Employer of Record Canada
Employing in Canada
Hailed as the ‘start-up mecca to rival Silicon Valley’, Canada is also the home of Niagara Falls, ice hockey and maple syrup. But for budding businesses — from the US and elsewhere in the world — that have their sights set on global expansion, the Great White North also has plenty else to offer. The business hubs of Toronto, Vancouver and Montreal have proved particularly tempting to entrepreneurs.
Thanks to its low corporate tax rate of just 15% and the various grants, loans and incentives available (including the Start-up Visa Program for foreign business owners), Canada is consistently ranked as one of the top places in the world for doing business. Not only that but the country is also considered among the world’s top 10 economies. One of the few countries to be affected by the 2008 financial crisis, Canada has been progressing steadily for some time now, and further growth is forecasted over the next decade.
Combined with the friendly, inclusive nature of its inhabitants, Canada’s economic stability and calm political landscape make it even more appealing to foreign investors seeking a reliable location to gain a foothold. Plus, almost 30% of Canadians speak French, which has achieved a growing status as a business language in recent years. But English is also spoken across the country, making it easy for international companies to do business.
Country Guidelines
An overview of employing in Canada
Canada is a federal state comprised of ten provinces (Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Québec and Saskatchewan) and three territories (Northwest Territories, Nunavut and Yukon).
Employment regulations in Canada are typically exercised by the provincial and territorial governments. Labour and employment matters are principally within provincial and territorial jurisdiction; however, the federal government has jurisdiction over employers that are engaged in activities that are interprovincial in nature (federally regulated).
Québec is an exception and instead operates under a civil law system.
Salary currency
Canadian Dollar — CAD $
Salary pay date
Wages must be paid to an employee on the regular payday established by the employer. TopSource Worldwide employees are paid on the last working day of the month except for those employees
who reside in British Colombia, who are legally required to be paid every 15 days.
Bonus
Please note that, under Canadian law, it’s important to be clear around bonus rules as if this isn’t clearly defined in the contract, bonuses can be deemed to be payable to an employee during their notice period or while being under a severance package. Our contracts of employment include appropriate wording to protect against this.
Social security system
The Canadian social security system covers all provinces excluding Quebec which has its own system. The Canadian social security system has two components of tax: Canada Pension Plan (CPP) and employment insurance (EI).
Healthcare
The healthcare system in Canada is publicly funded and standards are set by the federal government based on the Canada Health Act. Healthcare is delivered by provincially based Medicare systems.
Most basic healthcare services are covered by provincial health insurance.
Employer costs
Employers are responsible for deducting pension contributions, employment insurance premiums, health tax and workplace safety insurance. It’s important to be aware of all federal, regional and territorial taxes and contributions when calculating payroll deductions and employers’ costs in Canada.
Overall costs (2021)
| Benefit | Employer cost | Annual exemption | Threshold |
|---|---|---|---|
| Canada Pension Plan (CPP) | 5.45% *Deducted from gross pay + taxable allowances/benefits |
$3500.00 | $61, 700e |
| Employment insurance (EI) | 2.212% | – | $54,200 |
| Employer health tax | 1.95%* | – | – |
These rates are based on non-Québec employees
Employment insurance (EI) premiums
EI premiums must be deducted from insurable earnings by the employer to cover employee contributions. Employers are then expected to pay approximately 1.4 times the amount of the employee’s premiums.
Premium rates and maximums (2021)
| Maximum annual insurable earnings |
Rate (%) | Maximum annual employee premium |
Maximum annual employer premium |
|---|---|---|---|
| $56,300 | 1.58 | $899.54 | $1245.36 |
*In Québec, the premium rate for workers is 1.18%, due to the additional Québec Parental Insurance Plan
Employer health tax (EHT)
The EHT is an annual tax on an employer’s provincial remuneration.
*Please note this is dependent on company size and is progressive based on payroll.
An overview of the main statutory benefits
Pension
Canada Pension Plan (CPP)
Any employee working in pensionable employment will have pension contributions deducted from their pay by their employer and cannot elect to stop contributing to the CPP until they reach at least 65 years of age.
