company under the Companies Act, choosing one of the three structures above.
• Confirm the operations are non-commercial where applicable.
• No share capital requirement applies.

Once the entity is registered, the employer creates job descriptions, advertises the role, and interviews and hires candidates directly. A written employment contract isn't mandatory under Canadian labor law, but it's good practice to cover duties, hours, salary, overtime, benefits, probation, and termination terms in writing.

Once you set up your business subsidiary in Canada, job boards like Indeed Canada, Glassdoor, Monster Canada, CareerBuilder Canada, Eluta.ca, Jobbank, Jobillico, and Jobboom can help you find candidates directly.

How to hire employees in Canada through an employer of record?

An employer of record hires employees in Canada by acting as the legal employer, taking over payroll, statutory filings, and compliance with provincial and federal labor laws on your behalf.

This removes the need to examine a new hire's Social Insurance Number (SIN), file the Personal Tax Credits Return (TD1) and Federal TD1, issue the T4 form, or maintain a separate employee file for each hire.

EOR services in Canada follow four steps:

• Sourcing: The EOR collects and processes candidate information to confirm fit for the role.
• Onboarding: The EOR drafts localized employment contracts covering the terms of employment, compensation structure, onboarding guidelines, and statutory Canadian paid vacation.
• Payroll: The EOR pays employees in Canadian dollars (CAD) and calculates deductions in line with Canadian labor laws and entitlements.
• Benefits and entitlements: The EOR facilitates employee benefits, leave, attendance, and other statutory entitlements under Canadian law.

As the client company, you stay focused on the employee's day-to-day work, such as assigning tasks and giving feedback, while the EOR oversees onboarding, hires on your behalf, supports compliance with provincial and federal labor laws, and facilitates payroll, benefits, and taxation from one platform.

When comparing EOR providers in Canada, cost, legal and compliance experience, and cultural awareness and localization are the factors worth weighing most closely.

What are the types of employment contracts in Canada?

Canadian law recognizes two main contract types:

• Indefinite
• Definite

An indefinite contract has no end date and is the default when a contract doesn't state one, and it entitles the employee to reasonable notice or severance if let go without cause.

A definite contract runs for a set period, commonly used for project work or to cover a leave like maternity leave, and it ends automatically at the term's end without notice or severance, though ending it early usually means paying out what's left on the term.

Canadian law also recognizes part-time, casual, and seasonal work. A written contract isn't mandatory, but having one in writing holds up better if a dispute over notice or severance ends up in court.

How does onboarding work in Canada?

To ensure a smooth onboarding process, you must first draft a proper employment agreement, classified in Canada as full-time, part-time, or contract employment.

In Canada, full-time employment means working at least 30 hours a week for a single employer and meeting all other contractual obligations, while any work under 30 hours a week counts as part-time.

Contract employment runs to a predetermined end date, such as completing a specific task or project. Employment contracts can be written or verbal, though unionized employees use collective agreements that put terms in writing, and employers aren't required to put any other terms in writing except tax-related matters and deduction forms.

Employers must offer a safe work environment, give a reasonable notice period during dismissal, and avoid discriminating on protected grounds. Employees, in turn, must fulfill their duties diligently and in good faith, stay loyal to their employer, maintain trade secrets, and keep confidential information private both during and after employment.

Before the employee starts, you'll also need to meet tax obligations, set up payroll, and run background checks.

As your legal employer in Canada, Skuad supports onboarding directly:

• Extends a warm welcome, schedules a call to discuss HR and employment information for Canada, and addresses any queries.
• Creates a bespoke employment agreement in English and French (or another local language).
• Provides the employment agreement and benefits details for the new employee's signing and evaluation.
• Collects the employee's tax and banking details to establish payroll.
• Provides employees with a local point of contact for any queries regarding their job, local HR, or payroll.

The entire onboarding process typically wraps up within two weeks.

How do payroll taxes work in Canada?

Payroll taxes in Canada follow a six-step employer process:

• Confirming whether deductions apply
• Onboarding the new employee
• Opening a Payroll Program account
• Calculating deductions and contributions
• Remitting source deductions
• Filing year-end returns

Setting up payroll starts with confirming whether payroll deductions are required, which depends on how the employer, payers, and trustees are defined. Each new employee needs a Social Insurance Number (SIN) on file, along with a completed Personal Tax Credits Return, Form TD1.

