Employer of Record (EOR) in Canada
The Canadian economy is one of the most advanced in the world. The country is part of the G7 group of leading economies and is forecast to be one of the fastest growing of the seven in 2022, growing by at least 3.4% in the six months to 2023 due in part to the rising price of oil and crops that form a large part of Canada’s exports. Presenting to you all the data for EOR in Canada and PEO in Canada.
Nevertheless, Canada’s growth in GDP for 2023 looks as fragile as other G7 states, with growth slowing to around 1.7% due to macroeconomic uncertainties (Figure One).
With a high Human Development Index (0.855) and very high Gross Income per Capita (US$30,257), Canada remains an attractive economy to invest in. Let’s look at the main labor considerations for hiring in this country.
Hiring in Canada and Contracts of Employment
Canada is a bi-lingual country, so a basic consideration when hiring the local workforce is your requirement for an understanding of English and/or French, and how this resonates with your labor pool. In the French-speaking province of Quebec, employment contracts are often written in French.
A written contract of employment is not mandatory in Canada, although they are highly recommended, and most organizations will at least provide a written document outlining basic work standards and conditions.
Canada Work Permit is supposed to be given to well-qualified candidates for a fixed period of time. Candidates must apply for the Work Visa only after getting a job offer or confirmation of a work contract.
In Canada, minimum wages generally follow the rates established by the provinces. Although there is a federal minimum wage ($15.55), it only applies to people employed in sectors subject to federal regulation. They include banks, postal services, interprovincial transportation, and federal Crown enterprises.
The provincial minimum wage applies to workers in sectors that are not federally regulated.
The 10 provinces and 3 territories that make up the country each have unique rates.
Termination and Severance Terms
Probation periods are usually included in employment contracts and can be no longer than six months (although most employers use three months). Notice pay is often mandated if an employee is terminated in their probation period.
Employers must exercise a reasonable time frame for notice of dismissal. If they don’t do this for termination without cause, then provinces can mandate severe severance payments, depending on how large your organization is (in terms of revenue).
Fixed term contracts are commonly used, but legally these can be viewed as permanent contracts if the organization repeatedly renews them.
Employees who have worked for the same employer continuously for at least one month but fewer than two years are entitled to at least one week of notice from the employer. Employees who have worked for the same employer continuously for two years or longer are entitled to one week of notice for each full year, up to a maximum of 12 weeks’ notice.
Working Hours and Overtime
Controls over working hours vary depending on which province you are operating in, as well as the job and industry. Provinces also set standards regarding overtime and when this is paid, usually at a rate of between 1x and 1.5x basic pay. Overtime is eligible to be paid from forty hours onwards, depending on the province. This is a mandatory entitlement and at the same time, excessive hours are also banned.
Public Holidays and Vacation Allowances
- New Year — January 1
- Good Friday — movable
- Easter Monday — movable
- Victoria Day — May 23
- Saint-Jean-Baptiste Day — June 24 (Quebec only)
- Canada Day — July 1
- Civic Holiday — August 1
- Labor Day — September 5
- National Day for Truth and Reconciliation — September 30
- Thanksgiving Day — October 10
- Remembrance Day — November 11
- Christmas Day — December 25.
- Boxing Day — December 26 (Contact centers closed December 27)
Vacation days are also set at a provincial level, with Alberta, British Columbia, Manitoba, Ontario, and Quebec mandating two weeks of paid vacation for employees with at least one year of service. Nationally, most companies (like PEO in Canada) will offer between two to four weeks of paid leave.
Sick Leave and Health Insurance
In Canada, sick days are typically unpaid; however, in some circumstances, employees may be eligible for benefits through the Canada Pension Plan or Employment Insurance. Nevertheless, an employee is entitled to 12 weeks of protected leave in case of a serious illness or injury.
Canada offers all residents a “free at the point of delivery” health service. This covers the vast majority of medical needs, although coverage of “supplementary” services like dental care are specific to what individual provinces offer. In addition to this, most Canadian employees (around two thirds as of 2021) are also offered health insurance as a benefit by their employer.
Payroll and Taxes
The Canada Pension Plan contribution for the last year was marked at 5.45%.
As of 2021, the maximum federal tax rate for individuals is 33% but there are provincial tax rates on top of this, with maximums ranging from 13% in Ontario to over 25% in Quebec. Federal taxation includes Canada Pension Plan contributions and Employment Insurance. Minimum wage is set at a provincial level.
Given the attraction in setting up a business in Canada, understanding federal and provincial employment laws is essential. An Employer of Record, or a partner PEO company, is a great way to outsource this specific expertise in 100+ countries, while allowing you the time and space to focus on your organization.
Acvian provides business owners with a suite of tools and resources, including a payroll cost calculator, to ensure your organization’s employment provision is Canada-compliant. Acvian’s resources include hiring support, relocation services and payroll expertise, and can be tailored to your organization’s specific needs.