Hire and manage employees in Canada

Employer or Record (EOR) vs. entity

Before you can begin the hiring process in Canada, you need to decide whether to hire Canadian employees through an EOR or set up your own entity.

• Legal entity in Canada. Setting up a legal entity from scratch usually requires registering 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 and part-time Canadian employees, EORs handle all the legal requirements for complying with Canadian laws for payroll, contracts, and benefits. 

Choosing between an EOR and your own entity? Here are the pros and cons:

Once you’ve chosen an EOR, you can start the onboarding process by gathering your employee’s information (like their name, date of birth, date of hire, contact and bank information, and social insurance number) plus completed TD1 forms.

In our guide, you can learn the steps involved in hiring through an EOR in Canada. And with Rippling, you can hire and onboard Canadian employees in 90 seconds.

Classifying Canadian workers: employees vs. contractors

The early stages of hiring come with many questions: How do you classify your new Canadian workers? Are they employees or contractors? As in many countries, getting the right answers to these questions can be the difference between easily managing your international team and being exposed to millions of dollars in legal penalties.

Here are some of the ways Canadian law distinguishes between employees and contractors:

You can learn about classifying workers correctly—to help you stay compliant with Canadian labor and employment laws—in our classification guide.

Work permits for Canadian employees

Before you can continue with the rest of the hiring process, make sure your prospective employee is allowed to work in Canada. Foreign nationals who aren’t Canadian citizens, and don’t have permanent residency in Canada, usually need to obtain a work permit to work in Canada. However, there are some exceptions for temporary business visitors, students on a study permit, and workers who are performers, artists, reporters—or similar.  

Generally, there are two types of work permits in Canada.

• Employer-specific work permits. These visas allow foreign nationals to work only for one specific employer. The permit contains information about the employer, the location of work, and the duration of work. Foreign nationals typically apply for this type of work permit after receiving an offer of employment from a company in Canada.
• Open work permits. Open work permits allow foreign nationals to live in Canada and apply for open work positions in the country. These types of work permits can be issued by the Temporary Foreign Worker Program or International Mobility Program. They might also be issued to university graduates who are looking for work in Canada or the spouse of someone who has been issued an employer-specific work permit.

For more details on applying for Canadian work visas, check out our guide to work permits in Canada.

New hire onboarding checklist

Once you’ve done your due diligence and confirmed that your employee is legally allowed to work in Canada, you’re set to continue the onboarding process. This is your chance to create the foundation for a successful relationship with your employee early on. 

Remember, a successful onboarding experience starts before your employee’s first day and continues well beyond it, so make sure you’re thinking about more than just payroll and day one logistics. Here are some things to keep in mind for each stage of onboarding:

Before their first day

• Complete a background check. 
• Send an offer letter (more on that in the next section).
• Do the necessary paperwork (employment agreement, tax documents, etc.).
• Enroll them in benefits.
• Add them to payroll. 
• Order and configure their devices. 
• Assign them an onboarding buddy.

On Day 1

• Ensure their workspace is ready. 
• Send a welcome email. 
• Give them an agenda. 
• Schedule a 1:1 with their manager.
• Have a get-to-know-you event.

During their first 90 days

• Give them general and role-specific training. 
• Assign work and help them set goals. 
• Schedule consistent check-ins. 
• Offer regular feedback.

For an end-to-end list of onboarding essentials, see our guide on new hire onboarding in Canada.

What to include in an offer letter in Canada

The offer letter is a crucial part of hiring a new employee. You want to make sure the conditions of employment are clear to avoid any legal disputes down the line. Here’s a short checklist of what to include in an offer letter (also known as an employment agreement) in Canada:

• Position, job description, and start date 
• Working hours 
• Compensation and benefits (salary, equity, vacation, and insurance)
• Termination policy 
• Confidentiality and non-disclosure agreements 
• Contact information and phone number 

Read our guide to sending a legally compliant offer letter in Canada for the full checklist.

NDAs and confidentiality agreements in Canada

A non-disclosure agreement (NDA) is a legal contract—usually included in the employment agreement—that prohibits one or more parties from sharing proprietary or confidential information with third parties. While NDAs are legally enforceable in Canada, they must be reasonable and of legitimate business interest, and can’t be used to silence employees speaking out against harassment or abuse.

In Canada, an NDA can protect the following: 

• Trade secrets and proprietary information 
• Financial information 
• Customer information 
• Employee information 
• Intellectual property 

Learn about the different types of NDAs, their essential components, and more in our guide to NDAs in Canada.

Running background checks on Canadian employees

The prospect of hiring a new employee is exciting—we get it! But, be sure not to skip a background check. It’ll protect your company from the risk of potential threats, and verify your employee’s credentials. 

In Canada, background checks aren’t mandatory, but most employers choose to run them. Note: you must obtain consent from job applicants before conducting background checks.