The employer then opens a Payroll Program account to get the payroll number needed to send deductions, and calculates the employer's payroll taxes and contributions.

Once contributions are calculated, the employer remits source deductions, covering Employment Insurance (EI) premiums, income tax withholding, and Canada Pension Plan (CPP) contributions. At year-end, the employer files a summary of salaries and deductions.

To ensure thorough compliance, you need to understand how taxes are calculated for remote workers. On that note, here is a detailed explanation of Canada's payroll taxes.

Canada employer payroll taxes

Every province in Canada has its own taxation rates. The Payroll Deduction Table presents the deduction tables for federal and provincial tax deductions, Canada Pension Plan contributions, and Employment Insurance.

Refer to the official Canadian site, the Canada Revenue Agency (CRA), for more information.

What are the employer tax rates in Canada?

Quebec runs its own parallel system (QPP rather than CPP, plus QPIP and CNESST), so figures differ for Quebec-based employees.

How does the Canada Pension Plan work for employers and employees?

Both the employer and the employee pay 5.95%, matched dollar for dollar. Self-employed individuals pay both halves, for a combined 11.9%.

Income Tax Rates (Federal, 2026) in Canada

What are the compliance rules in Canada for hiring local employees?

Employment law in Canada is governed provincially in nine of the ten provinces through common law. Quebec is the exception, administering employment law under its Civil Code. Contracts and statutes serve as additional sources of Canadian employment law in both systems.

Under the Constitution Act, employment laws fall under provincial jurisdiction. The federal government's role is limited to national programs such as public pension benefits and unemployment insurance.

Otherwise, Canadian labor laws are directly under the purview of individual provinces and territories. The exception is federally regulated industries, including telecom, banking, airlines, and international shipping such as port services, railways, and air cargo, which fall under federal jurisdiction instead. This split makes navigating Canada's legal landscape a challenge for companies expanding remotely.

Canadian labor law applies to Canadian natives, citizens, and foreign workers alike. Baseline employer obligations include:

• Paying employees for work performed
• Maintaining a safe workplace
• Not holding a foreign worker's passport or work permit

What are the types of workers in Canada?

There are three types of workers in Canada:

• Employees
• Dependents
• Independent contractors

Employees are at liberty to enjoy rights and entitlements under Common Law, including leaves, vacations, overtime, etc.

Dependent contractors enjoy some privileges of the Common Law, like a notice period on termination.

Independent contractors enjoy no rights and entitlements under the Common Law.

What's the difference between contractors and full-time employees?

Canadian laws allow businesses to hire two types of workers:

1. Full-time employees
2. Contractors

Employees enjoy statutory benefits and are also protected under the Employment Standards Act, as per employment contracts in Canada.

Some of the benefits that employees are entitled to include payroll deductions, leaves, overtime pay, minimum wages, a notice of termination, etc.

Independent contractors have no such entitlement under any law.

Independent contractors are paid via invoices and are responsible for submitting their taxes and HST to the government.

Here are some other key differences, employees work full-time for the company, while contractors provide services on a project-to-project basis to clients. The company is also responsible for providing tools, uniforms, and office space to employees, while contractors organize the same on their own.

Appendix A of the Canadian Labor Code graphically illustrates the employee/independent contractor continuum.

Workers are protected under Part II and Part III of the Canadian Labor Code and are given the status of employees as per the employer agreement in Canada

In Canada, misclassifying a worker as an independent contractor carries costs and penalties of 10% to 20% on unpaid income tax and CPP premiums, back contributions, and interest, plus workers' compensation exposure. The line between contractor and employee is drawn by control, economic reality, and integration tests, not by the label on the contract.

Skuad supports both hiring models from a single platform:

EOR for full-time employees

• Acts as the legal employer across 160+ countries, so you can hire without setting up a local entity
• Supports employment contract generation aligned with local labor laws across supported markets
• Facilitates statutory contribution workflows covering applicable benefits and deductions
• Supports payroll processing in 70+ currencies with tax withholding and statutory deductions

Contractor management

• Helps onboard contractors with locally compliant agreements that reduce misclassification exposure
• Supports invoice generation, approval workflows, and payment processing across supported markets
• Helps flag classification risk early with built-in worker classification checks
• Facilitates multi-currency payouts across 70+ currencies with no manual reconciliation
• Helps manage contractor records, contracts, and payment history from one dashboard alongside full-time employees

Hiring full-time employees or contractors in Canada? Skuad supports both. See pricing

How is independent contractor status determined in Canada?

