How to hire employees in Canada (2026)

Incorporating in Canada gives you full control over your employment relationships. You can hire employees directly, register with the Canada Revenue Agency (CRA) as an employer, and run payroll through your own infrastructure.

The process involves registering a federal or provincial corporation, obtaining a Business Number from the CRA, registering for payroll, GST/HST, and workers’ compensation in the relevant province, opening a Canadian bank account, and setting up compliant employment contracts.

This typically takes 4 to 12 weeks depending on the province, and the costs for incorporation, legal advice, and initial setup can range from CAD $5,000 to $30,000 or more. Ongoing costs include accounting, legal compliance, annual filings, and the time your team spends managing it all.

Entity setup makes sense when you are building a large, permanent team in Canada. For one or two hires, or when you need someone employed quickly, the overhead is difficult to justify.

Hiring a Canadian independent contractor avoids the need for a local entity entirely. You agree on a scope of work, the contractor invoices you, and you pay them directly. No payroll deductions, no CPP or EI contributions, no employment contract.

The risk is misclassification. The CRA applies a set of tests to determine whether a working relationship is genuinely independent or whether it is, in substance, an employment relationship. The key factors include the level of control you exercise over how and when the work is done, whether the worker provides their own tools and equipment, the degree of financial risk the worker assumes, and whether they can profit from the work or hire subcontractors.

If the CRA determines that someone you have classified as a contractor is actually an employee, you become liable for unpaid CPP and EI contributions, back taxes, penalties, and interest. The worker may also be entitled to employment protections they were denied, including termination notice and vacation pay.

Contractor arrangements work well for genuinely independent, project-based work. They do not work as a substitute for full-time employment. If someone is working exclusively for your company, following your schedule, and embedded in your team, that is an employment relationship regardless of what the contract says.

An Employer of Record (EOR) is a company that employs people in Canada on your behalf through its own legal entity. The EOR handles the employment contract, payroll, tax withholding, CPP and EI contributions, benefits, and compliance with provincial employment standards. Your employee works for you day to day, reports into your team, and contributes to your goals. The EOR provides the legal infrastructure that makes the employment relationship compliant.

This is the fastest route to hiring in Canada for companies without a local entity. Most EOR providers can onboard a new employee within one to two weeks, and some can do it within days. There is no entity to set up, no CRA registration to manage, and no need to become an expert in Canadian employment law yourself.

The cost is a monthly service fee per employee, typically ranging from $199 to $699 depending on the provider, on top of the employee’s gross salary and mandatory employer contributions. For a comparison of providers, see our guide to the best Employer of Record providers in Canada.

Most private-sector employees in Canada fall under provincial jurisdiction. Each of the 10 provinces and 3 territories has its own employment standards legislation covering minimum wage, hours of work, overtime, vacation, statutory holidays, termination notice, and severance.

A smaller number of industries fall under federal jurisdiction, including banking, telecommunications, interprovincial transport, and broadcasting. Employees in these industries are covered by the Canada Labour Code regardless of which province they work in.

For most companies hiring in Canada, provincial employment standards apply. This means the rules depend on where the employee physically works, not where your company is based.

Written employment contracts are not technically required under Canadian law in every province, but they are strongly recommended and in practice essential. A well-drafted contract should cover the role, compensation, benefits, working hours, vacation entitlement, probationary period, termination provisions, confidentiality, intellectual property, and any restrictive covenants.

Termination clauses deserve particular attention. Canada does not have at-will employment. Every employee is entitled to reasonable notice of termination or pay in lieu. Provincial employment standards set minimum notice periods, but courts can award considerably more under common law, particularly for longer-tenured or senior employees. A properly drafted termination clause can limit your exposure to the statutory minimum, but it must comply with provincial requirements to be enforceable.

Minimum wage in Canada varies by province. As of 2026, rates range from $15.00 per hour in Alberta to $19.75 in Nunavut. The federal minimum wage, which applies to federally regulated industries, is $18.15 per hour as of April 1, 2026. If the provincial rate exceeds the federal rate, the higher rate applies.

Under federal standards, employees are entitled to two weeks of vacation after one year of service, three weeks after five years, and four weeks after ten years. Provincial minimums are similar, though Saskatchewan starts at three weeks after one year. Vacation pay is calculated as a percentage of gross earnings, typically 4% for two weeks and 6% for three weeks.

Beyond vacation, Canadian employees are entitled to various types of statutory leave including maternity leave, parental leave, sick leave, bereavement leave, and others depending on the province.

Ending an employment relationship in Canada requires careful handling. Statutory notice periods vary by province and length of service. Ontario, for example, requires one week per year of service up to a maximum of eight weeks. Some provinces also require severance pay on top of notice for longer-tenured employees.

Common law notice obligations can exceed the statutory minimum by a wide margin. Courts consider factors including the employee’s age, length of service, position, and the availability of comparable employment. Awards of 12 to 24 months’ notice are not unusual for senior employees with long tenure.

For more detail on end-of-employment obligations in Canada, including provincial differences, see our country guide.

For 2026, both employees and employers contribute 5.95% on pensionable earnings between $3,500 and $74,600. The maximum annual contribution for each is $4,230.45. An additional CPP2 contribution of 4% applies to earnings between $74,600 and $85,000, with a maximum of $416.00 each. Employers must match both CPP and CPP2 contributions.

The employee EI premium rate for 2026 is 1.63% on insurable earnings up to $68,900, with a maximum annual premium of $1,123.07. Employers pay 1.4 times the employee rate, which works out to 2.28%, with a maximum of $1,572.30 per employee.

Quebec has different EI rates because the province administers its own parental insurance programme (QPIP). The employee rate in Quebec is 1.30%, and the employer rate is 1.82%.

Workers’ compensation is mandatory in all provinces and territories. Premiums are paid entirely by the employer and vary based on the province and the industry classification of the work being performed. Each province has its own workers’ compensation board, such as WSIB in Ontario and WorkSafeBC in British Columbia.

Some provinces levy additional payroll taxes. Ontario, for example, has the Employer Health Tax (EHT), which applies to employers with total Ontario payroll exceeding $1 million. Quebec has the Health Services Fund, the Workforce Skills Development and Recognition Fund, and QPIP contributions on top of the standard federal obligations.

Employers must withhold federal and provincial income tax from every pay period and remit it to the CRA on the prescribed schedule. The frequency of remittance depends on your total monthly withholdings. T4 slips must be issued to employees and filed with the CRA by the end of February each year.

For a detailed breakdown of employment taxes in Canada, see our country guide. If you want to estimate the full employer cost for a specific role, the Boundless cost calculator below provides a detailed breakdown.