In Canada, employer of record (EOR) products and services play a crucial role in complying with the country’s complex employment regulations. SaaS EOR services cover everything from legal employment contracts to managing payroll taxes, ensuring businesses meet both federal and Canadian provincial compliance. By tapping into the expertise of a Canada Employer of Record, companies can confidently navigate diverse regulatory requirements. This support reduces the risk of non-compliance while enabling businesses to concentrate on their core activities instead of legal complexities.
Navigating employment in Canada with an EOR
As you look into the employment landscape, understanding how an employer of record (EOR) operates in Canada is important. Canada’s multi-layered employment law system presents significant compliance challenges for global companies looking to hire and manage talent. Approximately 90% of employees fall under provincial or territorial legislation, while the remaining 10% are federally regulated. Each jurisdiction has its own rules for minimum standards, notice periods, and benefits. An EOR in Canada provides the necessary local expertise to navigate this complexity.
Hiring in Canada, particularly without extensive knowledge of the employment laws, can be challenging and demanding for global businesses.
Key challenges for employers in Canada include:
-
No “at-will” employment: Employers must provide notice or pay in lieu of notice for termination without cause.
-
Contractor misclassification: The criteria for an independent contractor are strict, and misclassification can lead to significant penalties, including back pay for benefits and taxes.
-
Provincial variations: A company hiring in multiple provinces must comply with different sets of rules for each employee.
Hiring in Canada: challenges without an EOR
Direct employment of workers in Canada without an employer of record introduces multiple challenges. Companies must set up a legal entity, a process that is both expensive and time-consuming. Additionally, keeping up with ever-evolving federal and provincial labor laws demands significant resources. Without AI-powered EOR services, companies are at increased risk of non-compliance, legal penalties, and administrative overload. An employer of record EOR addresses these issues by overseeing the complexities of employment contracts, payroll, and tax obligations, allowing businesses to focus on strategic expansion.
Employment contracts in Canada
A legally compliant employment contract is the foundation of any hire in Canada. A legally compliant employment contract ensures any hire in Canada aligns with federal and provincial employment laws. An EOR ensures that every hire contract is compliant and meets all applicable provincial or federal minimum standards in employment terms. Contracts should be detailed, outlining an employee's compensation, benefits, and termination provisions in Canadian dollars (CAD). In Québec, employment contracts and related documents must be drafted in French, though an English version can also be provided if both parties agree. Employer of Record products and services can facilitate bilingual documentation, ensuring compliance in linguistically diverse regions.
Canada working conditions and leave
Working hours and overtime in Canada
Overtime rules vary by province but are generally calculated at 1.5 times an employee's regular rate of pay for hours worked beyond a set weekly threshold (e.g., 40 hours in Québec, 44 hours in Ontario). An EOR ensures correct calculation and payment of overtime, as certain roles, such as managers and supervisors, may be exempt.
Vacation and statutory holidays in Canada
Paid annual vacation is mandatory, with minimums varying by province. Most jurisdictions start at 2 weeks, increasing with service, though Saskatchewan notably begins at 3 weeks. For professional roles, 3 to 4 weeks of vacation is a common market expectation.
Employees are also entitled to paid time off for statutory holidays. Canada has 5 national holidays, with additional provincial and territorial holidays. An employer of record tracks and administers the correct holiday entitlements based on the employee's province of work.
Canada national holidays: New Year's Day, Good Friday (or Easter Monday in Québec), Canada Day, Labour Day, and Christmas Day.
Mandatory leave in Canada
Canada provides for various forms of job-protected leave, including sick leave and parental leave.
-
Sick leave: Federally regulated employees are entitled to up to 10 days of paid sick leave per year. Provincial entitlements vary; for example, British Columbia provides 5 paid days, and Québec provides 2. For longer-term absences, employees may be eligible for Employment Insurance (EI) sickness benefits.
-
Maternity and parental leave: Eligible parents are entitled to extensive, job-protected leave. While the leave itself is unpaid by the employer, parents can receive benefits through the federal EI program. Many employers offer a “top-up” payment to supplement EI benefits, which an EOR can administer.
An EOR allows businesses to offer standardized leave policies that conform to these legal frameworks.