Canadian courts determine independent contractor status using four tests:

• The Control Test
• The Economic Reality Test
• The Integration Test
• The Fourfold (Entrepreneur) Test

The Control Test: It assesses the degree of control exerted by a business organization on the actions of the worker. This includes whether the company manages how, when, and where the work is being performed. It also takes into account whether the worker has the freedom to hire other individuals to complete the required task.

The Economic Reality Test: It assesses whether the payment is determined based on the hour/day/week instead of the achievement of a fixed contract amount. It also evaluates whether the worker bears all costs related to the work.

Integration in the organization: It examines the worker’s role, the nature of their work, and whether or not they are an integral part of the company.

The Fourfold test/Entrepreneur Test: It primarily comprises four main dimensions, namely, degree of control over the worker, chance of profit, risk of loss, and ownership of tools/equipment.

What happens if you misclassify an employee in Canada?

In the event of misclassifying employees and independent contractors in Canada, organizations will likely face severe penalties, legal fees, and reputational damage. It includes,

• 10%-20% in penalties on unpaid Income Tax, CPP premiums, plus interest.
• Unpaid premiums of the Canada Pension Plan, including both workers’ and employees’ contributions.
• Workers’ compensation premiums, in addition to fines and interest.
• Under the labor laws of Canada, employees are entitled to minimum wage, parental leave, vacation pay, and all other statutory entitlements.

How does IP protection work in Canada?

The Canadian Intellectual Property Office (CIPO) is the primary body that offers IP services in Canada.

Registering your work with the CIPO is voluntary.

According to the Copyright Act, all original musical, literary, and dramatic works are protected by the law as long as they conform to the conditions set out.

This protection exists for the concerned individual's lifetime and extends up to 70 years following their death.

In Canada, copyright laws cover two rights: moral and economic.

Moral rights refer to the creator's inherent rights, which include the right to remain anonymous or use a pseudonym, the right to be credited for the work, and the right to safeguard their work against any distortion.

In the event that the author/creator decides to assign their copyright ownership, they will still enjoy the moral rights to the work unless otherwise stated.

What visa options exist for hiring foreign talent in Canada?

Foreign talent hired in Canada needs a work permit, the legal authorization to work, not just a visa, which is only the entry document placed in the passport. Canada treats these as two separate things: a visa lets someone enter the country, while a permit authorizes them to work or study once they're there. For hiring, only the work permit determines whether the person can legally work for you.

What are the different types of Canadian work permits?

What are the visa categories in Canada?

Hiring a foreign national in Canada usually means securing a work permit, and employer-specific permits often hinge on a Labour Market Impact Assessment before the hire can start. The documentation and timelines stack up for any international hire.

Skuad supports the work permit process on your behalf, including:

• Supporting work permit and visa applications for foreign employees joining your team
• Helping coordinate documentation with the relevant immigration authorities
• Assisting with employer-specific and open work permit steps as required by law
• Helping track documentation requirements and deadlines across the full permit lifecycle
• Helping keep your team aligned with requirements as renewals and regulations change

How does payroll processing work in Canada?

There are typically two ways to pay employees in Canada.

• Pay directly
• Pay with an Employer of Record in Canada

Processing payments directly to your employees in Canada can be done through cash, cheques, direct deposits, or pay cards.

While this method does give you complete transparency over the entire process, various crucial tasks need to be handled with precision to ensure successful global payroll processing.

These include understanding and complying with all the tax deductions and remittances.

Additionally, you need to follow the steps below.

What are the statutory benefits for employees in Canada?

Some of the statutory employee benefits in Canada include the following,

Employee health benefits in Canada

The Canadian Social Security covers most employees' primary health care.

In addition to this basic coverage, employers offer medical plans to provide additional benefits like dental care, ambulance services, etc.

Bonuses

Bonuses are common in Canada. However, it's unclear if businesses are compelled to pay a bonus if an employee leaves before it is due.

One consideration in the decision will be the circumstances surrounding the separation, such as whether the employee resigned or was fired by the employer.

The contract's terms will most likely determine what happens.

Additional Benefits

Additionally, employers in Canada offer Workers' Compensation and retirement benefits. However, the benefits differ from province to province.

What are the workers’ rights in Canada?

