Canada

Canada PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Canada to companies planning to enter the Canadian market or hiring local/expat employees in this country.

Traditional approach necessitates establishing a subsidiary in Canada.  However, our solution allows you to start the operations in Canada within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. 

Canada fast facts

Population, million: 38
Land area: 9,984,670 km²
Capital: Ottawa
Local currency: Canadian dollar (CAD)

GDP per capita:$ 47,931
GDP in currency:$ 1,8 trillion

Canada is a federation, consisting of 10 provinces and three territories. The Constitution divides legislative authority between the federal, provincial and territorial governments. Provincial governments have primary authority over labour relations and employment law. However, the federal government has legislative authority in relation to labour relations and employment law with respect to activities and undertakings which fall within the federal jurisdiction. 

Federal labor and employment law applies to:

  • banking;
  • interprovincial and international transportation;
  • broadcasting;
  • telecommunications;
  • aeronautics; and
  • a few other limited areas.

Hiring, Negotiating and Doing Business in Canada

Necessity of written employment contract

A written contract of employment is not required by law. Despite the absence of a legal requirement in this respect, many employers decide to enter into written employment contracts with employees to define the terms of the employment relationship. The primary restriction on the terms set out in an employment contract is that the minimum standards set out in employment standards must be respected (see below, Implied terms).

Different forms of engagement: employment, contracting, work with private entrepreneur

Canadian law distinguishes between employees (who are engaged under a contract of employment) and independent contractors (who are engaged under a contract for services).

Statutes that confer rights or obligations on employees and employers usually contain definitions of those terms. However, there is no widely applicable legal definition of “independent contractor”, and at times it can be difficult to distinguish an independent contractor relationship from an employment relationship. Make sure you have the right contract with your worker to mitigate misclassification risk.

Canada Employment Contract

Types of employment agreements

Fixed-term employment contracts are permitted in Canada. However, courts and other adjudicators will conclude that a fixed-term employment contract is, or became, an indefinite term contract if, for example:

  • The parties renewed the same fixed-term contract multiple times.
  • The employee continued working after the termination date specified in the contract.

Canada working hours

For most occupations, the standard working hours are eight hours per day and 40 hours per week; the maximum number of working hours per week is 48. Employees may work more than 48 hours per week in an emergency.

An employer and its employees (or the union representing the employees) can agree to modify the application of these rules to some degree. However, a government permit is generally mandatory to require or permit an employee to work hours regularly in excess of 48 hours per week. The standard and maximum working hours are higher for certain occupations (eg, bus and truck drivers).

Overtime

Under the Canada Labour Code, overtime is payable at one and a half times the standard hourly rate for all hours worked in excess of the standard hours (generally eight hours per day and 40 hours per a week). 

Vacation leave in Canada

Employees are entitled to nine paid holidays per year (ie, New Year’s Day, Good Friday, Victoria Day, Canada Day, Labour Day, Thanksgiving Day, Remembrance Day, Christmas Day and Boxing Day). In addition, after one year of employment, employees are entitled to two weeks of paid vacation each year. After six years of employment, employees are entitled to three weeks of paid vacation. Minimum statutory vacation pay is 4% (6% after six years of employment) of the employee’s earnings in the previous year. 

Canada Maternity Leave

Women are entitled to 17 weeks of unpaid maternity leave if the woman has completed six consecutive months of employment. Either parent can take up to 67 weeks of unpaid parental leave to care for a newborn child or a newly adopted child, as long as he or she has completed six consecutive months of service. The aggregate amount of leave taken by one or two employees concerning the same birth shall not exceed 78 weeks.

Canadian Severance Laws

An employer is required to provide an employee with reasonable notice of dismissal or payment in lieu of notice. Employment standards legislation in each jurisdiction provides minimum notice periods that employers are required to provide, based on the employee’s length of service. For example, in Ontario, an employer must provide employee notice of termination equal to one week per year of service up to a maximum of eight weeks’ notice. However, under the common law (as well as Québec civil law), employees are also entitled to a period of “reasonable” notice which usually exceeds the statutory minimum. 

In Ontario and the federal jurisdiction, employees dismissed without cause may be entitled to severance payments in addition to notice of termination (or pay in lieu of notice). The Canada Labour Code 1985 provides that employees with 12 months’ continuous service receive the greater of either:

 -Two days’ wages at their regular wage rate for each completed year of employment.

-Five days’ wages at their regular wage rate.

