Hiring in Canada? Foreign employers keen on tapping into the country’s skilled workforce can start off by hiring Canadian contractors and sending international payments. But if you want to expand and hire full-time employees, you’ll need to establish a legal entity or hire through an EOR.
Alternatively, you can use an “Employer of Record” (EOR), which handles Canadian payroll, tax, and compliance considerations. Through Rippling EOR’s entities, you can start hiring and working with employees in Canada quickly and compliantly.
Here’s a step-by-step guide for hiring through an EOR in Canada.
Step by step: How to hire through an Employer of Record in Canada
Step #1: Decide between a Canadian EOR and a legal entity
Should you hire Canadian employees through an EOR, or set up your own entity? This depends on your company’s resources, size, and plans to scale.
- Legal entity in Canada. Setting up a legal entity from scratch usually requires registration with local authorities, opening a local bank account, and consulting with local experts to ensure compliance with tax and labor laws.
- Canadian EOR. An EOR is a third-party service that operates as an employer on a company’s behalf—meaning you don’t need to set up your own entity. As well as allowing you to hire full-time Canadian employees, EORs handle all the legal requirements for complying with Canadian laws for payroll, contracts, and benefits. EOR services also include calculating and withholding taxes, onboarding and managing employees, and running payroll.
Registering a legal entity can take months. Once established, it requires knowledge of complex Canadian employment laws that vary by province and territory. Any misstep can incur fines and legal action from the Canadian Revenue Agency (CRA).
Pros and cons of EORs vs. setting up a legal entity
Cost & Implementation
✔ Less time-consuming to set up.
✔ You can start hiring within days instead of months.
✘ Becomes costlier as your headcount increases.
✘ Takes up to six months to set up—and requires registration fees.
✔ More cost-effective once you’ve hired enough employees in a foreign country.
✔ Quickly set up new hires, often within 1-14 days, depending on the provider.
✔ Supports large-scale expansion in a new market.
✔ Manages all of your compliance work for you, takes on liability, and provides localized employment contracts.
✘ Can’t tailor certain policies, and other HR/legal processes, to the needs of your business.
✘ Requires expert knowledge of local laws and tax regulations and internal legal resources, as your company is liable for all legal and compliance infractions.
✔ Can tailor certain policies, and other HR/legal processes, to the needs of your business.
Payroll & Benefits
✔ Quickly pay and insure employees around the world.
✔ Taxes are filed for you.
✘ Must manually keep track of statutory deductions and employee entitlements for every hire.
Step #2: How to choose the best EOR for your business
Several EORs on the market—including Deel, Papaya Global, and Rippling—can help hire, pay, and manage Canadian employees. Before you choose a platform, you should consider the services you will need, and how much you plan to grow your global hiring presence.
Here’s how Rippling EOR stacks up against Deel in Canada:
Recruiting & Applicant Tracking
Time & Attendance
Exclusivity of service
All-in-one global HR platforms, like Rippling, allow you to hire, pay, and manage employees and contractors worldwide. They are also “payroll processors,” which means they actually process your payroll, transmit funds, and calculate and file taxes in every country through their own software. This allows you to manage and automate the entire employee journey in one place, all around the world.
Most EOR platforms are not HRIS’s (Human Resource Information Systems). They were built with the express purpose to hire and pay people internationally. They aggregate local payroll providers in every country and manually transmit your payroll files to them. This approach comes with many limitations.
All-in-One Global HR Platforms
Most EOR Platforms
Onboarding new hires
Payroll processing time
Integrated with every HR, IT, and Finance tool you need to run your business
Hire employees in Canada in 90 seconds with Rippling
Normally, setting up a corporate entity abroad is a long, expensive process. But through Rippling EOR’s entities, you can start hiring and working with people abroad quickly and compliantly. See Rippling.
Step #3: How to hire and onboard your Canadian employees
Once you’ve picked an EOR that works in Canada, you can begin the onboarding process by collecting the following information from your new employees:
- Name (matching the account where you’ll deposit their pay).
- Date of birth and date of hire.
- Contact information, including their mailing address in Canada.
- Social Insurance number.
- Bank account information.
- Amount to be paid in Canadian dollars (CAD).
- Completed TD1 forms. Every full-time employee needs to fill out a Personal Tax Credits Return (TD1 form), and they’ll need to submit a new one any time they make changes to their personal tax credits.
Next, you need to send out an employment agreement that outlines key working conditions. An EOR can automatically localize and distribute employment agreements. Every Canadian hire will have a legally compliant contract offering statutory requirements for probationary periods, working hours, minimum wage, benefits, and termination policies like severance pay and notice periods.
Example: Let’s say you hire two hourly employees in Canada who live in different provinces that have separate overtime pay requirements.
