Guide to Hiring in Canada
Hiring Canadian employees is an easy solution for US-based companies looking to expand their talent pool without dealing with language barriers, wide cultural differences, and mismatched time-zones. But before you start interviewing, it’s important to get familiar with how to hire workers in Canada and understand whether full-time employees (FTEs) or contractors are best for your business.
Check out our complete guide to rules, regulations, costs and customs in America’s friendly neighbor to the north.
Work culture
Work culture in Canada is very similar to that in the US. You can expect the same formalities, structures, and social niceties when interviewing and hiring. In addition, politeness is a core value in Canada, and employing tact in negotiations and difficult situations is a priority. Direct criticisms are rarely levied.
Worker classification
Canada distinguishes between employers and contractors based on a variety of measures, and it’s critical you classify any workers correctly to avoid hefty fines.
Classification is based on factors like:
- Autonomy and control. The more they have, the more likely they’re a contractor.
- Equipment ownership. If they own it, they’re more likely a contractor.
- Integration with your teams. The more independent they are, the more likely they’re a contractor.
- Time-bound engagement. If their engagement has a defined end date, they’re more likely a contractor.
- Exclusivity of services. If they serve many clients at the same time, they’re more likely a contractor.
Gusto can help you hire and pay both international contractors and full-time employees who live and work in Canada.
Public holidays
Canada observes several public holidays (see below). Employees are entitled to holiday pay no matter how long they have worked for the company. While contractors are not entitled to holiday pay, they are likely to be unavailable for work during national holidays.
| New Year’s Day | January 1 | National |
| Good Friday | Friday before Easter Sunday | National |
| Victoria Day | Monday preceding May 25 | National except NS, NL |
| Canada Day | July 1 | National |
| Civic Holiday | First Monday in August | AB, BC, SK, ON, NB, NU |
| Labour Day | First Monday in September | National |
| National Day for Truth and Reconciliation | September 30 | National, federally regulated workplaces only |
| Thanksgiving | Second Monday in October | National except NS, NL |
| Remembrance Day | November 11 | National except MB, ON, QC, NS |
| Christmas Day | December 25 | National |
Hiring contractors in Canada
Hiring contractors in Canada is a breeze with Gusto. You can easily onboard Canadian contractors, automatically gather the right tax documents, set up recurring payments, and sync with accounting software right from Gusto.
Onboarding
With Gusto, onboarding contractors in Canada takes just a few minutes. Once you add the contractor through your dashboard, they’ll be notified via email on the steps to set up their account. Self-onboarding allows them to add their own personal information and local banking details and sign any necessary documentation. Onboarding documents are automatically saved in Gusto’s secure document storage.
Tax compliance
As a US employer, you aren’t required to withhold or pay Canadian taxes for your contractors — that’s the contractor’s responsibility. However, the IRS does require your contractor to sign a Form W-8-BEN or W-8-BEN-E, similar to a W-9 for domestic contractors. This form means you don’t have to withhold US taxes from your Canadian contractor’s earnings. The good news: Gusto helps collect signatures and store this form during the onboarding process. You don’t need to send it to the IRS, but you’re required to have it on file.
Employers do not need to pay taxes for independent contractors in Canada. However, contractors earning more than $30,000 per year will need to charge and collect GST (Goods and Services Tax) from their clients, currently set at 5%.
Contractor payments
Paying Canadian contractors with Gusto means you can pay contractors on the platform you already use – without a monthly per-contractor fee. Once you submit payroll, your contractor typically receives the funds in their home currency in 2–5 business days. We’ll also send them an email notifying them that their payment has been released. Contractors can easily log in to their Gusto account to check the status of their payments and download paystubs.
Hiring full-time employees in Canada
Hiring an employee in Canada typically requires setting up a Canadian business entity, which can be both expensive and time consuming. We have a faster, cheaper alternative: Gusto’s EOR service, powered by Remote. Through our partnership, Remote becomes the Employer of Record for your Canadian employee, taking care of the compliance and payroll, while you manage your employee from Gusto alongside your U.S. workforce.
Onboarding
With Gusto’s EOR service, powered by Remote, our team ensures your employees are onboarded and paid as quickly as possible while keeping your business compliant with all local employment rules. The minimum onboarding time we need is only 2 working days. Onboarding time begins after the employee submits all required information, and the onboarding timeline is also dependent upon registration with local authorities.
In addition, Gusto’s EOR Service helps you create a positive onboarding experience for your new employee, to set the right tone from the get go. This includes creating custom welcome emails, org charts to give your new hires key context, and custom offer letters compliant with Canadian hiring law, detailing:
- 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
Pay & tax
Both employers and employees are required to pay taxes in Canada. These rates vary by province.
Employer: 5.95% to Canada Pension Plan, up to $4034.10 per year*; 2.32% to Employment Insurance, up to $1,508.47 per year (can vary by province).**
Employee: 5.95% to Canada Pension Plan, up to $4034.10 per year; 1.66% to Employment Insurance, up to $1,077.48 per year (can vary by province).
Employee Federal Income Tax
- 15% – for $0 to $57,375 in earnings
- 20.5% – $57,375 to $114,750
- 26% – $114,750 up to $177,882
- 29% – $177,882 up to $253,414
- 33% – above $253,414
Employee Provincial Income Tax
Canada’s individual provinces and territories charge their own income taxes to residents and workers. These rates change periodically and vary widely from one province to another. Remote’s legal entity in Canada is based in the province of British Columbia, and income tax withholding is based on this province’s rates. For employees residing outside of this province, province-specific adjustments to the tax withholding amount will occur. For updated information regarding tax rates in specific provinces, view Canada’s official tax website.
