Hire Employees in Canada: A Comprehensive Guide for 2026

Introduction

Employment in Canada splits between a narrow federal system, covering banks, telecommunications, and interprovincial transportation under the Canada Labour Code, and ten separate provincial and territorial employment standards acts that govern most employers.

Companies that hire employees in Canada need to register with provincial authorities, withhold income tax, remit Canada Pension Plan (CPP) and Employment Insurance (EI) contributions to the Canada Revenue Agency (CRA), and issue T4 slips.

Minimum wage, overtime thresholds, vacation entitlements, and termination notice all shift depending on where the employee is based, and Canada's unionization rate, more than double that of the US, means collective bargaining agreements often dictate wages and working conditions on top of statutory minimums.

Hiring foreign talent adds another layer, since most roles require a Labour Market Impact Assessment before a work permit can be issued.

In this guide, we cover how to hire in Canada through entity setup, EOR, or AOR, the real cost of each path, the core federal and provincial employment laws, and the main hiring challenges employers face.

How to hire employees in Canada?

Attracting top talent requires building a strong employer brand and ensuring strict compliance with Canadian employment regulations. Here are some best practices to follow:

• Promote your employer brand on Canadian job boards like jobbank.gc.ca, indeed.com, myworkdayjobs.com, and other professional networking sites like LinkedIn.
• Create a company culture that resonates with Canadian values, such as work-life balance, diversity, and inclusion.
• Emphasize your commitment to fair hiring practices and a discrimination-free workplace.
• Clearly outline your compensation packages and benefits structure, adhering to provincial regulations.
• Integrate compliance into your company culture, prioritizing fair and ethical hiring.

Further, the type of business presence determines how to hire an employee in Canada and the related cost requirements.

Here are three best practices for hiring employees in Canada:

• By setting up a local entity
• Through an EOR platform
• Using an AOR

How to hire employees by setting up a local entity

You can establish a business presence to hire in Canada. This allows you to operate legally, hire employees, open bank accounts, and comply with Canadian tax regulations.

You can choose among the three primary business structures: sole proprietorship, partnership, or corporation.

Branch operations and joint ventures are other alternative structures for foreign businesses in Canada.

Setting up a legal entity in Canada offers more control and flexibility over hiring, compensation, and company culture.

Local presence enhances employer branding and attracts talent who value local employers.

However, the significant downsides to establishing your business presence in Canada are high legal and accounting fees and resource diversification to administrative tasks.

Most companies avoid it by switching to employer-of-record (EOR) or agent-of-record (AOR) solutions.

Incorporating in Canada, whether as a sole proprietorship, partnership, or corporation, means legal and accounting fees before a single employee is hired, plus ongoing administrative overhead that most companies underestimate going in.

Skuad supports the alternative without requiring entity setup. Skuad acts as the legal employer in Canada, so your company can hire, onboard, and pay employees while Skuad manages the local employment relationship.

Here is what Skuad helps with:

• Employment contract generation across 160+ countries, aligned with local labor laws and statutory requirements
• Statutory contribution workflows across supported markets, covering applicable social insurance and pension obligations
• Payroll processing in 70+ currencies with tax withholding and statutory deductions
• Termination and offboarding support aligned with local labor requirements across supported markets

Book a demo to see how Skuad gets your first Canada hire onboarded without entity setup

How to hire employees via EOR

An Employer of Record acts as a legal employer on your behalf when hiring employees in your preferred region.

This means the EOR takes care of all the legal and administrative responsibilities associated with employing someone, including payroll processing and deductions, taxes and benefits administration, compensation insurance, and more.

EOR can give you the flexibility to

• Enter the Canadian market rapidly
• Hire a small to medium-sized team
• Reduce the administrative burden of managing employees

Setting up a Canadian entity to hire directly means registering with provincial authorities, opening a Canadian bank account, and managing CPP (Canada Pension Plan), EI (Employment Insurance), and workers' compensation remittances on your own.

Skuad supports this without requiring entity setup. Skuad acts as the legal employer in Canada, so your company can hire, onboard, and pay employees while Skuad manages the local employment relationship. For more detail on Canada-specific requirements, see Skuad's Canada hiring guide.

Here is what Skuad helps with:

• Employment contract generation across 160+ countries, aligned with local labor laws and statutory requirements
• Statutory contribution workflows across supported markets, covering applicable social insurance and pension obligations
• Payroll processing in 70+ currencies with tax withholding and statutory deductions
• Statutory benefits administration in line with local requirements

How to hire contractors through AOR

An Agent of Record is a middleman between your company and independent contractors you hire in Canada.

