Hire employees in Canada
Everything a foreign company needs to know before employing people in Canada: whether you need an entity, what an employee really costs once CPP, EI and provincial payroll taxes are added, why the province of employment decides almost every rule, what leave is mandatory, and why a badly drafted termination clause is the most expensive mistake you can make. Written for CHROs, CFOs, General Counsel and founders.
Quick answers
The questions leadership teams ask first, answered directly.
Do I need a local Canadian entity to hire?
No. Foreign companies can engage talent in Canada through three routes:
- Employer of Record. Dryft Global employs the person through its established Canadian infrastructure. Dryft runs multi-provincial payroll, remits to the Canada Revenue Agency (CRA) and Revenu Québec, handles Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) and Employment Insurance (EI), covers workers' compensation and applies the right provincial standards.
- Direct Canadian corporation. You incorporate federally (CBCA) or provincially, register extra-provincially wherever you employ people, open a CRA business number with a payroll (RP) account, register with each provincial workers' compensation board, and in Quebec with Revenu Québec as well.
- Independent contractor. Lawful only for a genuine business serving several clients at its own risk. Canada also recognises a middle category, the dependent contractor, who is owed reasonable notice on termination.
When should I use an EOR instead of incorporating?
An EOR makes commercial sense when you are:
- Onboarding talent in days rather than the weeks incorporation, licensing and CRA registration take.
- Employing a distributed team across several provinces without running separate tax registrations, compensation boards and language regimes.
- Building a first presence or remote R&D team before committing to a subsidiary.
A Canadian corporation becomes the right answer when headcount reaches a permanent 20 to 30+, when you need local contracting or office leases, when you want to claim SR&ED research tax credits directly, or when you plan to sponsor foreign nationals through your own LMIAs.
What does an employee actually cost beyond salary?
Plan for roughly 12% to 18% on top of gross salary. Employer CPP or QPP matching and EI at 1.4 times the employee premium are capped at annual ceilings. Workers' compensation adds 0.2% to 3%+ by industry, provincial employer health taxes up to 4.26%, and statutory vacation pay 4% to 6%. Market-standard benefits add another 4% to 8%. Full breakdown below.
How difficult is termination in Canada?
Easy on paper, expensive in practice. Statutory minimums are modest: 1 to 8 weeks of notice or pay in lieu, plus up to 26 weeks of Ontario severance for larger employers. The exposure is common law "reasonable notice": without an enforceable termination clause, a dismissed employee in the nine common-law provinces is owed 3 to 5 weeks of pay per year of service, up to 24 months or more. Since Waksdale, courts void the entire clause if any part falls below the provincial standard. In Quebec, reasonable notice cannot be waived, and after 2 years' service dismissal needs good and sufficient cause.
Can Dryft Global legally employ my team in Canada?
Yes. Dryft provides Employer of Record services across all Canadian provinces and territories. We issue compliant bilingual contracts with enforceable termination clauses, manage CRA and Revenu Québec payroll, workers' compensation and pensions, provide extended health and dental benefits, and handle HR compliance while you direct the work.
Hiring routes compared
Weigh speed, overhead, CRA exposure and common-law termination risk. Here is how the routes stack up.
| Factor | Direct corporation (CBCA / provincial) | Dryft Global EOR | Independent contractor |
|---|---|---|---|
| Speed to onboard | 4 to 8+ weeks (incorporation, licences, CRA accounts) | 2 to 5 business days | 1 to 3 business days |
| Corporate entity required | Yes, plus extra-provincial filings | No, employed through Dryft's Canadian infrastructure | No, direct commercial contract |
| CRA and Revenu Québec burden | Direct liability for corporate filings and payroll | Fully managed and assumed by Dryft | None directly, but high retroactive CPP / EI liability |
| Misclassification risk | None, direct employment | None, statutory T4 / RL-1 employment | Severe: CRA reclassification and dependent contractor claims |
| Termination exposure | Direct liability for common-law notice and ESA compliance | Managed with statutory minimums and standardised buffers | Dependent contractor claims for common-law notice |
| Best fit | 20 to 30+ staff, SR&ED credits, enterprise billing | Rapid entry, 1 to 20 distributed hires, remote engineering | Discrete, non-integrated project deliverables |
What an employee costs in Canada
Canada's statutory on-cost is split between federal programmes (CPP and EI, or QPP and QPIP in Quebec) and provincial ones (workers' compensation and, in some provinces, employer health taxes). Federal contributions stop at annual earnings ceilings, so the effective rate falls for higher earners. Provincial rules follow the province of employment, not where your company sits.
