Employer of Record in Canada: A Comprehensive Guide for 2026

Introduction

Hiring in Canada means working across thirteen sets of 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 vary. 

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

An Employer of Record in Canada lets you hire compliantly in any province without setting up a local entity, acting as the legal employer that runs payroll, CPP and EI deductions, and statutory leave on your behalf.

This guide covers what you need to know: federal and provincial tax, CPP and EI contributions, minimum wage by region, 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

Here 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

Direct hiring

Canada is the land of opportunities, and expanding in this region is a good move. 

With multiple business opportunities in Canada, you can incorporate a holding company or take the EOR route. 

The Canadian system permits the incorporation of a holding company in Canada.

Want to know how to set up a Canadian employer?

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 or provincial level.
2. Extra-Provincial Corporation: In this case, the incorporation only occurs at the provincial level and must meet the province's requirements.
3. Partnership: It could be a general partnership firm or a limited partnership. Later, it can be converted into a Limited Liability Partnership.

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

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

The employer must create job descriptions and advertise the position to start the hiring process in Canada. Shortlisted candidates are then interviewed and finally hired. 

Although a written employment contract is not mandatory under Canadian Labor Laws, it is good practice to include details of terms and conditions such as 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.

Hiring with the help of Canada Employer of Record

Working with an EOR like Skuad saves you from the tedious and long-drawn process of hiring candidates and frees you from carrying out other mandatory requirements as per Canadian Labor Laws.

For example, examining the new employee's SIN (Social Insurance Number), filling out forms like Personal Tax Credits Return, TD1, Federal TD1, Canadian T4 form, Source Deductions Return, maintaining a separate file for the newly joined employee, etc. 

An EOR acts as a legal employer that takes over all the liabilities and responsibilities associated with payroll and compliance. 

It allows flexibility in workforce management and enables you to scale up or down your operations as per the business requirements. 

Below, we have highlighted a detailed breakdown of how EOR services in Canada function. 

• Sourcing candidates: The first step is sourcing and hiring. Crucial information related to potential fit for the organization is collected and processed by the Canada Employer of Record service.
• Onboarding new employees: Following this, the employer of record companies in Canada will draft localized employment contracts that comply fully with all the necessary regulations.
  
  • These agreements will include essential information related to the terms of employment, compensation structure, onboarding guidelines, statutory Canadian paid vacation, and more.
• Payroll Management: Managing payroll for employees in Canada with EOR services is relatively straightforward and does not involve the complexities of tax calculations or tax deductions.
  
  • Employees will receive their salaries in the Canadian Dollar (CAD), and your EOR partner will manage all deductions and calculations in compliance with the labor laws and different entitlements. 
• Employee Benefits and Entitlements: The EOR will take care of all employee benefits administration, leave and attendance management, and other statutory entitlements, as per Canadian laws.
  
  • As their client company, you will simply need to focus on the employee’s core responsibilities and day-to-day activities, such as assigning tasks and projects and offering regular feedback, among others.

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 and benefits, and handles taxation all-in-one at a centralized platform. 

However, when partnering with such companies, it is very important to consider certain factors, such as the employer of record in Canada, cost, legal and compliance experience, and cultural awareness and localization, among others.

Onboarding and agreements

In the simplest terms, employee onboarding refers to familiarizing the new employee with the company culture and policies and making them understand how things work in the new working environment. 

The ultimate goal is to make them effective and contributing team members.

To ensure a smooth onboarding process, you must first draft a proper employment agreement. Employment agreements in Canada can be divided into the following types,

• Full-time employment: In Canada, full-time employment refers to working at least 30 hours per week for a single employer and fulfilling all other contractual obligations.
• Part-time employment: In Canada, any work that is less than 30 hours per week is considered part-time employment.
• Contract employment: This refers to the agreement with a predetermined end date, such as the completion of a specific task or project.

Employment contracts can be written or verbal. Collective agreements are agreements in which unionized employees mention the terms and conditions in writing. 

Employers are not obliged to offer employees any other terms in writing except for tax-related matters and deduction forms.

Employers need to comply with all statutory requirements. They are obliged to:

• Offer a safe work environment
• Offer a reasonable notice period during dismissal
• Not to 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.

In addition, you will be required to fulfill the necessary tax obligations, establish payroll, conduct background checks on newly hired employees, and more. 

You only need to supply pertinent information and authorize the employment agreement. As your legal employer in Canada, we will:

• Extend a warm welcome, schedule a call to discuss HR and employment information for Canada, and address any queries.
• 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 employees with a local point of contact for any queries regarding their job, local HR, or payroll.