Canada health insurance and benefits
While Canada’s publicly funded healthcare system covers medically necessary physician and hospital services, it does not cover everything. Supplemental health insurance is a standard expectation for most professional roles, covering services like prescription drugs, dental care, vision care, and paramedical services (e.g., physiotherapy). Sourcing and administering a competitive group benefits plan without a local Canadian entity is a significant challenge. An EOR provides access to robust benefits packages, helping you attract and retain top talent.
Termination and severance in Canada
Terminating employment in Canada requires careful adherence to both statutory requirements and common law principles. Probationary periods, typically 3 to 6 months, must be clearly defined in the employment contract. Employers must provide either working notice of termination or pay in lieu of notice. The required notice period is determined by statutory minimums (based on length of service) and a “reasonable notice” period established by common law, which is often significantly longer. An EOR provides critical guidance on calculating appropriate notice and severance to mitigate legal risks.
In certain circumstances, particularly in Ontario for larger employers, statutory severance pay is also required in addition to notice. In provinces like Québec, as well as under federal law, termination without cause is restricted, requiring a just cause for dismissal.
Payroll and Taxes in Canada
Employers in Canada are responsible for deducting and remitting income taxes and payroll contributions. Tax rates are progressive and applied at both federal and provincial levels. An EOR manages all payroll functions, including employment tax remittances, ensuring compliance with federal and provincial withholdings.
As of July 2025, key tax information includes:
-
Top Marginal Tax Rates (Combined Federal & Provincial, approximate): British Columbia (53.50%), Ontario (53.53%), Québec (53.31%), Alberta (48.00%).
-
Canada Pension Plan (CPP): Contributions are mandatory up to a yearly maximum pensionable earnings limit (YMPE), which for 2025 is CAD 71,200. A second tier of contributions (CPP2) applies to earnings between the YMPE and a new upper earnings limit of CAD 75,500.
-
Employment Insurance (EI): Employers and employees contribute up to a maximum annual insurable earnings limit (CAD 65,000 for 2025). Contribution rates vary slightly for employees in Québec.
Advantages of collaborating with a Canadian EOR
Teaming up with a Canadian Employer of Record offers distinct advantages, simplifying your hiring operations within the country. AI-powered EOR services facilitate swift onboarding of Canadian talent, eliminating the need to establish an expensive legal entity in Canada. By taking charge of employment contracts, compliance, and payroll, an EOR ensures your workforce is integrated according to local laws. Collaborating with an EOR not only conserves company resources but also ensures compliance with Canadian employment laws.
Selecting an ideal employer of record in Canada
Choosing the right employer of record in Canada requires businesses to assess the provider’s proficiency in Canadian employment legislation and their capability to deliver customized solutions.
Factors to consider when choosing a Canadian EOR include:
-
Expertise in Canadian employment law: Verify that the EOR has in-depth knowledge of both federal and provincial employment laws across Canada. This includes understanding regional variations in minimum wages, notice periods, and benefits.
-
Comprehensive service Offering: Evaluate the range of services provided. A robust EOR should offer:
-
Payroll processing and tax remittances (federal and provincial)
-
Benefits administration, including health insurance and pension plans
-
Compliance management for employment contracts, working conditions, and leave policies
-
Guidance on termination and severance requirements
-
Support for bilingual documentation, especially in Quebec.
-
-
Scalability and flexibility: Choose an EOR that can accommodate your company's growth and changing needs, whether you're hiring one employee or expanding into multiple provinces.
-
Reputation and client references: Look for an EOR with a strong track record and positive client testimonials. Request references and inquire about their experience with similar businesses.
-
Technology and Integration: Assess the EOR's technology platform. It should be user-friendly, secure, and capable of integrating with your existing HR or payroll systems for seamless data management.
-
Cost Structure: Understand the EOR's pricing model, including all fees for setup, ongoing services, and any additional charges. Ensure transparency and no hidden costs.
-
Customer Support: Excellent customer support is crucial. The EOR should provide responsive and knowledgeable assistance for any questions or issues that may arise.
Why G-P?
G-P EOR is the award-winning, AI-powered SaaS platform that empowers ambitious companies to build global teams. Onboard, manage, and pay top talent in over 180 countries in minutes, bypassing the typical time, cost, and complexity of local entity setup. G-P EOR is the preferred partner for leading HCM, PEO, and payroll platforms. Bring your workforce data together in one place to maintain existing workflows while ensuring consistent and accurate data across your integrated systems.