When you use an EOR in Canada, it will generate separate employment agreements to account for the Ontario resident being eligible for 1.5x base pay after 44 hours in a workweek, and the British Columbia resident getting the overtime rate after eight hours in a workday.
Rippling EOR automatically flags non-compliant sick leave policies and tells you how to fix it. If you'd like to give your employees more leave to match policies in other countries, you can do that too. See Rippling.
Step #4: Run payroll
For the A-to-Z on global payroll, read our comprehensive guide to running international payroll for employees in Canada.
Once you’ve collected a new hire’s information and both parties have signed employment agreements, an EOR will pay your Canadian employees in CAD, while withholding legally required taxes from salaries. This includes contributions to:
- Federal and provincial income taxes
- Canada Pension Plan (or the Québec Pension Plan for Québec Residents)
- Employment Insurance
- Employment Health Tax
- Workers’ Compensation Insurance
Keep in mind many EOR companies are payroll aggregators, meaning they pay employees via third-party vendors. This makes for slower processing times and headaches when it comes to managing international employees under the same system.
Rippling EOR, by contrast, simplifies global employment by using native payroll software to send funds and handle taxes, allowing you to pay Canadian employees alongside your local workforce—all within a single pay run.
Below is a preview of how Rippling’s one-click global payroll system works:
Frequently asked questions about hiring through an EOR in Canada
How much does an EOR cost?
EORs typically use one of two pricing structures:
- Fixed monthly fee per employee
- Percentage of payroll plus applicable taxes
Both methods can also come with various administrative fees, onboarding charges, and other costs for supplemental features.
Keep in mind that you don’t need to use an EOR for your entire workforce. If you want to segment its use, you’ll only be charged for the employees you employ through the EOR.
What is the difference between an EOR and PEO?
A Professional Employer Organization (PEO) co-employs a company’s workforce and provides administrative services like paying employees, handling compliance, and filing payroll taxes. The company and PEO are jointly responsible for the workforce. A PEO does not, however, allow you to hire in other countries where you haven’t set up a local entity.
An EOR, on the other hand, is the sole employer of the portion of your workforce you use it for, assuming all the associated liabilities. An EOR allows companies to work with employees in other countries without setting up a legal entity.
Does an EOR protect your sensitive and confidential information?
While outsourcing your payroll management to an EOR can spare you time and compliance risk, sharing your data with companies who use third-party vendors leaves you exposed to data breaches from manual uploads.
You should seek out EORs that prioritize data protection, including:
- Compliance with industry-standard privacy regulations in different countries.
- Secure infrastructure with around-the-clock maintenance.
- Carefully vetted personnel.
You can also establish a Data Processing Agreement (DPA) with a payroll service that mandates sound privacy practices and provides legal protection.
Does an EOR help with Canadian tax filings?
An EOR can automatically calculate and file your taxes in Canada. Rippling, for instance, is an authorized payroll provider by the CRA. On your company’s behalf, it can distribute and submit T4 forms that outline:
- Total income.
- Employment income.
- Taxable benefits.
- Income tax deducted.
- Canada Pension Plan (CPP) contributions—or regional pension plans like the Québec Pension Plan (QPP).
- Employment Insurance (EI) premiums.
What are the mandatory benefits for Canadian employees?
Canada’s Employment Standards Act provides the following mandatory employee benefits:
- Sick leave
- Parental leave (including paternity and maternity leave)
- Vacation entitlements (which vary depending on year of service)
- Public holidays
- Workers’ compensation
Healthcare is not mandatory, but recommended, and exact benefits vary by province. For instance, Remembrance Day is a statutory holiday in Alberta and British Columbia, but not Ontario.
For more information on mandatory benefits in Canada, read our complete guide.
What are the employer costs for full-time employees in Canada?
Employers are responsible for deducting the following from their full-time employees’ paychecks. Along with social security contributions like EI premiums and pension deductions, provincial taxes may also apply. Find the details below:
Canada Pension Plan
5.95% (capped at CAD 66,600 wages)
2.282% (capped at CAD 61,500 wages)
Employment Health Tax
Varies by province—see the table below
Workers' Compensation Insurance (estimated)
0.21% (capped at CAD 110,000 wages)
Employment Health Tax by province
British Columbia Employer Health Tax
2.925% x (payroll - CAD 500,000)
1.95% x payroll
Manitoba Health and Education Levy (HE Levy)
4.3% x (payroll - $1.5M)
2.15% x payroll
Ontario Employer Health Tax
1.95% x payroll
Québec Health Services Fund
<CAD 1M (businesses other than manufacturing)
<CAD 1M (businesses in manufacturing)
1.25% x payroll
1.65% x payroll
See Québec form TP-1015.G-V
4.26% x payroll
Newfoundland and Labrador
Health and Post Secondary Education Tax (HAPSET)
2% x payroll