In Ontario, an employee with five or more years of service will be entitled to severance pay if either:

-The employer’s payroll is Can$2.5 million or more.

-The employer permanently discontinues the employment of 50 or more employees within a six-month period due to a permanent discontinuance of all, or part, of its business.

Severance pay is calculated by multiplying regular weekly wages by the number of years of employment (pro-rated for a partial year), to a maximum of 26 weeks.

Canada Tax

Individuals resident in Canada are subject to Canadian income tax on worldwide income. Relief from double taxation is provided through Canada’s international tax treaties, as well as via foreign tax credits and deductions for foreign taxes paid on income derived from non-Canadian sources.

In addition to federal income tax, an individual who resides in, or has earned income in, any province or territory is subject to provincial or territorial income tax. Except in Quebec, provincial and territorial taxes are calculated on the federal return and collected by the federal government. Rates vary among the jurisdictions. Two provinces also impose surtaxes that may increase the provincial income taxes payable. Provincial and territorial taxes are not deductible when computing federal, provincial, or territorial taxable income.

All provinces and territories compute income tax using ‘tax-on-income’ systems (i.e. they set their own rates, brackets, and credits). All except Quebec use the federal definition of taxable income.

Health Insurance Benefits in Canada

Many employers also provide employees with sick pay for a certain number of days off due to illness. However, employers are generally not legally obliged to provide employees with sick pay for periods during which they do not work.

Compensation for employees who suffer a work-related illness or injury may be available under the statutory workers’ compensation regimes administered by each province.

Government employment insurance sickness benefits may be available to employees whose normal weekly earnings are reduced by more than 40% because of non-occupational sickness, injury or quarantine.

Employers are generally not entitled to recover sick pay from the state. However, employers who offer a short-term disability plan may be eligible for government Employment Insurance premium reductions.

Additional Benefits in Canada

The law does not regulate bonuses and fringe benefits – they are of a discretionary nature (so employees cannot effectively claim them).

The company’s internal salary regulations and the individual employment contract usually stipulate how bonuses are calculated and awarded. This regulation is mandatory in relation to bonuses that are paid on a regular basis.

In all cases, bonus policies should be notified to employees in advance, to avoid possible labor law discrimination disputes.

General market practice benefits/additional allowances

Canadian employers commonly reward employees through contractual or discretionary bonuses for their individual performance and their contribution to company objectives. There are no restrictions or guidelines on the type or size of bonuses that can be awarded to employees, but the size and type of the bonus will impact the income tax consequences for the employee.

Canada Holidays

Provincial, territorial and federal legislation all prescribe public holidays, many of which are observed nationally. While as a general rule employees in both the public and private sectors are entitled to take public holidays off with regular pay, employees can agree to work on a public holiday. Generally, an employee who works on a public holiday must either:

  • Receive a day off in lieu of the holiday.
  • Be paid at a premium rate for that day.

While the date and number of public holidays vary across jurisdictions, most jurisdictions prescribe nine public holidays per year. In Ontario, these are:

  • New Year’s Day.
  • Family Day.
  • Good Friday.
  • Victoria Day.
  • Canada Day.
  • Labour Day.
  • Thanksgiving Day.
  • Christmas Day.
  • Boxing Day.

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.

 

FAQ Canada

  • Canada working hours

    For most occupations, the standard working hours are eight hours per day and 40 hours per week; the maximum number of working hours per week is 48. Employees may work more than 48 hours per week in an emergency.

  • Canada Holidays

    • New Year’s Day.
    • Family Day.
    • Good Friday.
    • Victoria Day.
    • Canada Day.
    • Labour Day.
    • Thanksgiving Day.
    • Christmas Day.
    • Boxing Day.
  • Canada Tax

    Individuals resident in Canada are subject to Canadian income tax on worldwide income. Relief from double taxation is provided through Canada’s international tax treaties, as well as via foreign tax credits and deductions for foreign taxes paid on income derived from non-Canadian sources.

    In addition to federal income tax, an individual who resides in, or has earned income in, any province or territory is subject to provincial or territorial income tax. Except in Quebec, provincial and territorial taxes are calculated on the federal return and collected by the federal government. Rates vary among the jurisdictions. Two provinces also impose surtaxes that may increase the provincial income taxes payable. Provincial and territorial taxes are not deductible when computing federal, provincial, or territorial taxable income.

  • Hannah Kohl
    Author:
    Hannah Kohl. Head of Customer Success. Has extensive experience in the HR and IT industries. Helped 100+ international clients to achieve their global goals.

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