It’s the responsibility of the employer to calculate how much CPP to deduct, using the annual CPP contribution rates and maximums.
Employers must contribute an amount equal to the CPP deducted from the employee’s remuneration.
The maximum pensionable earnings will be provided each year by the CPP. Deductions are stopped once the contributions reach the maximum annual threshold.
CPP contribution rates: 2021
| Maximum annual pensionable earnings |
Basic exemption amount | Maximum contributory earnings |
Employee and employer contribution rate (%) | Maximum employee and employer contribution |
|---|---|---|---|---|
| $61,7000 | $3,500 | $58,100 | 5.45 | $3,166.45 |
Québec Pension Plan (QPP)
Québec employers deduct QPP contributions instead of CPP contributions. The contribution rates for QPP are higher than those for CPP.
Sickness
If an employee cannot work for medical reasons, EI sickness benefits can provide up to 15 weeks of financial assistance of a maximum of $595 per week.
Maternity & paternity
A pregnant employee is entitled to up to 17 weeks (18 weeks in Québec) of maternity leave. This leave can be taken at any time during the period that:
In Québec:
An employee must provide their employer with a certificate from a healthcare practitioner confirming they are pregnant. They must also give notice at least four weeks (three weeks’ notice in Québec) before starting the leave advising the length of leave to be taken.
Employees are also entitled to up to 63 weeks of unpaid parental leave. Employees in Québec are entitled to up to 65 weeks of unpaid parental leave after the child’s birth. Furthermore, employees in Québec are entitled to unpaid paternity leave upon the birth of the child equal to 5 consecutive weeks.
Maternity leave and parental leave are addressed under employment standards legislation in each province. EI is available for employees who are pregnant, have recently given birth, are adopting a child or are caring for a newborn. Because EI benefits provide only a portion of an employee’s regular wages, many employers offer ‘top-up’ benefits to employees for some portion of their leave.
Enhanced benefits
Registered Retirement Savings Plan (RRSP)
TopSource Worldwide offers an RRSP scheme through Manulife. It should be noted that contributions are entirely voluntary both on behalf of the employer and employee. The employer can determine whether the employee will be required to match any employer contributions. We can work with our clients on this during the onboarding phase.
Health insurance
TopSource Worldwide can offer an enhanced healthcare policy for employees through Manulife which provides for extended healthcare, dental and also includes life assurance, accidental death & dismemberment and long-term disability.
Contractual provisions
Contract of employment
Please note that it’s important in Canada for employees to sign their contract prior to the hire date.
Probationary period
The customary probationary period is three months.
Working hours
The standard working hours of an employee in a federally regulated industry are:
Federally regulated employees are all entitled to one full day of rest each week, which usually falls on a Sunday.
In most cases, the maximum number of hours worked in a week is 48.
This can be exceeded in exceptional circumstances including permits, for emergency work, under an averaging plan or a modified work schedule.
Overtime
Any hours worked in excess of the standard hours of work are considered overtime hours.
Overtime pay is at a rate of a minimum of 1.5 times the regular hourly wage for those hours that would apply, with the following exceptions:
Vacation allowance
Any vacation pay owed to an employee by the employer must be paid at the time the employee takes their vacation. If the employment ends and the employee is owed vacation pay, the employer must pay it within 30 days after the employee’s last day of work.
Vacation pay is calculated as a percentage of the gross wages an employee earns during the ‘year of employment’. The amount varies between 4% or 6%.
Additional leave
Employees are entitled to up to five days of personal leave per calendar year to:
In Québec, employees can be absent from work 10 days per year to fulfil obligations related to:
If the employee has been employed for three months, the employee is then entitled to two days of absence paid per calendar year for the reasons above, as well as under the following circumstances:
Additionally, employees in Québec are entitled one paid day for the employee’s marriage or civil union if it falls on a working day. The employee is entitled to one unpaid day for the marriage or civil union of an immediate family member.