Benefits
Pension
The Canada Pension Plan (CPP) is a mandatory, public pension plan that provides basic financial support to retired, disabled or deceased workers and their families. It is funded by percentage-based contributions from both employees and employers, as well as self-employed individuals.
Canadians in Québec, however, are covered by the Québec Pension Plan (QPP) and pay different percentages than other Canadian regions.
Health Insurance
While Canada has a robust public healthcare system, 99% of employers provide supplemental health benefits for employees, according to our partners at Remote.
Supplemental health insurance provides access to a wider range of options for providers and specialists, as well as significantly shorter wait times. Extended coverage may include things like prescription drug coverage, paramedical services like massage therapy or physical therapy, or dental and vision coverage—all health benefits that are not standard offerings under Canada’s social healthcare system.
Life, accident, and long-term disability insurance are also offered by many employers in Canada.
Benefits plans through Remote allow you to offer supplemental health, vision, dental, and pension, along with mental health support and life and disability insurance.
Statutory time off & leave policies
PTO: Paid time off laws in Canada vary by province. Federal employment legislation guarantees two weeks of PTO to employees after one year of work. After five years, the minimum increases to three weeks, then four weeks at 10 years.
These are the minimum legal requirements, but the average Canadian receives 19 vacation days annually. Others follow a similar progressive philosophy — starting with three to four weeks, and often up to six weeks. Employers may offer unlimited time off in Canada.
When an employee leaves, employers must pay out any accrued PTO within 30 days, both for completed years on the job and the current partial year.
Sick Leave: Employees in Canada are guaranteed protected time off for sick leave, though the annual entitlement varies by province. Sick leave is front-loaded, meaning employees get the full amount at the beginning of each year, and it does not roll over.
Leave for Legal Proceedings: Employees in Canada are entitled to protected unpaid leave to serve on juries or act as witnesses, but this does not extend to employees who are parties in lawsuits, either as plaintiffs or defendants.
Parental Leave: Canada guarantees at least 15 weeks’ maternity leave and 35 weeks of parental leave (shared between partners), though some provinces set a higher minimum. Parental leave does not have to be taken consecutively, but must be used within one year of birth or adoption. The pay rate is 55% of salary, but employers do not have to cover this cost, as it’s covered by Canadian social programs.
Bereavement Leave: Federal law in Canada guarantees employees ten days of protected bereavement leave after the death of an immediate family member. Employers are only required to pay for three of the ten days. Employees become eligible for bereavement leave after three months of employment.
Family Violence Leave: Canada is one of a few nations to offer family violence leave for victims. Employers must offer at least 10 days of protected leave to employees to use in case of family violence, five of which must be paid. Employees accused of committing acts of family violence are not eligible.
Aboriginal Employee Leave: Employees in Canada with Aboriginal heritage are entitled to receive five days of unpaid leave per year to observe Aboriginal customs and events, which can include fishing, hunting, and traditional ceremonies.
Termination
Termination Process: Canada does not practice at-will employment. Instead, employers have to prove serious misconduct if they want to fire an employee after their probationary period has ended. Canadian laws encourage employers to work with employees who are underperforming instead of defaulting to termination. It is also common in Canada to include a termination clause in contracts to establish and govern the rights and obligations for employer and employee.
In cases where termination is unavoidable, employees in Canada retain a few protections, but legislation varies across provinces and territories with local laws. For instance, after two years of employment, employees in Quebec gain additional protections similar to those enjoyed by workers in the UK and France. An employee in Quebec with two years of service can only be terminated in a layoff or for serious infractions.
Notice Period: Employees are usually entitled to notice (or pay in lieu of notice) when being terminated. Notice periods vary based on age, experience, tenure, availability of other work options, and the application and length of notice period differ across provinces.
Probationary Periods: Probationary periods are common in Canada and typically last around three months. Some provinces enforce mandatory probationary periods to provide employers with some protection, even when the probationary period is not specified in the employment agreement.
Minimum wage
The Government of Canada set a federal minimum wage of CAD$17.30 per hour, rising with inflation, effective on April 1, 2024. However, each province still sets their own hourly minimum wage, and most provinces adjust them regularly to keep up with inflation. The Canadian government publishes a list of minimum wages by province.
Minimum wage
The Government of Canada set a federal minimum wage of CAD$16.65 per hour, rising with inflation, effective on April 1, 2023. However, each province still sets their own hourly minimum wage, and most provinces adjust them regularly to keep up with inflation. The Retail Council of Canada maintains an updated list of minimum wages in the country.
Overtime pay and maximum working hours
Canada uses a standard 40-hour workweek with 8-hour days from Monday to Friday. In most cases, employees can work a maximum of 48 hours weekly, and hours worked outside of standard hours require overtime pay. The exact amount depends on the employee’s regular schedule, role, and what is agreed upon in the contract, and some roles (such as doctors, lawyers, and managerial roles) may be exempt. Overtime compensation is a fixed rate of 1.5 times the employee’s regular wage, and overtime is capped at 8 hours per week. Employers cannot force employees to work more than their scheduled hours. Overtime triggering limits also vary by province, ranging from 40 to 48 hours.
Weeks that contain holidays must reduce the standard working hours by 8 hours for each holiday. In a week when a holiday occurs, overtime applies after 32 hours.
In Ontario, information technology professionals are usually excluded from many of the protections awarded in the Employment Standards Act, including daily/weekly limits on hours of work, daily rest periods, time off between shifts, eating periods, and overtime pay. This is also true of high technology professionals in BC. Specific exclusions vary according to each province/territory.
Additional info
Record Keeping
For 36 months, employers must keep records of all hours worked by employees regardless of whether the employee is paid hourly or is salaried or is entitled to overtime pay. Some records are required to be retained for longer (e.g., retention of vacation time records in Ontario are required to be kept for five years).
