Canadian Labor Laws

Each province and territory in Canada has its own employment standards legislation. It sets out minimum employment requirements, including minimum wage, working hours, overtime pay, and vacation entitlements. Here, we have discussed key employment obligations per Canadian labor laws. 

Working hours in Canada

• In the federally regulated private sector and Ontario, the maximum working hours is 48 hours a week. 
• In Quebec, employers must respect the right of employees to refuse to work over 14 hours a day.

Overtime Threshold

• Employers must oblige overtime pay demands from the employees per Canadian labor law standards. However, the overtime thresholds for maximum working hours in Canada vary across jurisdictions.
• Employers in Ontario must pay employees who worked for more than 44 hours in a week. 
• Employers in Quebec must pay employees who work more than 40 hours a week.

Termination of employment in Canada

• Canadian employment law mandates written notice for termination at least two weeks prior.
• Employers must make severance payments for terminations without cause. However, this may apply to employees with 12 months of continuous service. 
• Employers can calculate severance pay per Canadian labor law by multiplying regular weekly wages by the number of years of employment, to a maximum of 26 weeks.
  

Payroll and Taxes in Canada

Payroll in Canada involves calculating and paying employee salaries, ensuring minimum wages alongside deducting taxes and other contributions. Here is an overview of the payroll process and employer taxes in Canada:

Manage employee payroll information:
Collect employee social insurance numbers, determine the province of employment, get the completed TD1 forms for deductions, and bank account details for salary and other remittances.  

Minimum wage:

The statutory minimum wage in Canada per Employment and Social Development Canada is $16.65 hourly. Province-wise minimum wage in Canada is tabulated below:

Tax deductions:

This includes withholding personal income tax (federal progressive tax rate of 15% - 33%, in addition to provincial tax rates), Canada Pension Plan (CPP) premiums (employer contribution is the same as that of employee contribution), and Employment Insurance (EI) premiums (1.4 times the employee contribution). Here’s a useful online calculator for payroll deductions in Canada. 

Payroll frequency:

Payroll frequency in Canada can be monthly, bi-weekly, or bi-monthly. You can pay salaries through direct deposit, cheque, or cash. Further, employers must fill out the tax slips ( T4 and T4A) and summaries.

Consider using a payroll software solution to help you manage your payroll in Canada if you are a global business. 

Employee Benefits in Canada

Public Holiday 

Employers in Canada must observe ten paid public holidays, including 

• New Year’s Day
• Good Friday
• Victoria Day
• Canada Day
• Labor Day
• National Day for Truth and Reconciliation 
• Thanksgiving Day
• Remembrance Day
• Christmas Day
• Boxing Day

However, employers may be required to substitute certain public holidays per jurisdiction. For example, Family Day replaces Remembrance Day in Ontario. 

Moreover, employers must declare a holiday before or after the general holiday if it falls on a scheduled non-working day. Six general holidays include New Year's Day, Canada Day, Remembrance Day, National Day for Truth and Reconciliation, Christmas Day, or Boxing Day. 

Paid Vacation 

• Most employers in Canada across jurisdictions must offer at least two weeks of continuous vacation per year. 
• However, employers in federally regulated and Quebec jurisdictions must offer three weeks of continuous paid holiday per year for experienced employers. 

Leave policy in Canada

Employers must pass on the following statutory benefits in Canada to their employees: 

Sick leave/Paid time off: 

• You must provide five days off annually. 
• You may pay employees for the first three days if they have been employed for three months with the same employer. In Quebec, you may be required to pay only for the first two days. 
• Most Canadian jurisdictions require employers to offer longer unpaid sickness leave. In Quebec, employers must oblige 26 weeks of job-protected unpaid leave. 

Maternity leave: 

• The statutory duration for maternity leave in Canada varies across jurisdictions. Employers may offer up to 15-17 weeks of unpaid leave to pregnant employees. 
• Employers are not obliged to pay employees throughout pregnancy leave. However, employers in Quebec must offer five days of paid parental leave within 15 days of childbirth or adoption.  

Shared parental leave: 

• Canadian labor law obliges employers to offer 40-69 weeks of shared parental leave, based on their place of employment and use of maternity leave. 
• However, employers may restrict a maximum parental leave to 35-61 weeks per parent.
  

Cost of Hiring an Employee in Canada

The choice between registering a local entity and using an employer-of-record (EOR) in Canada to hire talents depends on your long-term business objectives, resources, and risk tolerance. Let’s simplify your decision and compare the cost of hiring an employee in Canada through establishing a subsidiary versus an EOR solution like Skuad.  