Unlike an Employer of Record (EOR), which assumes full legal employment status, an AOR focuses on managing independent contractors' administrative and compliance aspects.

There are alternatives to AORs. You can use online platforms that connect you with independent contractors, but compliance and risk management might be limited.

The table summarizes the primary ways to hire in Canada and their characteristics:

Whether you're hiring full-time or engaging contractors in Canada, the underlying question is the same: build the compliance infrastructure yourself, or use a platform that already has it.

Skuad supports both models from a single platform:

EOR for full-time employees

• Acts as the legal employer across 160+ countries, so you can hire in Canada without provincial entity registration
• Supports employment contract generation aligned with local labor laws across supported markets
• Facilitates statutory contribution workflows covering applicable social insurance and pension obligations
• Supports payroll processing in 70+ currencies with automated tax withholding

Contractor management (AOR)

• Helps onboard contractors with locally compliant agreements that reduce misclassification exposure
• Supports invoice generation, approval workflows, and payment processing in local currency
• Helps flag classification risk before it becomes a compliance issue

Full-time or contractor, compare pricing

What is the cost of hiring in Canada?

You need to consider the following costs to hire employees in Canada:

• Payroll costs vary across provinces, including salary, benefits, and taxes.
• Recruitment and onboarding costs, including job posting fees and other optional agency fees for recruitment, background checks, employee training, equipment charges, etc.
• Additional considerations involve LMIA (Labor Market Impact Assessment) checks to hire foreign talent, employer sponsorship requirements for Canadian visas, employer branding initiatives, business establishment charges, or EOR/AOR service fees.

The table summarizes the cost comparison between setting up a local entity and using an EOR/AOR service.

Skuad supports cost visibility before you commit to a hire. Estimate the actual cost of hiring in Canada, salary plus CPP and EI contributions plus service fees, before you make an offer.

Calculate the true cost of hiring in Canada

What are the employment laws in Canada?

Canadian employment law splits into two systems: a federal layer that applies to a narrow band of industries, and ten separate provincial and territorial systems that cover most employers. Three federal laws matter most:

• The Canada Labour Code (Part III): sets standards for wages, hours of work, vacation, leave, and termination, but only for federally regulated businesses, banks, telecommunications, broadcasting, and interprovincial transportation among them. Most employers in Canada fall outside this scope and are governed by their province's own Employment Standards Act instead.
• The Canadian Human Rights Act (CHRA): prohibits discrimination on 11 grounds, including race, religion, age, sex, and disability, for federally regulated employers and the federal government. Every province and territory has its own human rights code covering employers that aren't federally regulated, which is the large majority of businesses hiring in Canada.
• The Employment Insurance Act: funds the EI program, which provides temporary income support to workers who lose their job, plus special benefits for illness, pregnancy, and caregiving. Employers and employees both pay EI premiums, and eligibility depends on insurable hours worked and a valid job separation.

Since Canada has ten provinces and three territories, and each has its own employment standards act and human rights code, the practical question for most foreign employers isn't which federal law applies; it's which province's rules apply to a given hire. Minimum wage, overtime thresholds, vacation entitlements, and termination notice periods all vary by province.

What are the challenges of hiring in Canada?

Finding good hires in Canada has become a challenge for employers. Companies struggle to fill open positions due to a lack of qualified applicants, competition for skilled workers, and lengthy hiring processes.

The skill mismatch and non-competitive compensation make it harder for you to hire in Canada.

Let’s elaborate on the top four hiring challenges in Canada:

Canadian employment laws

A few aspects of employment laws in Canada make hiring complex:

• There are regional variations within labor law provisions like minimum wage, permissible overtime hours, leave policy, notice period for termination, and payroll taxes.
• The unionization rate in Canada is more than double that in the United States. This means you must factor in collective bargaining agreements, which can dictate wages, benefits, working conditions, and grievance procedures.
• You need to have a well-defined recruitment and selection process to ensure strict compliance with human rights laws that prohibit discrimination based on various factors, such as race, religion, gender, and disability.

Payroll in Canada

The estimated 12.2% employer cost on a USD 60,000 salary highlights additional expenses beyond the base salary:

The requirement to withhold income tax, contribute to Canada Pension Plan (CPP) and Employment Insurance (EI), and issue T4 slips.

