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How to Hire in Canada

As companies grow and expand their workforce, many wonder how to hire in Canada. International hiring comes with a unique set of challenges and complexities, from constantly evolving labor laws to arduous local compliance regulations.

Canada is a great place for U.S. companies wanting to grow in North America and an ideal location for expansion. These nearby countries have a border and also have similar interests and helpful economic relationships. For companies looking to do business in Canada, the first question they have is how to hire a Canadian workforce.

When a company hires in Canada, it must follow the federal and provincial laws governing that regulate the Canadian workforce. Failure to comply with these laws and regulations could result in significant fines, penalties, and even reputational damage.

Here are all the basics you need to know about hiring employees in Canada to ensure international success.

How can businesses hire in Canada?

Canada has had 10 years of steady economic growth, making it a popular place for businesses worldwide. An organization can hire an independent contractor or an individual as an employee when hiring a Canadian workforce. In some cases, it may not be up to your discretion as to how Canadian workers are classified. Depending on the work being performed, some Canadians cannot be legally hired as independent contractors.

Businesses have two options: do it themselves or outsource these responsibilities to a global Professional Employer Organization (PEO). In Canada, businesses can hire employees by doing it themselves or outsourcing to a PEO. In this section, we’ll discuss the steps you need to take for both options.

There are three options for employers planning to hire in Canada:

Independent contractors
Direct employees
Professional Employer Organization (PEO)

We’ll break down each option to help you make the best decisions for your business growth.

Hiring Contractors

The country boasts a skilled workforce and the federal corporate tax rate for businesses is currently 15%. If you are hiring an independent contractor, you’ll need to make sure the worker meets the proper classifications for that employment type. Generally speaking, contractors must fit within the following guidelines:

The individual can work for many companies at the same time.
The individual gets to control and manage their working status and schedule.
The individual is typically required to work for shorter periods with any single company, or else risk being classified as an employee.

We’ve heard many clients’ horror stories when it comes to hiring contractors abroad. The government considers it a misclassification if a worker does not meet the above criteria. When this happens, the worker can sue the company for benefits, overtime, holiday pay, and more.

If the agreement is not clear or followed, the government usually supports the contractor. In addition to these costs, the company may also face fines and penalties for the violation.

U.S. companies hiring and paying in Canada need international contractors to fill out IRS Form W-8BEN. This certifies their foreign worker status in the eyes of the U.S. government. Although this step will resolve tax compliance for the employer in the U.S., the business will still need to abide by Irish employment law.

Hiring an independent contractor in Canada can be an efficient method of employment if the above guidelines are met. Additionally, if you have multiple contractors in different countries, consider using contractor management. This allows you to pay all your contractors in their preferred currency from a single, streamlined platform.

Hiring Employees Directly

If you are planning to hire part-time or full-time employees in Canada, you will need to establish a legal entity there. Establishing a legal entity is expensive and time-consuming. It can take three to six months to complete.

Legal entities are the foundation of all operations within a country. They can impact every aspect of a business, including finance, accounting, IT, and other supply chain functions. If this is the route your business decides to pursue, it’s highly recommended that you work with an expert during this process. This ensures that the structure isn’t inefficient or costly to maintain.

Contractors can be paid through an international wire transfer, digital payment networks like PayPal, through a service provider like Upwork or Fiverr. As a contractor, they are responsible for reporting their earnings for their taxes. To hire part-time or full-time employees in Canada, you need to have a legal entity. Establishing a legal entity can take three to six months to complete.

This requires in-country expertise to ensure the structure is efficient and not costly to maintain. Correctly establishing an entity also impacts several functions within the business, including finance, accounting, IT, and more.

The three primary components to incorporating in Canada are:

Incorporation and registration,
Post incorporation,
Corporate annual compliance.

Here, we break down each of the three components into actionable steps you can take throughout the process:

Incorporation and Registration

Prepare entity registration documents.
Prepare local entity articles of incorporation.
Advise on corporate governance structure – local director/shareholders requirements.
Apply for and obtain a business license and entity registration approval.
Apply for and obtain a tax ID.
Register the newly incorporated entity to be a local employee.

Post Incorporation

Payroll setup
Statutory benefits and social security registration
Data protection registration
Accounting setup, including bookkeeping and reporting
Local bank account setup
Local indirect tax – VAT | GST | HST

Corporate Annual Compliance

Preparation of group consolidated accounts and financial statements under IFRS, US GAAP, or other local GAAP and statutory audit support
Tax, payroll, and statutory returns
Handling of correspondence and other administrative duties

Outsource Hiring to a PEO Provider

You can hire and pay employees in Canada without the hassle of DIY processes by using a global Professional Employer Organization (PEO) or Employer of Record (EOR) provider. A PEO or EOR provider is an organization that enters a joint-employment relationship with an employer by “leasing” employees to the employer. This allows the PEO to share and manage many employee-related responsibilities and liabilities, including HR, payroll, and accounting. Companies that want to hire in Canada should quickly pursue this option.