| Component | Employer share | Notes |
|---|---|---|
| CPP / QPP (Tier 1) | ~5.95% CPP or ~6.40% QPP | Matches the employee, from the $3,500 basic exemption up to the YMPE ceiling |
| CPP2 / QPP2 (Tier 2) | ~4.0% | On the band between the YMPE and the YAMPE ceiling |
| Employment Insurance (EI) | ~2.28% | 1.4 times the employee premium up to Maximum Insurable Earnings; reduced in Quebec, where QPIP premiums apply |
| Workers' compensation | 0.2% to 3.0%+ | 100% employer-funded; WSIB, WorkSafeBC, WCB Alberta, CNESST; rated by industry |
| Provincial employer payroll taxes | 0% to 4.26% | Ontario and BC EHT up to 1.95% above exemption thresholds; Quebec HSF 1.25% to 4.26%; Manitoba levy up to 2.15% |
| Statutory vacation pay | 4.0% to 6.0% | 4% for 2 weeks, 6% for 3 weeks after 5 years in most provinces |
| Statutory subtotal | ~12% to 18%+ | Of gross pay, before supplementary benefits |
| Market-standard group benefits | 4% to 8%+ | Extended health, dental, life, STD and LTD, RRSP match of 3% to 6% |
| Total employer on-cost | ~16% to 26%+ | Above base salary, benefits included |
For an employee on CAD 100,000 gross, budget roughly CAD 112,000 to CAD 118,000 all-in before supplementary benefits. Ask us for a province-specific cost model.
Payroll and tax
Canadian payroll runs bi-weekly (26 pays) or semi-monthly (24 pays); monthly payroll is restricted in most provinces. The employer withholds federal and provincial income tax, employee CPP or QPP and EI (plus QPIP in Quebec) and remits to the CRA and Revenu Québec by the 15th of the following month, sooner for large remitters. Employees complete TD1 credit forms on hiring (TP-1015.3-V in Quebec). Annual T4 slips (RL-1 in Quebec) are due by the end of February. A Record of Employment must reach Service Canada within 5 days of any interruption of earnings.
Income tax
Employees pay two layers of progressive tax. Federal rates run 15%, 20.5%, 26%, 29% and 33% across five brackets. Provincial rates add about 5% to 21%+, so top combined rates exceed 53% in Ontario, Quebec, BC and Nova Scotia. For fully remote staff, the CRA generally treats the province of employment as the one from which payroll is paid; any difference from the province of residence is reconciled on the employee's own return.
Minimum wage
There is no single Canadian minimum wage. Each province and territory sets its own hourly rate, usually indexed to inflation and adjusted annually, and a separate federal rate applies to federally regulated industries.
Leave and mandatory benefits
- Paid vacation. 2 weeks (10 working days) with 4% vacation pay after 1 year, rising to 3 weeks and 6% after 5 years in most provinces (10 years in some). Tech roles typically offer 3 to 4 weeks.
- Public holidays. 8 to 10 depending on the province: Ontario and Alberta 9, BC 10, Quebec 8. Work on a holiday is paid at 1.5 times plus holiday pay, or a substitute day.
- Sick leave. Varies sharply: BC gives 5 paid and 3 unpaid days a year, Ontario 3 unpaid days, the federal sector up to 10 paid medical days.
- Maternity. 15 to 17 weeks of job-protected leave, with income replaced by federal EI maternity benefits (QPIP in Quebec).
- Parental leave. Up to 61 to 63 weeks standard, or 71 to 78 weeks extended, shared between parents and matched to EI parental benefit structures. Employers pay no salary during leave unless they top up.
- Other protected leaves. Up to 37 weeks to care for a critically ill child, 17 weeks for an adult relative, 3 to 5+ days of bereavement, 10+ days for domestic violence.
- Working time. Standard weeks of 40 hours (BC, Quebec) or 44 hours (Ontario, Alberta), with overtime at 1.5 times above the threshold. BC and Alberta also pay overtime after 8 hours in a day. Genuine managers and licensed professionals are exempt.
- Market-standard benefits. No 13th month or private health plan is mandatory, but extended health, dental, life, disability cover and an RRSP match of 3% to 6% are expected in any competitive offer.
Termination and notice periods
Most provinces allow dismissal without statutory notice in the first 3 months, but only if probation is written into the contract before day one. After that, two tiers apply in the common-law provinces: the statutory floor under each Employment Standards Act, generally 1 week per year of service, and common-law reasonable notice, which applies in full unless an enforceable written clause displaces it. Quebec runs on the Civil Code instead.
| Completed service | Statutory minimum notice (typical ESA) | Common-law exposure without a valid clause |
|---|---|---|
| Under 3 months (written probation) | None | Full reasonable notice without a probation clause |
| 3 months to 1 year | 1 week | Weeks to a few months |
| 1 to 8 years | 1 week per completed year | 3 to 5 weeks per year of service |
| 8 years or more | 8 weeks (cap in Ontario, BC, Quebec) | Up to 24+ months for senior or long-serving staff |
- The Waksdale trap. If any part of the termination clause could breach the provincial standard, even an over-broad "for cause" definition, the whole clause is void and full common-law notice applies. Draft every contract province by province.
- Ontario statutory severance. On top of notice, employees with 5+ years' service get 1 week per year up to 26 weeks if your global payroll is at least CAD 2.5 million or you close a business dismissing 50+ people.