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

Taxes

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 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.

Employer taxation

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

Canada Pension Plan (CPP): Employer and Employee

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)

Compliance

In nine Canadian provinces, employment laws are governed by the common law. Only the Civil Code of Quebec administers employment laws. 

The other sources of Canadian employment law are contracts and statutes.

According to the Canadian Constitution Act, employment laws in the country are governed by provincial jurisdiction. 

This, however, does not apply to industries like telecom, banking, and international shipping, such as port services, railways, and air cargo services.

The federal government does not have much say in Canadian labor laws. It only runs federal programs for public pension benefits and unemployment 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.

Canadian Labor Laws are applicable to 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.

Types of workers in Canada

There are three types of workers in Canada: employees, dependents, and 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.

Independent contractors vs full-time employees

Canadian laws allow businesses to hire employees and 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

Full-time or contractor. Skuad supports both. See pricing

Tests to determine independent contractor status in Canada

Four main tests are in place to determine the independent contractor status in Canada. They include:

• 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.

Fines/penalties upon misclassification of employees

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.
• Worker’s 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.

IP protection and copyright laws 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 until the concerned individuals' lifetime and extends to 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 stay 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.

Types of visas in Canada

Canada draws a line between a visa (an entry document in the passport) and a permit (the authorization to work or study). For hiring, the work permit is what matters most.

Work Permits

Other Visa and Entry Categories

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

Payroll

There are typically two ways to pay employees in Canada. 

• Pay directly
• Pay with 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

Benefits and compensation

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.

Workers’ rights

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.

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.

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. 

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).

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.

Hybrid and remote work 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. 

Suppose you genuinely wish to see your business thrive across different countries and continents. In that case, 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.

Technology and Infrastructure

Before hiring employees for remote work in Canada, make sure that you have the necessary technology and infrastructure to support both in-house and hybrid or remote workers. 

These include reliable internet access, communication tools for virtual collaboration, and adequate hardware or software.

Flexible Work Policies

Ensure your organization's existing work policies are in sync with remote employment. 

This includes ensuring these guidelines address vital areas such as working hours, performance evaluation, emergency response plans, and communication expectations.

Effective Communication Systems

Last but not least, to guarantee successful hybrid or remote employment in Canada, you also need to implement proper and effective communication systems within your organization. 

You must have clear channels that can broadcast crucial information related to workplace changes or safety measures to every employee. 

This way, no one will feel left out, and it can also boost employee morale.

Salary

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, which helps you unveil robust compensation data, uncover the latest salary trends, and make fair and competitive offers to your potential employees.

Leave policy

Holidays

Background checks

Before you onboard any new employee in your organization, conduct a thorough background check to protect your business and avoid costly mistakes. 

In the simplest terms, background checks are the process of verifying the accuracy of a job applicant's personal details. 

These details can include social media checks, educational qualifications, previous employment details, and credit information.

Benefits of Background Checks in Canada

Background checks in Canada offer a wide range of benefits to an organization. They enable it to hire the right people, which, in turn, leads to an increase in overall success. 

Below are a few examples.

Avoiding negative publicity

Hiring dishonest employees can not only cost your organization a lot of money but can also lead to severe reputational damage. 

Conducting a background check before onboarding such individuals can prove to be extremely beneficial in this aspect. 

It enables you to uncover any vital information related to their criminal record or credit history that otherwise would have remained hidden.

Ensuring a safe workplace

As an employer, you have a duty of care for employees. This not only means facing all the protocols of guaranteeing a safe working environment but extends further into the selection and behavior of staff members. 

In the event of negligent hiring, you might be faced with expensive lawsuits and legal fines. 

To prevent such occurrences, it is essential to make hiring decisions with full possession of all the facts, which is exactly what a background check helps to deliver. 

Reducing staff turnover

Last but not least, background checks can also enable you to increase employee retention. 

It goes without saying that when you are hiring any new candidate, you have to spend huge amounts of monetary resources and energy on training and upskilling them. 

Therefore, it is only logical that you would want to hire such employees who would stay at your company for the long run. 

Furthermore, a high staff turnover rate can also send the wrong message about your organization.

A comprehensive background check will help you to select only quality staff for your organization. 

Other than these, there are several other advantages of background checks in Canada. They include improved quality of hire, preventing employee dishonesty, and compliance with the law, among others.

Types of background checks in Canada

Pre-employment background checks are legal in Canada as long as you obtain written consent from prospective employees before you begin the process. 