In addition to the employee benefits in Canada, under the labor laws, individuals are also entitled to certain rights. They include the following:

In the past, the probation rules in Canada never had room for enforcing employee rights in Canada.

However, it is different these days as the courts recognize how employees can be vulnerable when they start a new job.

1. Trade Union

In most Canadian jurisdictions, employers can recognize trade unions.

In Ontario, a trade union needs to have support from at least 40% of the employees.

Only when the trade union is recognized does it get bargaining rights for terms and conditions on behalf of employees.

2. Anti-Discrimination Laws/Acts

The Canadian Human Rights Act is the primary law prohibiting discrimination in Canada based on race, sex, marital status, color, religion, and disability, among other grounds.

3. Health and Safety Act

Occupational Health and Safety legislation outlines the roles and responsibilities of employers and workers regarding all workplace safety-related issues.

Additionally, there is a special ‘right-to-know’ regulation specific to hazardous products in Canada.

It consists of various provincial and territorial laws collectively called WHMIS (Workplace Hazardous Materials Information System).

4. Data Protection Laws

The Personal Information Protection and Electronic Documents Act governs data protection and privacy in all other provinces and territories except Alberta, Quebec, and British Columbia.

The provincial privacy law applies in Alberta, Quebec, and British Columbia.

As per the Privacy Laws, employers can collect employees' data and use and disclose it appropriately under permitted circumstances.

What does hybrid and remote work look like in Canada?

Whether hiring Canadian employees for a US company or a UK organization, a simple understanding of the employment and tax laws is not the only criterion for successful recruitment.

You need to consider other factors such as technology requirements, infrastructure, or flexible work arrangements, all of which facilitate successful remote & hybrid employment in Canada. That means reliable tech, clear policies, and communication that keeps teams aligned.

What's the average salary in Canada?

The average salary in Canada is about CA$61,600.

However, please note that this is just a tentative figure. It can vary greatly depending on multiple factors, such as the following,

• The employee’s work experience: An individual with many years of work experience is likely to command a higher salary than someone who has just graduated or is a fresher.
• The job location: Salary compensation may also differ depending on the job location.
• The industry: The salary will differ depending on the domain your company operates in. For example, a marketing specialist in Canada currently earns up to $67010 per annum. On the other hand, an employee working in the HR industry earns an average salary of $70,646 per annum.

Bonuses are not mandatory under Canadian laws. However, employers can include the clause in individual employment contracts, often as a negotiation tool with senior candidates.

Check out Skuad's salary insights tool for Canada, which helps you understand compensation data by province, the latest Canadian salary trends, and make fair, competitive offers to your Canadian hires.

What is Canada's leave policy?

What public holidays does Canada observe?

How do background checks work in Canada?

A background check in Canada verifies the accuracy of a job applicant's personal details before you extend an offer, covering things like social media activity, educational qualifications, previous employment, and credit information.

Employers run these checks to catch inaccurate or misrepresented information early, since hiring on unverified details can lead to costly mistakes down the line.

What are different types of background checks in Canada?

Pre-employment background checks are legal in Canada with the candidate's written consent. Common checks include criminal record checks through the RCMP's Canadian Police Information Centre, employment and education verification, credit checks for finance-related roles, and social media reviews.

How does termination work in Canada?

Termination in Canada runs on two separate requirements:

• Employers must give a notice period of one to eight weeks, or pay in place of that notice, once the employee has completed the minimum continuous service period the law sets
• An employee who has completed at least 12 months of service has a right to severance pay, calculated at two weeks' wages for every year worked before termination.

To begin employee termination in Canada, employers can act on resignation, mutual agreement, termination during probation, misconduct, performance issues, or unauthorized absence, and the same notice and severance rules apply whether the employee resigns or is offboarded.

What happens if you hire in Canada without an EOR?

Hiring without an EOR puts every compliance risk on you directly, since there's no partner tracking Canada's province-by-province rules or catching errors before they become penalties.

• Contractor misclassification: Misclassifying a worker as an independent contractor carries penalties of 10% to 20% on unpaid income tax and CPP premiums, plus interest and workers' compensation exposure.
• CPP and EI shortfalls: Missing or underpaying Canada Pension Plan or Employment Insurance contributions can trigger CRA penalties and back taxes on top of the amount owed.
• Missed provincial filings: With 13 provinces and territories each setting their own rules, a filing requirement that applies in one province can be easy to miss in another.
• Termination notice mismatches: A notice period that doesn't match a province's statutory minimum can turn a routine offboarding into a wrongful dismissal claim.
• Permanent establishment exposure: Operating without a registered entity where you have employees can trigger its own tax filing obligations.

