Penalties for misclassification trigger a variety of statutory rights and benefits, such as minimum wage, overtime, paid vacation, pension and employment insurance contribution. Moreover, the back payments also include an interest of either 10% or 20%, depending on the severity and number of cases.

FUN FACT

Canada is ranked as the most educated country in the world—more than 50% of the population has a post-secondary education.

Taxes

Employer tax:

7.9% - 8.5%

Pension plan - 5.45% - 5.9% depending on the province

Employment insurance - 1.6% - 2.2% dependent on territory

Employer Health tax - 0.98% - 4.3% dependent on territory

Employee tax:

5%-62%

Canada pension plan: 5.45% - 5.9%, dependent on territory

Employment insurance - 1.18% - 1.58% dependent on territory

Income tax: Income taxes in Canada are levied on both federal and provincial/territorial levels, see details here.


GROSS INCOME	PROGRESSIVE TAX RATE
Up to $49,020	15%
€49,020 - $98,040	20.5%
€98,040 - $151,978	26%
€151,978 - 216,511	29%
More than $216,511	33%

Canada Employment Cost Calculator

Use our handy calculator to understand what are all the employment costs you have to consider in Canada.

Provide us with some extra details and we will send you a full breakdown of the salary costs.

Employer of Record in Canada

An Employer of Record is the legal employer of a worker in Canada. As such, the Employer of Record takes care of all Canadian compliance aspects of employment, including payroll, taxes, statutory benefits, employment contracts and more. In Canada, an Employer of Record must hold a Personnel Placement Agency licence. Boundless' licence number is AP-2101873.

the employer of Record is responsible for:

Ensuring their employment is compliant with local employment laws

Processing local payroll

Filing employment related taxes and returns

Issuing payslips to the employee

Distributing salary payments

How Employer of Record works

COMPANY

Maintains a direct relationship with the employee, allocates them work tasks, and manages their performance.

BOUNDLESS

Takes care of payroll, taxes, benefits, ensuring the employee and the company are compliant with all legal regulations.

EMPLOYEE

The third party to the agreement, the employee, fulfils all of their obligations as a worker for the company.

Statutory Benefits

Pension

Employment insurance

Worker's compensation insurance

Common Non-mandatory Benefits

Extended healthcare

Supplementary pension

Additional paid days off

Wellness programs

Health coaching

Virtual care

Flexible working

Training

Transportation allowance

Employee Rights and Protections

Written employment contract

Payslip

Flexible working

Health & Safety

Refusal of unsafe work

Equal pay

Scheduling notice

Protection from harassment & violence

Work unions

Leave

Paid time off: two weeks on average + public holidays

Paternity leave: no statutory leave

Sick leave: no paid leave, number of unpaid days varies by province/territory

Parents and parental leave: 37-71 weeks depending on province/territory

Maternity leave: 16-19 weeks

Probation period

In Canada, the probationary period varies by province/territory and could be anywhere between 29 days to six months.

Payment Frequency

Salaries are usually paid on a monthly or semi-monthly basis. Some provinces/territories impose a pay frequency on employers. Many employers also pay on a weekly or bi-weekly basis.

End of Employment

Canada doesn’t recognise at-will employment. Instead, in order to lawfully terminate an employment, companies must provide employees with a notice of termination. Specific termination laws vary by province/territory, but the guidelines are more or less the same. Non-unionised employees in every province/territory except Nova Scotia, Quebec, and the federal jurisdiction can be dismissed without cause but must be given the required notice. Canadian laws encourage employers to work with underperforming employees rather than default to termination.

Before taking an employment termination route, companies in Canada should have a progressive discipline policy in place to assist employees who need to improve their performance or correct a misconduct. After each step before termination, the employee should be given an opportunity to correct the problem or their behaviour.

Employees who have been employed for a certain period are entitled to severance pay when dismissed by their employers. The pay and tenure vary by province/territory and aren’t applicable in every jurisdiction.

Employees in certain situations are protected from being dismissed. These situations include (but are not limited to) maternity, parental, domestic violence, compassionate, and critical illness leaves.

Frequently Asked Questions

What are my options if I want to hire a worker in Canada?

While there are generally four ways of employing people across borders, not all are legal or sensible. Here is an overview of each way to employ a worker in Canada, outlining the potential cons.

HQ country employment & payroll

While the person is in Canada, they are employed and payrolled directly by the company’s HQ entity.

Cons: This may appear attractive, but it generally isn't legal in the long term. HQ payroll won't be possible if the person is not a tax resident in the HQ country.

Independent contractor agreements

People are locally registered as sole traders or limited liability company owners in Ireland and invoice for their work. There is no direct employment relationship.

Cons: In Canada, this is not a compliant or legal way to engage full-time workers who work solely for your company. There will be challenges in attracting and retaining talent.

Direct local employer setup

The company sets up as a fully-compliant local employer. This often involves setting up a local entity and local tax registration.

Cons: Expensive, time-consuming, high-level of complexity. Unknowns around how obligations and costs will evolve over time. There will be a need to stay on top of changes in regulations.