Establishing a Subsidiary vs. Employer of Record (EOR) in Canada

Compliance Risks of Hiring Employees in Canada 

To hire in Canada, you need to take care of several compliance risks that employers must be aware of and manage effectively to avoid legal issues and financial penalties.

• Employment Standards Legislation: Explore the list of federally regulated private sector and provincial and territorial employment standards here. Failure to comply with employment standards can result in financial and legal penalties.

• Temporary Foreign Worker Programs: Hiring foreign employees in Canada involves complying with federal immigration and labor laws. Employers may sponsor potential candidates for work visas in Canada. Violations can result in potential fines and revocation of work permits in Canada.

• Workplace Health and Safety Regulations: Employers must provide a safe work environment and follow occupational health and safety regulations. Non-compliance can lead to workplace accidents, legal actions, and regulatory fines.
• ‍Unionization and Labor Relations: If employees choose to unionize, employers must comply with labor laws governing collective bargaining and labor relations.

How to Hire Talent in Canada

You may hire employees in Canada or outsource your recruitment and employee management needs. Following are the most recommended options for hiring and expanding business operations: 

Option 1: Establish a Subsidiary

• Setting up a subsidiary in Canada gives control over operations and hiring. 
• It invariably allows you to maintain long-term employment relationships and retain the best talents in the industry. 
• Setting up a local entity involves careful legal, financial, and administrative considerations. Moreover, the parent company is liable to manage compliance risks. 

Option 2: Hire as a Contractor

• Canadian labor laws allow companies to engage professionals on a contractual basis. Companies can now adjust their workforce to project needs and save costs.
• To hire employees in Canada, you must ensure the negotiated contractual arrangements reflect the nature of the employment relationship to avoid legal repercussions. 
• However, hiring in Canada on a contractual basis will give companies less control over day-to-day employee activities. 

Option 3: Use EOR Solutions - Skuad

• Most companies are embracing EOR solutions to offset the high cost of hiring in Canada. 
• EOR solutions can be convenient and efficient in hiring and managing employees in Canada without establishing a subsidiary. ‍
• Skuad acts as the legal employer for your employees, handling payroll, compliance, and administrative tasks. It is particularly beneficial if you want to test the market before committing to setting up a full subsidiary.
  

Recent Hiring Trends in Canada

Hiring trends in Canada have evolved in response to various economic, social, and technological factors. The Canadian job market is strong, and there are many opportunities to hire skilled employees in Canada across the globe. The focus sectors in Canada include healthcare, science, technology, engineering, mathematics (STEM), agri-tech, and transport. 

A recent survey by Robert Half predicts employee turnover to increase in the upcoming months. Employers are increasingly offering flexible work options and are focused on diversity and inclusion. Additionally, they are improving the overall employer branding to attract and retain the best talents. 

Top Job Listing Sites in Canada

Here are the top job listing sites for global employers to hire employees in Canada:

• Indeed Canada 
• Workopolis
• Job Bank
• Jobillico 
• SimplyHired Canada 
• Glassdoor Canada 

Global employers should choose job boards that are most relevant to their industry and the types of candidates they are looking to hire in Canada. They may also consider features such as free job posting, candidate search by keyword, location, and experience, and creating a company profile. 

Refer to this section to develop comprehensive job descriptions and hire the best talent in Canada.

Make Hiring in Canada Simpler with Skuad

The multifaceted federal and provincial employment laws introduce complexity to hire employees in Canada. Instead of diverting your business resources to hiring in Canada, it is more crucial to attend to growth-driving areas.

Skuad introduces an efficient hiring and onboarding solution, greatly simplifying your business expansion in Canada. Skuad effortlessly can hire and pay your Canadian workforce. 

Talk to our experts to learn more. 

FAQs

Q1. What is required to hire an employee in Canada?

Some basic requirements to hire in Canada include a valid business registration and work permit, an account for payroll with the Canada Revenue Agency (CRA), and compliance with applicable employment laws. However, Skuad’s EOR solution can help you overcome these requirements. 

Q2. Can a US employer hire a Canadian citizen?

Yes, any US company can hire employees in Canada. Registering a local entity and complying with applicable labor laws alongside a PEO like Skuad is the most preferred route. However, a better cost-effective alternative to hiring and managing employees in Canada is choosing Skuad’s EOR solutions.

Q3. How do I pay my employees in Canada from the US?

Paying your employees in Canada from the US is simple and easy using an EOR or PEO solution. An EOR is a good option if you do not want to establish a presence in Canada. Whereas, a PEO is helpful if you are not familiar with Canadian employment and tax laws.