An EOR, like Skuad, takes on this compliance burden directly, acting as the legal employer and tracking these requirements on your behalf, so the risk doesn't sit with you.

What is the difference between an EOR vs. an entity setup?

Entity setup suits a large, long-term Canadian workforce or a physical office presence. An EOR fits testing the market, hiring a few employees, or scaling across provinces quickly, without registering an entity first.

What's the difference between a PEO and an EOR in Canada?

A Professional Employer Organization (PEO) works through co-employment: you share payroll and HR administration with the PEO, but you stay the legal employer on record. That means you need an existing Canadian entity before a PEO can help you.

Co-employment isn't recognized under Canadian law the way it is in the US. So a PEO in Canada functions more as an HR administration partner than a shared legal employer, and compliance liability stays with you.

An EOR works differently. It acts as the sole legal employer, taking on employment contracts, payroll, statutory deductions, and compliance directly, so you can hire in Canada without a local entity at all.

Employer of Record in Canada: Hire across every province

The hard part of hiring in Canada isn't finding talent. It's staying compliant across a patchwork of federal and provincial rules that change by region and by the year. A wrong CPP rate, a missed paid sick day, or a termination notice that doesn't match provincial standards can turn a simple hire into a liability.

An Employer of Record, such as Skuad, carries that weight for you. It acts as the legal employer in any province or territory, running payroll, remitting CPP and EI, applying the right statutory leave, and handling compliant offboarding, so you can hire in Toronto, Vancouver, or Montreal without opening an entity in each.

Book a demo with Skuad to see how it can help you onboard your Canadian hire within weeks.

FAQs

1. What is an Employer of Record in Canada?

An employer of record (EOR) in Canada legally employs your staff on your behalf, acting as the entity of record for payroll, tax, and compliance purposes. It handles Canada Pension Plan (CPP) and Employment Insurance (EI) contributions, applies the right provincial or territorial employment standards for each hire, and manages CRA payroll filings, so you can hire employees across any Canadian province without registering a local entity or navigating each province's rules yourself.

2. How much does an employer of record in Canada cost?

Most EOR providers in Canada typically charge between $200 and $1,000 per employee each month, on top of the employee's salary and mandatory statutory contributions, including CPP at 5.95% and EI at 2.28% of the employer's share. Unlike setting up your own entity, there are no registration, legal, or compliance fees to pay upfront, since the EOR already holds the required Canadian payroll and tax registrations.

3. Can a foreign company hire in Canada without setting up an entity?

Yes. Most EOR providers already hold Canadian payroll and CRA registrations, so they can sign compliant employment contracts and run payroll on your behalf without you registering a corporation, extra-provincial corporation, or partnership. This lets you skip the weeks-to-months incorporation process entirely and start hiring employees in any Canadian province, often within about two weeks, while the EOR handles statutory filings and provincial compliance for you.

4. Why is hiring across Canadian provinces so complex?

Each of Canada's 10 provinces and 3 territories sets its own employment standards, minimum wage, tax rates, and leave rules, so a hire in Ontario can follow different requirements than one in British Columbia or Alberta. Quebec adds another layer, administering employment law under its Civil Code rather than common law, and requiring French-language and Quebec Parental Insurance Plan (QPIP) obligations on top of the usual federal and provincial rules.

5. What are the compliance risks of hiring in Canada without an EOR?

The main risks are misclassifying a worker as an independent contractor, which carries penalties of 10% to 20% on unpaid income tax and CPP premiums plus interest, along with CPP and EI contribution shortfalls, missed provincial filings, and permanent establishment exposure. Any of these can trigger CRA penalties, back taxes, and legal fees, and the risk compounds the more provinces you hire in without a partner tracking each one's rules.

6. How quickly can an EOR onboard an employee in Canada?

Onboarding usually takes a few business days to two weeks once the employee's Social Insurance Number (SIN) and Personal Tax Credits Return, Form TD1, are collected and the employment agreement is signed. Foreign nationals typically take longer, since employer-specific work permits often require a Labour Market Impact Assessment (LMIA) and a valid job offer before the hire can start working in Canada