Employer of Record (EOR) in Canada

Employer of record Canada bird's view of a city

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Employer Of Record In Canada

A new market entails new risks and opportunities. With skilled and well-equipped on-ground staff, your journey becomes easier and simpler. Skuad's EOR solution has helped hundreds of businesses fulfill their global vision in an optimized manner. Use our in-house and local resources, infrastructure, and knowledge to recruit and hire the best skills in Canada. While you focus on the bigger picture and primary company operations, leave the micro-level HR core tasks to Skuad’s pioneering solution. Learn more about how Skuad’s EOR solution can help you set up a business entity in Canada.

Canada At A Glance

Estimated Population: 37.53 Million (2019)

Currency: Canadian Dollar (CAD). The symbol used is $.

Capital: Ottawa

The number of officially recognized languages spoken: 196 languages, of which 2 are official languages, 128 immigrant languages, and 66 indigenous languages.

Languages frequently used: English, French

GDP:5% (Real GDP Growth, Annual % change)

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Employment In Canada

As per the Canadian Constitution, the federal government does not have much say in the labor laws in Canada. The federal government only runs the federal programs of public pension benefits and unemployed insurance. Otherwise, Canadian labor laws are directly under the purview of individual provinces and territories. However, industries like airlines, telecom, and international shipping are governed by federal jurisdiction. Navigating the complex legal landscape can be a big challenge for companies looking to expand remotely. Skuad's EOR Solution can offer customized solutions that meet your unique HR needs.

Canadian Labor Laws are applicable for Canadian natives, citizens, and foreign workers. Some of the basic rules for employment in Canada include compulsory pay for work, workplace safety, and the prohibition of employers from taking a passport or work permit from foreign workers.

Here are some important Canadian Employment Laws to be aware of:

Title Explanation
Main sources of Employment Laws The Common Law governs the employment laws in Canada in 9 Canadian provinces. Only in Quebec, the Civil Code of Quebec administers employment laws. The other sources of Canadian employment law are contracts and statutes.
As per the Canadian Constitution Act, the employment laws in the country are governed by provincial jurisdiction except for industries like telecom, banking, and international shipping like port services, railways, and air cargo services.
Type of workers There are three types of workers in Canada – employees, dependent, and independent contractors. Employees are at liberty to enjoy rights and entitlements under the Common Law, including leaves, vacations, overtime, etc. Dependent contractors enjoy some privileges of the Common Law, like notice period on termination. Independent contractors enjoy no rights and entitlements under the Common Law.
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 of terms and conditions on behalf of employees.
Employment contract law Canada Employment contracts can be written or verbal. There are collective agreements where the terms and conditions are mentioned in writing by unionized employees. Except for tax-related matters and deduction forms, employers are not obliged to offer any other terms in writing to employees.
Employers need to comply with all statutory requirements. They are obliged to:
  • Offer a safe work environment
  • Offer reasonable notice period during dismissal
  • Not discriminate on protected grounds
Employees, in turn, are obliged to:
  • Fulfill all duties diligently and in good faith
  • Ensure employer loyalty
  • Maintain trade secrets
  • Ensure confidentiality of information not just during work but after the end of employment too
Working hours The standard workweek in Canada is 40 hours, and workday hours are eight hours per day. However, provincial laws regulate the working hours of employees. In a week of seven days, one day off is granted.
Compensation & Bonus The salary compensation is different from industry to industry. It also differs as per province and region of employment. However, the average salary in Canada is about CA$54,630.
Bonuses are not mandatory as per Canadian laws. However, employers can cover the clause in individual employment contracts, often as a negotiation tool with senior candidates.
Leaves Maternity leaves are not a paid entitlement in Canada, though benefit coverage exists. Employees choose to take up to 17 weeks of maternity leave. Additionally, some states like Quebec have additional leverage; there is insurance where new parents receive a percentage of earnings. In Ontario, employers cannot initiate action for new mothers, while in certain other states, the seniority of the employees is intact while on leave.
Employees also receive up to 63 weeks of unpaid parental leave, or 71 weeks if the leave is shared between parents. The leave may be taken within 78 weeks from the date of birth or from the date the child is adopted.
Holidays Most provinces permit about two weeks of paid holidays once a year after completing a year of service. In federally regulated industries, workers get up to two weeks of paid vacation, and subsequently three weeks on completing five years, and four weeks on completing ten years in service.
Public Holidays These are the public holidays in Canada on which employees get paid:
  • Good Friday
  • Victoria Day
  • Saint-Jean-Baptiste Day (Quebec only)
  • Canada Day
  • Civic Holiday (Except in Quebec and Yukon)
  • Labor Day
  • Thanksgiving
  • Remembrance Day
  • Christmas Day
  • Boxing Day
  • New Years' Day
Different provinces have additional paid holidays. When employees work on a holiday, they get a day off and half-pay instead of the same pay.
Sick leave The laws differ from province to province. In most cases, 17 weeks of unpaid medical leave is provided as per Canadian Labour Laws. When employees suffer from chronic illness, they can seek compensation via the Canadian Pension Plan or Employment Insurance.
Canadian human rights legislation In Canada, the laws strictly prohibit discrimination against employees on any grounds.
Protecting business interests after termination The restrictive covenants are non-competition and non-solicitation.
Data Protection laws in Canada Except for Alberta, Quebec, and British Columbia, the Personal Information Protection and Electronic Documents Act governs data protection and privacy in all other provinces and territories. In Alberta, Quebec, and British Columbia, the provincial privacy law applies. As per the Privacy Laws, employers can collect employees' data and then use it and disclose it appropriately under the permitted circumstances.
Employee health benefits in Canada The Canadian Social Security covers basic health care for most employees. Besides this basic coverage, employers offer medical plans to provide additional benefits like dental care, ambulance services, etc.
Additional benefits Additionally, employers in Canada offer Workers' Compensation and retirement benefits. However, the benefits differ from province to province.