An employer may request that the employee provide supporting documents to evidence the reason of leave. This may be requested up to 15 days after the return to work.
Bereavement leave (paid and unpaid)
Employees are entitled to five days of bereavement leave in the event of a death of an immediate family member. They can take this leave over more than one period starting the day on which the death occurs and ending six weeks after the date of the funeral/burial/memorial service of that immediate family member.
In Québec, the leave must be taken between the time of death and the funeral. Certain days of leave could be used at the time of death and then, after a return to work, other days of leave could be taken during the funeral.
Compassionate care leave
An employee may take up to 28 weeks (27 weeks in Québec) of unpaid leave within a 52-week period to care for a family member who has a serious medical condition with a significant risk of death.
Leave related to critical illness
If an employee is a family member of a critically ill child or adult, they are eligible to take:
This leave is unpaid.
Termination
Federally regulated employees don’tt have to give their employer notice if they choose to quit. However, if the employer chooses to terminate a position, they must either:
In Québec, the notice period varies depending on the length of the employee’s uninterrupted service:
| Length of service | Notice period |
|---|---|
| Three months to one year | One week |
| One to five years | Two weeks |
| Five to 10 years | Four weeks |
| 10 years or more | Eight weeks |
An employee has the right to collect severance pay if they’ve completed at least 12 consecutive months of continuous employment before their layoff or dismissal resulted in a termination of employment. They’re entitled to two days’ regular wages for each full year they worked for the employer before their termination of employment. The minimum benefit is five days’ wages.
Holiday Entitlement
Federally regulated employees are entitled to a minimum of two weeks of vacation annually after completing one year of employment with the same employer. After five consecutive years of employment with the same employer, the entitlement increases to three weeks of vacation annually.
In all provinces, employees are entitled to at least two weeks of vacation per year; in Saskatchewan, employees are entitled to three weeks per year.
A vacation pay calculator is available to assist in determining vacation entitlements. This calculator applies to the majority of employees in the federal jurisdiction.
Employees are also entitled to between six to 10 paid statutory holidays per year. If an employee is required to work a holiday, the employee is entitled to premium pay (typically time-and-one-half) as well as to holiday pay for that day.
| Public holidays 2021 | ||
|---|---|---|
| New Year’s Day | Friday 1 January | |
| Good Friday | Friday 2 April | National except QC |
| Victoria Day | Monday 24 May | National except NB, NS, NL |
| Saint-Jean-Baptiste Day | Thursday 24 June | Québec only |
| Canada Day | Thursday 1 July | |
| Civic Holiday | Monday 2 August | |
| Labour Day | Monday 6 September | |
| Thanksgiving Day | Monday 11 October | National except NB, NS, PE, PL |
| Remembrance Day | Thursday 11 November | National except ON, QC, NS, NL |
| Christmas Day | Saturday 25 December | |
| Boxing Day | Sunday 26 December | ON |
Alberta (AB), British Columbia (BC), Manitoba (MB), New Brunswick (NB), Newfoundland and Labrador (NL), Northwest Territories (NT), Nova Scotia (NS), Nunavut (NU), Ontario (ON), Prince Edward Island (PE), Saskatchewan (SK), Québec (QC)
| Public holidays 2022 | ||
|---|---|---|
| New Year’s Day | Saturday 1 January | |
| Good Friday | Friday 15 April | National except QC |
| Victoria Day | Monday 23 May | National except NB, NS, NL |
| Saint-Jean Baptiste Day | Thursday 24 June | QC only |
| Canada Day | Friday 1 July | |
| Civic Holiday | Monday 1 August | AB, BC, SK, ON, NB, NU |
| Labour Day | Monday 5 September | |
| Thanksgiving Day | Monday 10 October | National except NB, NS, NL |
| Remembrance Day | Friday 11 November | National except MB, ON, QC, NS, NL |
| Christmas Day | Sunday 25 December | |
| Boxing Day | Monday 26 December | ON |
France
Luxembourg
Netherlands