Accurate payroll necessitates meticulous record-keeping of employee contributions, deductions, and remittances to the Canada Revenue Agency (CRA).

There is a steady demand for an increase in salary payments due to Canada's rising cost of living.

You must also factor in provincial variation when calculating payroll taxes and compliance requirements.

However, unlike some European countries, Canada does not have a Value-Added Tax (VAT), which simplifies payroll calculations to some extent.

Between CPP and EI contributions, T4 issuance, CRA remittance deadlines, and payroll taxes that shift by province, running payroll in-house means tracking several moving parts that change depending on where each employee is based.

Skuad supports this without requiring you to build in-house payroll infrastructure for Canada. Here is what Skuad helps with:

• Payroll processing in 70+ currencies, so international teams get paid without manual conversion
• Statutory contribution workflows across supported markets, covering applicable social insurance and pension obligations
• Automated payroll calculations for salary disbursement, tax withholding, and remittance, reducing manual processing
• Payroll compliance monitoring as statutory requirements change

Whether you're running payroll for one Canadian hire or a multi-province team, Skuad supports it as a single workflow rather than a province-by-province.

Competitive talent landscape

Companies hire in Canada to address two critical factors: company growth and lack of requisite skills among current employees. This could result in:

• Candidates demand a more competitive compensation package as there are more open positions and a limited pool of qualified executives.
• Staying updated on the evolving skill sets like artificial intelligence (AI) and deep learning required in focus industries to identify suitable candidates.
• Adapting to the growing hybrid and distributed work opportunities and navigating various options for hiring foreign talent.

Additionally, recruiters hire employees in Canada while considering the need for bilingual executives with a less optimistic economic outlook and a smaller talent pool.

Beyond the skills gap

While the lack of qualified candidates is a significant hurdle, here are two additional challenges Canadian employers face in today's hiring landscape:

Foreign talent can be an attractive option for direct hire in Canada. Still, you must conduct a Labor Market Impact Assessment (LMIA) to ensure Canadians are given first preference and meet work permit requirements.

Consequently, it has resulted in the rise of job posting scams, which risk employer brand reputation and deter recruiters from attracting more genuine and qualified candidates.

Simplifying remote hiring in Canada

Between provincial variation in employment standards, CPP and EI remittances, LMIA requirements for foreign talent, and collective bargaining considerations in unionized sectors, hiring in Canada involves more moving parts than a single national framework would suggest.

Skuad supports the operational complexity of hiring in Canada, employment contracts, CPP and EI contributions, payroll in 70+ currencies, work permits, and AOR-to-EOR conversion, so your team can focus on the hire, not the paperwork.

Companies across SaaS, technology, and professional services use Skuad to build Canada teams without setting up local HR infrastructure from scratch.

Book a demo to see how Skuad supports hiring in Canada

FAQs

1. What is an employer of record in Canada?

An employer of record in Canada is a third-party organization that legally employs staff on a company's behalf, managing payroll, Canada Pension Plan (CPP) and Employment Insurance (EI) contributions, and compliance with federal and provincial employment standards, without the company registering its own entity.

2. How much does an EOR cost in Canada?

EOR costs in Canada typically combine the employee's salary, employer contributions of roughly 10 to 12 percent (CPP, EI, and workers' compensation), and a provider service fee. Total employer cost usually runs around 12 percent above base salary, depending on the province and provider.

3. Can a foreign company hire employees in Canada without a local entity?

Foreign companies can typically hire in Canada through an EOR without registering a legal entity in the province where their employee is based. This generally avoids the incorporation process and the ongoing CRA remittance obligations that direct hiring usually requires.

4. What happens if a company misclassifies workers in Canada?

Misclassifying an employee as an independent contractor in Canada can expose a company to back payments for CPP, EI, and unpaid statutory benefits, along with penalties from the Canada Revenue Agency. Classification tests generally vary by province, which adds risk for multi-province hiring.

5. Is an EOR or setting up an entity better for hiring in Canada?

Setting up a legal entity in Canada generally gives a company more control over hiring and branding but usually takes longer and requires provincial registration and a Canadian bank account. An EOR typically lets a company hire faster without that setup, though per-employee costs are usually higher.

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

Onboarding timelines through an EOR in Canada generally range from one to two weeks from contract signature to first payroll run. Direct hiring through a new entity usually takes longer, since incorporation and CRA registration typically need to be completed first.