Put another way, a PEO handles the administrative burden related to employee and payroll management, allowing your business to focus on growth. One of the primary benefits of engaging with a PEO is that they will likely already have a legal entity established in Canada, allowing you to hire fast while still maintaining compliance. Here are a few of the administrative services offered by a PEO or EOR provider:

Payroll administration
In-country compliance management
Reduced risks with international contractors
Global talent acquisition
Advanced HR technology for the international workforce
Canadian employment contracts (some provinces require the contract to be in French and English)

Employment Laws in Canada

The employment laws in Canada can be a little tricky. This is because the regulations are split between the federal government and individual provincial governments. Each province has unique laws regarding:

Minimum age of employment in Canada
Working hours per week and overtime pay
Minimum wage and equal pay
Weekly rest days
General holidays with pay
Annual vacations with pay
Maternity leave and parental leave
Individual and group terminations of employment

To be safe, it’s important to refer to the Canadian Labor Relations, which offers a directory of employment regulations by province. As you hire employees in Canada, pay attention to the provinces where each of your employees are located. If you have multiple Canadian employees who live in different regions, such as Quebec and Ontario, you’ll need to be aware of the different requirements for each item listed above.

Working Hours

The average workday in Canada is eight hours, and the standard workweek is 40 hours with a maximum of 48. Every province in Canada and the federal government requires one day of rest per seven-day period and an extended break period between work shifts, typically eight to 13 hours.

Minimum Wage

Minimum wage requirements vary across Canada and are regulated by provincial employment law. For employees required to work more than a 40-hour workweek, overtime pay is typically time and a half, with a maximum of eight overtime hours per week.

Bonuses

Bonus payments are not required under Canadian law, but they are often included in employment contracts and are commonly used to negotiate with top candidates.

Holiday Entitlement

In most provinces, employees receive at least two weeks of paid vacation after one year of service.

Employees in federally regulated industries receive:

Two weeks of paid vacation after five years of service
Three weeks of vacation after six years
Four weeks of vacation after 10 years of service.

Additionally, federally regulated Canadian employees receive the following paid public holidays:

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

Canada observes several provincial holidays.

Furthermore, Canadian employees are also entitled to:

Maternity leave
Paternity leave
Paternal leave
Sick leave
Parental leave
Bereavement leave
Compassionate care leave
Critical illness leave
Leave for victims of family violence
Personal leave

FAQs About Hiring in Canada

Global PEO Services, a Safeguard Global company, has worked with hundreds of companies expanding into Canada, and we’ve used our collective knowledge to compile a list of frequently asked questions regarding payroll and hiring.

What are the different types of employment in Canada?

Permanent Employment – Under the permanent employment designation, the Canadian Labor Code specifies four major categories of employment: full-time, part-time, casual, and managerial/professional. Even though all these are covered by the Labor Code, there is no statutory distinction between them.
Fixed-Term Contracts – Per the Labor Force Survey of Canada, contract jobs are positions defined by the employer before hiring and are meant to end on a certain date or once a specific task or project is completed.
Temporary Employment – The Labor Code of Canada does not distinguish between permanent and temporary employees. Under the law, all employees are protected.

What are the retirement requirements for employees?

The two kinds of retirement benefit systems for employees in Canada are contribution-based and government-sponsored. The former is a Canada Pension Plan, while the latter is an Old Age Security Plan. Social insurance, often known as social welfare, is a government-mandated insurance program that provides financial help to the elderly, the disabled and injured, and the unemployed.

What are the employee data privacy requirements?

When doing business in Canada, the legal measures governing employee data privacy are different per jurisdiction. Generally speaking, personal data must be collected with consent and only used for the purposes for which it was collected. In most jurisdictions, where notice has been given through clear employer policies, email and internet use may be monitored.

How Global PEO Services Can Help

Growing globally can be an exciting time for an organization and there are risks and challenges involved. Global PEO Services (GPS), a Safeguard Global company, can help mitigate these risks, while still giving you control over your day-to-day operations. With laws and regulations frequently changing, doing business in Canada can be challenging – especially when complying with legal and tax obligations.

We manage all local legal requirements, HR, and payroll, so your business can focus on growth. For companies hoping to do business in Canada, GPS can help you grow and remain compliant so you can achieve your goals.

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