Partnering with an Employer of Record Canada /full-service Professional Employer Organisation

Employment is handled by a platform that specialises in employing people on behalf of customer companies. The Employer of Record helps to hire and pay employees.

Cons: For some countries, the ongoing costs may be higher than direct employment. Some education is needed to inform employees about how the employment relationship will work.

How long does it take to set up a company in Canada?

Setting up a local company in Canada is relatively straightforward. However, the difficult part comes after the initial setup when the employer needs to run payroll for their Canadian employees every month, file taxes, extend and manage employee benefits, follow changes rules and regulations. Here is an overview of everything an employer in Canada will find themselves needing to do for their Canadian employees.

Can I employ people as independent contractors in Canada?

While many employers practice employing remote workers as independent contractors, it's a bad practice. If an individual is giving their full and undivided attention to your company in Canada, treating them as an independent contractor is a likely breach of Canadian employment laws and of those in your country.

Your company could be liable for fines on owed holiday pay, sick pay, social welfare payments, paternity benefit, maternity benefit, or other legal measures. Since the individuals you are working with do not receive the benefit of local employment laws and protections that are often afforded to people working full-time hours.

What does HR compliance mean in Canada, and why does it matter?

When you hire employees in Canada, you have certain obligations as an employer. HR compliance is about ensuring your policies and procedures respect all applicable laws and regulations regarding employment and work practices. Complying with local employment law in Canada is fundamental for the correct running of your business - not only because these laws are in place to protect employees and guarantee their rights are safeguarded, but to minimise your risk of liabilities as an employer. Being compliant means respecting and following all local labour laws, sick leave and illness benefits, annual leave, minimum wage, tax credits, working hours regulations, employment contracts, etc.

How much does it cost to employ someone in Canada?

As with every other country, there are certain costs associated with employing a worker in Canada that come on top of the gross salary you are offering. In Canada those are pension plans contribution, employment insurance, and employer health tax. To view the exact percentages and amounts given the salary you are planning to offer, you can use our handy calculator tool.

What does Employer of Record mean in Canada?

It means that Boundless is the legal employer of the individual, as far as the Canadian government, tax, and employment authorities are concerned. In Canada, we hold a Personnel Placement Agency licence, number AP-2101873 and are responsible for:

informing you about any pre-employment requirements
ensuring their employment is compliant with Canadian employment law
informing you about the length of the maternity leave, paternity leave, public holidays, illness benefits, medical benefits
providing a locally compliant employment contract
processing local payroll
filing employment-related tax returns
issuing payslips to the employee
distributing salary payments
payments to the local tax authorities

Customers that work with an Employer of Record in Canada are responsible for:

sourcing and recruiting their own Canada employees
managing the employee’s day-to-day work load
contributing to the personal / professional development of the employee through their work
following any guidance we give on employment and HR best practices or legal obligations in Canada, such as the employment contract, public holidays, annual leave, sick leave, maternity and paternity benefits, probationary periods, overtime pay, statutory redundancy payments, liability insurance and many others
ensuring that payroll bills relating to their team are paid to Boundless before the cut-off point in each pay cycle

Who is responsible for filing and paying employees' taxes and social insurance contributions in Canada if employing through an Employer of Record?

Boundless as the Employer of Record Canada files all pertinent taxes, Canada pension plan contributions and other contributions to the social system in order for the Canada employee to be compliant.

How does Boundless as an Employer of Record Canada ensure HR compliance in Canada?

We carefully choose employment lawyers or advisories to partner with in each country we operate in, including Canada. They ensure the Canada employment contracts, and any other relevant documents required for new employees comply with the local jurisdiction. We have thorough discussions on specific norms such as payroll services, social protection, data protection, notice period or work-from-home regulations. Whenever a potentially sensitive issue arises in Canada, our internal team contacts the relevant firm to ensure all steps are taken to resolve it promptly.

What are the legal responsibilities of a company when they use an Employer of Record service like Boundless in Canada?

The company remains responsible and informs employees of the day-to-day management of the people and teams that are employed through Boundless, including any disciplinary or performance issues.

Boundless ensures compliance with Canadian-specific procedures, practices and labour laws while employing people and teams on behalf of the company.

Do employees get all their rights and benefits when employed through an Employer of Record in Canada?

Any new employee that is locally employed through an Employer of record gets full employment rights and benefits as specified in Canadian employment law. They get a locally compliant employment contract, statutory maternity leave, annual leave, illness benefits, any relevant tax credit, and many more. All Canada-based employees receive healthcare through the public healthcare system.

What taxes do I need to pay in Canada?

In Canada, both employers and employees have to pay taxes. For employers, these include pension plans contribution, employment insurance, and employer health tax and for employees, they include Canada pension plan contribution, employment insurance, and income tax. To get a clear overview with both employee and employer taxes, use our salary breakdown calculator, submitting any additional data needed and get a downloadable pdf like this one.

Choose Boundless as your employment partner in Canada

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