Contractors vs. Full-time Employees

As per Canadian laws, employees and contractors can be hired by businesses in Canada. Employees enjoy statutory benefits and are also protected as per employment contracts in Canada under the Employment Standards Acts. Independent contractors have no such entitlement under any law. Some of the benefits that employees are entitled to include payroll deductions, leaves, overtime pay, minimum wages, a notice of termination, etc., while independent contractors get payment via invoices and are responsible for submission of their tax 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 Labour Code graphically illustrates the employee/independent contractor continuum. Workers are protected under Part II and Part III of the Canadian Labour Code and given the status as employees as per the employer agreement in Canada. Request a demo today.

Hiring in Canada

To hire employees in Canada, the employer needs to have a Payroll Deductions Account and Business Number (BN). Skuad's Employer of Record Solution in Canada helps you hire a local workforce without registering for a BN with CRA.

To start the hiring process in Canada, the employer must first create job descriptions and then advertise the position. After this, shortlisted candidates are interviewed and then finally hired. Although a written employment contract is not mandatory under the Canadian Labour Laws, it is good to write the details of terms and conditions like duties, hours, salary, wages, overtime, benefits, probation and termination, etc.

Once you set up your business subsidiary in Canada, you can use online search engines' services to find the right people to work for you. Some of Canada's top job search engines are – Indeed Canada, Glassdoor, Monster Canada, CareerBuilder Canada, Eluta.ca, Jobbank, Jobillico, and Jobboom. Most of these sites are credible and have helped hundreds of hiring companies in Canada recruit top talent.

However, if you work with an EOR like Skuad, not only does it save you from the tedious and long-drawn process of hiring candidates, it also frees you from carrying out other mandatory requirements as per the Canadian Labour Laws. For example, examining the new employee's SIN (Social Insurance Number), filling out forms like Personal Tax Credits Return, TD1, Federal TD1, Source Deductions Return, maintaining a separate file for the newly joined employee etc. Skuad’s hi-tech EOR Canada handles all your HR needs end to end so that you can focus on all other aspects of your Canadian expansion. Get in touch with Skuad to learn more.