Some of the most common forms of background verification include:

Criminal record checks

It refers to searching the RCMP’s (Royal Canadian Mounted Police) Canadian Police Information Centre system to verify any prior conviction, warrant, or charges against the potential employee. 

It usually does not require fingerprints and can be done within minutes by simply entering the individual's name and date of birth.

Employment verification

Employment verification, as the term implies, involves contacting the candidate’s previous employer to verify their work history, including job title and responsibilities. 

One of the main reasons behind this is to ensure that the potential employee meets all the qualifications and requirements to secure the job position.

Credit checks

Credit checks are usually conducted for job roles that involve financial responsibilities, such as accounting or banking. 

It reveals crucial information about a person’s credit history and economic status.

Such checks are especially important for job roles that involve handling money or sensitive financial information for an organization.

Education verification

Education verification in Canada is typically conducted to verify the accuracy of the job candidate's qualifications. 

This includes degrees, diplomas, academic certificates, or any other qualifications claimed by the candidate. 

The employer may directly contact the educational institutions for this purpose.

Social media background checks

Social media background checks refer to the process of reviewing a job candidate's social media profiles and web presence. 

The key is to discover whether the individual is the right fit for the organization. There are many ways in Canada to conduct social media background checks. 

While some prefer a quick scan of the person's social media profiles, others might want an in-depth evaluation of the person’s blogs, posts, comment sections, or any other traces of their presence on the internet.

Termination and offboarding

Employers can terminate their employees in Canada under the following circumstances.

• Employee resignation
• Mutual decision by both employer and employee
• Termination during the probationary period
• Misconduct
• Performance issue
• Absence without leave, etc.

To begin employee termination in Canada, as per the statutory Canadian Labor Laws, the employee must give a notice period ranging between 1 week and eight weeks, or pay instead of notice. 

The notice is given only when the employee has continuously completed a minimum period on the job.

As per the Canadian Severance Pay Law, employees have a right to severance pay in Canada when dismissed or offboarded after completing a minimum term of 12 months. 

The total amount of the severance pay upon firing in Canada is the two-day wage for every year of service before termination.

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.

Cultural Considerations

Hiring international employees from Canada also implies a cultural exchange. Some of the critical characteristics of the Canadian work culture are,

• Emphasis on diversity and inclusion

The Canadian work culture strongly advocates diversity and inclusion, which is evident through its work policies. Organizations continuously develop new strategies and plans to make their employees feel valued and included, regardless of their background. 

• Work-Life Balance

Maintaining a healthy work-life balance is another crucial characteristic of Canadian work culture. Some of the most common practices include remote work opportunities, generous leave policies, parental leave, and flexible working hours.

• Politeness and Modesty

Last but not least, Canadian workers highly value workplace etiquette, which includes politeness and modesty. Punctuality, a respectful demeanor, and a modest approach to achievements are a few examples of workplace culture considered of great value in Canada.

Conclusion

Global expansion plans are critical for a business's success. When you decide to set up a remote workforce in Canada, you must address various factors before doing so. 

It could take time and money and unnecessarily overburden your existing resources.

Every county has distinct compliance and taxation laws, payroll, and HR regulations, which can complicate matters. 

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.

FAQs

What is an employer of record in Canada?

In Canada, an Employer of Record (EOR) like Skuad legally employs individuals on behalf of another company without a local entity, handling responsibilities like payroll, taxes, employee benefits, and compliance with labor laws.

Is employer of record legal in Canada?

Yes, an Employer of Record in Canada acts as the legal employer, managing payroll, taxes, benefits, and employment contracts. To operate legally, they must hold a Personnel Placement Agency license.

How do I choose an employer of record?

To choose an Employer of Record, assess their reputation, knowledge of local labor laws, the range of HR services they offer, and their cost. It’s essential to select an EOR with proven reliability and expertise in the specific regions where you need support, like Skuad.

What is the difference between EOR and PEO?

A PEO shares HR responsibilities with your company as a co-employer, whereas an EOR completely takes on the role of employer for your workforce in areas where your business does not have a local presence.

How much does an EOR cost in Canada?

Employer of Record cost varies based on the EOR you partner with. With Skuad, you can hire talent in Canada starting at just $199 — providing you unmatched value at an affordable cost.

What are the benefits of an EOR?

The benefits of using an Employer of Record include ensuring compliance with employment laws, facilitating faster market entry without the need for a local entity, and allowing companies to focus on their core business activities.