- Quebec. Article 2091 of the Civil Code makes reasonable notice non-waivable. Non-management staff with 2+ years' service can only be dismissed for good and sufficient cause under Section 124, with reinstatement as a remedy.
- Human rights. Dismissals linked to disability, family status, age or another protected ground bring tribunal claims with uncapped damages for injury to dignity.
- Mass terminations. Dismissing 50 or more people at one establishment requires advance notice to the provincial ministry and extended notice of 8 to 16 weeks.
Can I use independent contractors?
Only for a genuine business, and Canada tests substance, not labels. The CRA and the courts apply the Sagaz factors: control over hours and methods, ownership of tools, the right to subcontract, financial risk and chance of profit, and integration into your core operations. Quebec applies the Civil Code test of legal subordination. If a contractor is reclassified you owe all unremitted employer and employee CPP or QPP and EI, CRA penalties of 10% on a first assessment and 20% on a repeat, daily compound interest, back workers' compensation premiums and health taxes, unpaid vacation pay, holiday pay and overtime. Even if the tax position holds, a contractor who earns most of their income from you is a dependent contractor and is owed reasonable notice when you end the relationship. An EOR is the compliant alternative for anyone who works like an employee.
The legal framework in brief
Canada divides employment law by constitution. Provinces and territories govern about 90% of the workforce; the Canada Labour Code covers federally regulated sectors such as banking, telecoms and airlines. Quebec adds civil law and French-language rules. The sources you will hear referenced most:
- Provincial Employment Standards Acts. Ontario ESA 2000, BC ESA, Alberta Employment Standards Code and their equivalents: hours, overtime, vacation, holidays, leaves, notice and severance.
- Canada Labour Code. The federal equivalent for federally regulated industries, including 10 paid medical days and 10 public holidays.
- Civil Code of Québec and Act Respecting Labour Standards. Contract of employment (Art. 2085), non-waivable reasonable notice (Art. 2091) and the Section 124 unjust dismissal remedy.
- Charter of the French Language (Bill 96). French-first contracts, French workplace communications and Francisation certification at 25+ Quebec staff.
- Common law. Bardal (reasonable notice), Waksdale (termination clauses) and Sagaz (contractor status) shape outcomes as much as any statute.
- Human Rights Codes. Federal and provincial protection across disability, race, religion, sex, age, sexual orientation and family status, with a duty to accommodate to undue hardship.
- Occupational Health and Safety Acts. Joint health and safety committees and the right to refuse unsafe work, extending to home offices.
- Workers' Compensation Acts. Mandatory employer-funded insurance through WSIB, WorkSafeBC, WCB Alberta and CNESST.
- PIPEDA, provincial privacy acts and Quebec Law 25. Employee data rules, with Law 25 the strictest in North America; Ontario requires a written electronic monitoring policy at 25+ employees.
- Immigration and Refugee Protection Act. Right-to-work checks via the SIN and work permits; LMIA, CUSMA, intra-company transfer and Global Skills Strategy routes for foreign hires.
Where the talent is
Canada has a labour force of more than 21 million and leads the OECD for post-secondary attainment. Its six time zones line up with US headquarters and its universities anchor world-leading AI clusters. English is the working language outside Quebec, where French governs contracts and workplace communication.
| Region | Talent and industry concentration |
|---|---|
| Greater Toronto and Waterloo | Fintech, enterprise SaaS, banking, AI, health tech, life sciences, advanced manufacturing, head offices |
| Greater Vancouver | Cloud infrastructure, digital media, gaming, cleantech, software engineering, Asia-Pacific trade |
| Greater Montreal | Artificial intelligence (MILA), deep learning, VFX, video games, aerospace, biotech, fintech |
| Calgary and Edmonton | Energy tech, clean energy, agtech, systems engineering, enterprise software, logistics |
| Ottawa and Gatineau | Govtech, telecoms, cybersecurity, SaaS, defence tech |
| Atlantic Canada (Halifax, Moncton) | Ocean tech, cybersecurity, digital services, shared services, customer support |
Canada Implementation Kit
This page tells you the rules. The kit tells you what to do, in what order, and what goes wrong when you skip a step. Built from Dryft's own onboarding checklist for Canada.
- Step-by-step implementation checklist, from hiring route selection to first payroll
- Province of employment decision tree for remote staff
- Waksdale-proof termination clause drafting, province by province
- Quebec French-language compliance under Bill 96
- SIN verification, work permit checks and TD1 / TP-1015.3-V setup
- CPP, EI, workers' compensation board and provincial payroll tax registration
- Required written policies, including Ontario's electronic monitoring policy and Law 25 privacy notices
- Every official federal and provincial authority with direct links
This guide is general information, not legal, tax or immigration advice. Canadian employment, tax and immigration rules change regularly through federal and provincial legislation, annual indexation of ceilings and minimum wages, and court decisions on contract enforceability. Confirm current figures for the relevant province with a qualified adviser or with Dryft before acting. Last reviewed September 2026.
Ready to hire in Canada?
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