EOR Canada Onboarding - Making it indelible

You only need to supply pertinent information and authorize the employment agreement.

As your legal employer in Canada, we will:

  • Schedule a call to discuss HR and employment information for Canada, as well as address any queries, to extend a warm welcome.
  • Create a bespoke employment agreement in English and French (or other local language)
  • Provide the employment agreement and benefits details for the new employee's signing and evaluation.
  • Collect the employee's tax and banking details to establish payroll.
  • Provide an employee with a local point of contact for any queries regarding their job, local HR or payroll.

Typically, the full staff onboarding process may be finished within two weeks.

Probation & Termination

Probation The probationary period in Canada is usually three months. However, it varies from province to province and can extend up to six months in some regions. In the past, the probation rules in Canada never had any room for the enforcement of 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.
Termination of employment in Canada To kickstart the employee termination in Canada as per the statutory Canadian Labor Laws, a notice period ranging between 1 week to 8 weeks or pay in lieu of notice must be given by the employee. The notice is given only when the employee has completed a minimum period on the job continuously.
As per the Canada Severance Pay Law, employees have a right to severance pay when dismissed or laid off after completing a minimum term of 12 months. The severance pay is the wage for 2 days for every year of service before termination.

To know more about termination of employment and probation period, visit Skuad.

EOR Solution

A business expansion into Canada needs to be strategically planned. Choosing to go ahead with Skuad's comprehensive Employer of Record (EOR) solution can be a significant advantage for foreign businesses that wish to expand globally in a cost-effective manner. The versatile platform helps you hire a local workforce without the need to interpret the local labor laws – because this is taken care of by us.

The recruitment of a workforce in Canada can be challenging and daunting as the entire ecosystem is complex. With the help of employers of record companies in Canada, you will have a partner who oversees the onboarding process, hires employees on your behalf, ensures compliance with provincial and federal labor laws in Canada, processes salaries, benefits, and handles taxation all-in-one at a centralized platform. All that is required from you is clarity on your exact requirements, and Skuad’s EOR solution will customize the solution as per your business needs.

Skuad's employer of record services includes legal coverage, a globally-enabled HR ecosystem, flat price with zero hidden costs, a smart self-service platform that comes with a range of tools for easy accessibility, comprehensive hire-to-retire services, 24x7 support, and flawless personal data compliance.

Types Of Visas In Canada

Foreigners who want to work in Canada must first obtain a work permit. There are two different types of Canada Work Visa.

Canada work visa requirements include, among other things:

  • Proof of medical health
  • Proof that the candidate will not work for 'ineligible' employers
  • Ensure that the person is not a threat to the country's security.
  • Proof that the candidate will leave the country once the work permit in Canada expires.
  • Proof of financial security to take care of self and family during the stay in Canada
  • Proof that there is no record of criminal activity – produce a Police Clearance Certificate.
  • Ensure that he or she will not work for employers involved in erotic or striptease business
  • Be ready to offer any other document on request.

Additionally, there are other requirements if one applies from outside or within a Canadian work permit for foreigners.

Types Of Work Permits

Openwork Permits It is a type of work visa where a foreigner can choose to work with any employer during the term of the work permit. The candidate can apply for this type of visa from within Canada, outside Canada, or from a Canadian port.
Employer-specific work Permits This work permit allows the foreign national to work for only one employer during the term of the work permit’s validity.

A work permit is mandatory in Canada. There is no concept of a Canadian work permit without a job offer.

Know more about work permits in Canada through Skuad global HR platform.

