Canada PEO & Employer of Record

WeHireGlobally provides international PEO filings and global recruiters in Canada to companies considering entering the Canadian market or hiring local/foreign employees in Canada. The conventional approach requires setting up a subsidiary in Canada. However, our solution allows you to start operating in Canada within days, saving you time and money.

WeHireGlobally will hire candidates on your behalf while retaining full operational control over their work. So legally they would be our employees, on our local payroll, 100% compliant but working 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: $52,791
GDP in currency: $2.015 trillion

Canada is a federation, made up of 10 provinces and three territories. The Constitution divides legislative power among federal, provincial, and territorial governments. The provincial government has primary authority over industrial relations and employment law. However, the federal government has legislative power over labor relations and employment law for activities and undertakings that fall under federal jurisdiction. Federal labor and employment laws apply to banks; interprovincial and international transportation; broadcasting; telecommunication; aeronautics; and some other restricted areas

Hiring, Negotiating and Doing Business in Canada

Necessity of written employment contract

A written employment contract is not required by law. Although there is no legal obligation in this regard, many employers decide to enter into a written employment contract with the employee to define the terms of the employment relationship. The main limitation to the terms specified in the employment contract is that the minimum standards set forth in the employment standard must be met (see below, Implied Terms).

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

Canadian law distinguishes between employees (those working under an employment contract) and independent contractors (those who work under a service contract). Laws that prescribe rights or obligations to workers and employers often have definitions of these terms. However, there is no widely applicable legal definition of “independent contractor,” and it can sometimes be difficult to distinguish an independent contractor relationship from an employment relationship. Make sure you have the right contracts with your employees to minimize the risk of misclassification.

Canada Employment Contract

Types of employment agreements

Fixed-term employment contracts are allowed in Canada. However, courts and other arbitrators will find that a fixed-term employment contract has or has become an indefinite contract if, for example, the parties have renewed the same contract multiple times; the employee continues to work after the contract termination date.

Canada working hours

For most occupations, normal working hours are eight hours a day (up to 10 hours) and 40 hours a week; the maximum number of working hours in a week is 48. Employees may work more than 48 hours a week in an emergency. Employers and their employees (or workers’ unions) may agree to change the application of these rules to some extent. However, government permits are often required or allowed for a regular employee to work more than 48 hours per week. Normal and maximum working hours are higher for certain occupations (e.g. bus and truck drivers). The minimum wage in Canada is 15 Canadian dollars.

Overtime

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

Vacation leave in Canada

Employees are entitled to nine statutory paid holidays per year (i.e. New Year’s Day, Good Friday, Victoria Day, Canada Day, Labor Day, Thanksgiving, Memorial Day, Christmas Day, and Gift Day). In addition, after one year of service, employees are entitled to two weeks of paid leave per year. After five years of service, employees are entitled to three weeks of paid leave. The statutory holiday minimum wage is 4% (6% after five years of employment) of the employee’s earnings in the previous year. Employers must grant vacations and employees must take the vacations to which they are entitled. However, there are still exceptions.

Among those exempted from annual leave are registered stock and real estate salespeople, extras in film production, teachers, etc.

Canada Maternity Leave

Women are entitled to 15 to 17 weeks of unpaid maternity leave if they have completed six consecutive months of employment. Either parent can take up to 61 weeks of unpaid leave to care for an infant or newly adopted child, as long as they have completed six months of continuous service. The cumulative leave period of one or two employees related to the same birth cannot exceed 78 weeks.

Canadian Severance Laws

Employers are required to provide employees with reasonable notice of termination or payment in lieu of notice. Employment standards legislation in each jurisdiction sets forth a minimum amount of notice that an employer must provide, depending on how long the employee has worked. For example, in Ontario, an employer must give an employee notice of termination equal to one working week per year up to a maximum of eight weeks notice. However, under common law (as well as Quebec civil law), employees are also entitled to a “reasonable” notice period that often exceeds the statutory minimum. In Ontario and federal jurisdictions, employees whose employment is terminated without cause may be entitled to severance pay in addition to the notice of termination (or payment in lieu of notice). . The Canadian Labor Code of 1985 provides that employees with 12 consecutive months of service will receive the following two larger amounts: 

• Two-day wages at their usual rate of pay for each year of service completed.

•  Five days pay at their usual rate. 

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

• The employer’s payroll is C$2.5 million or more. 

• An employer terminates the employment of 50 or more employees within six months due to termination of all or part of its operations.

 Severance pay is calculated by multiplying regular weekly wages by years of service (prorated for a year), up to a maximum of 26 weeks.

Canada Tax

Individuals residing in Canada are subject to Canadian tax on worldwide income. Canada’s international tax treaties provide relief from double taxation, as well as foreign tax credits and deductions for foreign taxes paid on income from non-Canadian sources. 

Furthermore, an individual who resides in or has income in a province or territory is subject to provincial or territorial income tax. Except in Quebec, provincial and territorial taxes are charged on federal income and are collected by the federal government. Rates vary by jurisdiction. The two provinces also levy a surcharge which may increase the income tax payable by the province. Provincial and territorial taxes are not deductible when calculating federal, provincial, or territorial taxable income. All provinces and territories calculate income tax using an “income tax” system (for example: they set their own rates, brackets, and credits). All but Quebec use the federal definition of taxable income.

The federal tax bracket is:

$0 to $49,020 income (15%)

Over $49,021 to $98,040 (20.5%)

Over $98,041 to $151,978 (26%)

Over $151,978 to $ 216,511 (29%)

$216,512 or more (33%)

Health Insurance Benefits in Canada

Many employers also provide sick leave for employees for certain days of sick leave. However, legally, employers are not required to pay employees sick pay while they are not working. Workers’ compensation for work-related illness or injury may be available under a workers’ compensation plan administered by each province. The Government Employment Insurance Sickness benefit may be available to regular employees whose weekly income is reduced by more than 40% due to a non-work illness, injury, or quarantine. Employers generally do not have the right to recover sick pay from the state. However, employers who offer a short-term disability plan may be eligible for a reduced government EI premium.

Additional Benefits in Canada

Bonuses and benefits are not required by law – they are discretionary in nature (so employees cannot claim them). The company’s internal salary regulations and individual labor contracts often stipulate how bonuses are calculated and awarded. This provision is binding on premiums paid on a regular basis. In all cases, bonus policies must be communicated to employees in advance to avoid possible discrimination disputes in the employment law.

General market practice benefits/additional allowances

Canadian employers often reward their employees with contractual or discretionary bonuses for personal achievement and contributions to goals the company target. 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 bonus will affect the tax consequences for the employee.

Canada Holidays

Provincial, territorial, and federal laws all prescribe statutory holidays, many of which are observed nationally. While, as a general rule, employees in the public and private sectors are entitled to a holiday at their normal salary, employees can agree to work on a public holiday. In general, an employee who works on a statutory holiday must:

• Take a day off in lieu of a statutory holiday.

• Be paid at a premium for that day.

Although the date and number of public holidays vary by jurisdiction, most jurisdictions prescribe nine public holidays per year.

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

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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.