Once you have consent, you can run different types of background screenings based on a new hire’s role, including:

Learn more about the different types of background screenings—and mistakes to avoid—in our guide to background checks in Canada.

Paying employees in Canada

Now that you’ve decided between an EOR or establishing your own entity, you’ll need a payroll solution to start paying your new hires. There are two types of international payroll solutions: global payroll processors and global payroll aggregators. You can read more about them in our guide.

With a payroll solution selected, you can take the following steps: 

• Determine your new hire’s employment status.
• Collect their information, including name, date of birth, date of hire, contact information, social insurance number, bank account information, and completed TD1 forms.
• Choose which currency you’ll use to pay them. Canadian dollars (CAD) is the default unless you have written permission to pay them in a different currency.
• Run payroll. 

Since employers are responsible for calculating payroll deductions, it’s important keep the following costs in mind:

Mandatory employee benefits in Canada

Before finalizing your offer letter, it’s important to understand the employee benefits you’re required to provide to your Canadian hires. Some of the mandatory benefits include: 

• Pension. In Canada, both employers and employees contribute a percentage of the employee’s earnings to the Canada Pension Plan (CPP). Canadians in Québec, however, are covered by the Québec Pension Plan (QPP) and pay different percentages than other Canadian regions.
• Employment insurance.  Most employees in Canada are entitled to employment insurance (EI) that equals 55% of their average weekly earnings up to a maximum (C$61,500 in 2023). EI is commonly used to provide income to Canadians who take parental leave, but also covers sickness, critical illness, and compassionate care leave. Benefits vary for Canadians living in Québec, as they are covered by the Québec Parental Insurance Plan (QPIP).
• Vacation entitlements. Minimum vacation entitlements vary by province or territory, and years of service. The lowest minimum (regardless of the aforementioned factors) is two weeks. 
• Statutory holidays. As mentioned above, benefits in Canada can vary significantly depending on province or territory—and statutory holidays are no exception. There are a few nationwide holidays, however, including New Year’s Day, Good Friday, Canada Day, Labour Day, and Christmas Day.

Read our guide for a complete walkthrough on offering employee benefits in Canada.

Managing remote employees’ computers and apps

If it’s your first time hiring in Canada, you’ll likely be employing remote workers. It can be tricky to manage all of their devices when they’re working out of home offices because there’s so much to keep track of: from delivering equipment, to protecting and updating it from afar—not to mention creating a repeatable process across your international team. 

Rippling can help you instantly set up and secure employees’ accounts from day one. Read about setting up and managing remote employee devices overseas in our guide.

Protecting company IP in Canada

As you give your new employees access to apps and share sensitive information, intellectual property (IP) protection should be at the forefront of your mind. Unfortunately, Canada’s IP protection rights are far from straightforward, as they vary by region and province.

To govern your ongoing relationships with employees in Canada, you’ll need a Proprietary Information and Inventions Assignment Agreement (PIIA)—also referred to as a Confidential Information and Invention Assignment (CIIA). 

In general, PIIAs in Canada can be used to cover:

• Copyrights
• Patent rights 
• Industrial design ownership

Note: The enforcement of these agreements is largely dependent on the type of intellectual property and its governing law. Read more about IP protections in our primer on IP ownership and rights in Canada.

Complying with Canadian labor laws

Ensuring you’re in compliance with Canadian labor laws is one of the most crucial aspects of hiring. But, Canadian compliance work can prove to be tricky, especially when managing workers across 13 provinces and territories—each with their own rights and standards.

Here are some of the most important regulations you need to be mindful of when hiring in Canada:  

• At-will employment doesn’t exist in Canada. You can only terminate an employee without notice for “just cause,” meaning you have to be able to prove serious misconduct. 
• Some industries have special regulations. Industries like telecommunications, banking, and transportation are subject to the Canada Labour Code, while the remainder of the Canadian workforce (about 90%) are subject to provincial employment laws, along with other national laws. 
• The employer is responsible for maintaining health and safety standards. Your Canadian employees are subject to the Labour Code, so you are responsible for reporting workplace hazards, and for protecting employees from harassment. You are legally required to act if notified of sexual misconduct, workplace violence, and must protect the anonymity of the person reporting it. 

Read our guide on Canadian labor and employment laws for more details.

Terminating employees in Canada

In the unfortunate scenario that you need to terminate one of your Canadian employees, it’s beneficial to be well-versed in termination requirements. 

Employees in Canada enjoy strong protections against unjust dismissals. You can only terminate a Canadian employee during their probationary period (defined in the employment contract), or with just cause (such as misconduct, theft, or violence). Otherwise, employees are required to a notice period or pay in lieu of notice. 

Notice periods and termination pay vary by province and territory, as well as length of service. In most Canadian provinces, however, the minimum notice period is one week and starts after three months of employment. 

For more details on terminations in Canada–and what qualifies as a wrongful dismissal—read our full guide.

Disclaimer: Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.