Payroll & Taxes in Canada

Canada Employer Payroll Taxes

Process Detail
Confirm if payroll deductions are required or not The employer, payers, and trustees need to be defined.
A new employee has to be set up The employee's Social Insurance Number or SIN needs to be applied for Personal Tax Credits Return, and Form TD1 has to be filled up.
Opening of Payroll Program accounts The payroll number is required for sending deductions.
Deductions and contributions calculations Canada Employer payroll taxes and contributions need to be determined.
In 2020, the government reduced the Canadian employer tax rates from 1.62% to 1.58% in a bid to strengthen the working environment in the country.
Remit source deductions Sending EI, IT deductions, CPP contributions.
Filing returns on Canadian payroll and tax services Year-end summary of salaries and deductions to be filed every year.

Canada payroll tax rates

Every province in Canada has its taxation rates. The Payroll Deduction Table is referred to as T4032, presenting the deduction tables for federal and provincial tax deductions, Canada Pension Plan contributions, and Employment insurance. Refer to the official Canadian site Canada.ca for more information. You can alternately opt for payroll outsourcing in Canada through an EOR solution to make things easier and faster for you.

Employer Taxation

Tax Explanation
Federal Tax 38%
28% after a federal tax abatement
*Individual provinces and territories - lower rate (usually around 2%-3%) and a higher rate (between 11.5%-16%).
Canada Pension Plan 5.25%

Employee Taxation

Tax Explanation
Income Tax Rates
Taxable Income (PHP) Tax Rate (%)
0 - 48,535 15%
48, 535 - 97,069 20.5%
97,069 - 150,473 26%
150,473 - 214,368 29%
214,368 and above 33%
Canada Pension Plan 5.25%

Bonuses

Bonuses are a common thing in Canada. It's unclear if businesses are compelled to pay a bonus if an employee leaves before the bonus 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.

Incorporation

Canada is the land of opportunities, and it is a good move to expand in this region. With multiple business opportunities in Canada, you can choose to incorporate a holding company or take the EOR route. The Canadian system permits incorporating a holding company in Canada.

You can set up your business in Canada in the following three ways:

  1. Corporation – The business is incorporated as a legal entity, and none of the shareholders have any personal obligations for debts, etc. The entity can be incorporated at the federal level or provincially.
  2. Extra-Provincial Corporation – In this case, the incorporation happens at the provincial level only and needs to meet the province's requirements.
  3. Partnership – It could be a general partnership firm or a limited partnership. There is the option to convert it into a Limited Liability Partnership later.

Steps to incorporate a holding company or a subsidiary in Canada:

  • Registration of the company under the Company Act. Choose from the three options mentioned above.
  • Non-commercial operations need to be confirmed.
  • No share capital requirement.

Professional Employer Organization (PEO)

The level of involvement that you want in the HR functionalities of your overseas entity will determine whether you should opt for a professional employer organization in Canada or an EOR Solution. Skuad offers both services to its clients.

While it is usual for people to confuse the two, there are many differences between an EOR and a PEO. Both forms of service providers provide HR-related support to foreign businesses. However, the EOR is the legal employer that takes over the entire liabilities and responsibilities associated with payroll and compliances, whereas the PEO acts as a co-employer and shares the responsibilities with the parent company. When you choose an EOR, you need to get into any payroll or tax-related matters in Canada or any other country where you plan to expand, which means that you do not have to establish your business entity in Canada. However, with a PEO, you are more in control, though it requires that you set up your business entity in Canada. Book a demo to find out which service will best suit your particular needs.

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Conclusion

Global expansion plans are critical for a businesses' success. When you decide to set up a remote workforce in Canada, there are various factors to address before setting up your subsidiary in Canada. It could take a lot of time, money and overburden your existing resources unnecessarily.

Every county has its distinct compliances and taxation laws, payroll, and HR regulations, which can make matters complicated. Choosing the services of Skuad's Employer of Record Canada solution will help you expand effectively abroad without getting into the intricate hassles of understanding the local laws, setting up a subsidiary, hiring the right people, and processing payroll as per the laws of the land. Talk to us to find the best EOR solution for your requirements.

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