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How to Hire Employees in Canada

With its diverse talent pool, robust economy, and favorable business environment, Canada offers numerous advantages for companies seeking to tap into new markets and drive growth. This article will explore the key things international companies need to know when hiring in Canada

Key Takeaways

  • When hiring employees it is crucial to understand Canada employment laws: Familiarize yourself with Canadian labor laws, including provincial laws, which may vary. 
  • Post the job: Advertise the job through Canadian job websites, newspapers, or recruitment agencies.
  • Interview and select: Conduct interviews, background checks, and select the best candidate.
  • Draft an employment contract: Draft an employment contract according to Canadian labor law, and onboard the employee.

What are the legal requirements for hiring employees in Canada?

Hiring employees in Canada involves various legal requirements to ensure fair and equitable employment practices. Here’s a list of some key legal considerations:

  1. Employment Standards: Each province and territory has its own employment standards legislation that outlines the minimum standards employers must meet. This includes regulations on minimum wage, hours of work, overtime pay, public holidays, vacation time and pay, termination notice and pay, etc.
  2. Employment Equity Act: This federal law is designed to ensure equal employment opportunities for four designated groups: women, people with disabilities, Indigenous peoples, and members of visible minorities.
  3. Canadian Human Rights Act: This act prohibits discrimination in employment based on race, national or ethnic origin, colour, religion, age, sex, sexual orientation, gender identity or expression, marital status, family status, genetic characteristics, disability, and conviction for an offence for which a pardon has been granted or in respect of which a record suspension has been ordered.
  4. Labour Laws: There are federal and provincial labour laws that regulate unionized workplaces. They cover issues such as collective bargaining, strikes, and lockouts.
  5. Immigration and Work Permit Requirements: If you are hiring foreign workers, they will need the appropriate work permit or visa. The employer may need to obtain a Labour Market Impact Assessment (LMIA) to hire a foreign worker.
  6. Payroll and Tax Deductions: Employers are required to deduct Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax from employees’ remuneration and remit them to the Canada Revenue Agency (CRA). Employers also contribute to CPP and EI.
  7. Workers’ Compensation: Employers are typically required to register with the workers’ compensation board in their province or territory, which provides insurance in the event of a workplace injury or illness.
  8. Record Keeping: Employers are required to keep accurate records of employees’ hours worked, wages, and deductions. These records must be kept for a certain period, typically several years.
  9. Privacy Laws: Employers must comply with federal and provincial privacy laws when collecting, using, and disclosing employees’ personal information.
  10. Occupational Health and Safety: Employers have legal obligations to ensure the health and safety of their employees. This includes providing a safe work environment, proper training, and adhering to specific standards and regulations.

    Remember, legal requirements can vary by province and territory, and by the type and size of business. For accurate and current information, it’s important to consult with a legal expert or human resources professional who is familiar with Canadian employment laws.

How much does it cost to hire employees in Canada?

The cost of hiring employees in Canada can vary greatly depending on the role, industry, location, and the level of experience and skills required. Here are some general cost categories you can expect when hiring in Canada:

  1. Salary: This is the most direct cost of hiring an employee. As of May 2023, the median annual salary in Canada is around CAD 56,000, but this varies widely depending on the job and industry.
  2. Benefits: Benefits can add a significant amount to the cost of an employee. This includes health and dental insurance, retirement contributions, paid time off, and any other benefits you offer. A general rule of thumb is that benefits add an additional 20% to 40% on top of the base salary.
  3. Employer Contributions: In Canada, employers are required to make contributions to the Canada Pension Plan (CPP) and Employment Insurance (EI). In 2021, the employer’s contribution rate for CPP is 5.45% of the employee’s salary (up to a maximum salary level), and for EI, it’s 2.21 times the employee’s EI premiums.
  4. Recruitment Costs: These are the costs associated with advertising the position, reviewing applications, conducting interviews, and any other activities related to finding the right candidate.
  5. Training and Onboarding: New employees often require training and a period of time to get up to speed. This can include formal training programs, as well as the time spent by other employees to help onboard the new hire.
  6. Workspace and Equipment: Depending on the job, you might need to provide a workspace, computer, software, tools, or other equipment for the employee.
  7. Administrative Costs: This includes the cost of payroll processing, record keeping, compliance with regulations, and other administrative tasks related to managing employees.

It’s also worth noting that if you’re hiring an employee in a different province, or a remote employee, there may be additional costs or considerations, such as travel costs for meetings or differences in provincial tax rates.

To get an accurate idea of the cost of hiring employees in Canada, it’s best to consult with a human resources professional or a financial advisor who is familiar with Canadian employment practices and laws.

What are the key ways to hire employees in Canada, such as PEO and EOR solutions?

Hiring employees in Canada can be done directly or through various service providers that can help streamline the process. These services can be particularly useful if you are a foreign company that wants to hire employees in Canada without setting up a legal entity there. Here are some common ways to hire employees in Canada:

  1. Direct Hiring: This involves posting job listings, conducting interviews, and hiring employees directly. It’s a good option if you already have a legal entity in Canada and a Human Resources team to handle the hiring process.
  2. Professional Employer Organization (PEO): A PEO provides comprehensive HR solutions for companies. They can manage payroll, benefits, tax compliance, and other HR tasks. When you hire through a PEO, the PEO becomes the ‘co-employer’ for tax and legal purposes, but the employees still work under your direction and supervision. Read more in our article on the role of the supervisor in PEO arrangements.
  3. Employer of Record (EOR): An EOR is similar to a PEO, but typically focuses more on the legal and financial aspects of employment, such as payroll, taxes, and compliance with local labor laws. The EOR hires the employees, who then work for you. This can be a good option if you want to quickly start operations in Canada without setting up a legal entity there.
  4. Temporary Employment or Staffing Agencies: These agencies provide temporary workers for short-term needs. The agency is the employer of record, so they handle payroll, benefits, and other HR tasks. Read more in our guide to the differences between staffing agencies and employers of record.
  5. Independent Contractors: Instead of hiring employees, you can contract with individuals to provide services. However, you need to be careful that these individuals are truly independent contractors under Canadian law and not “employees in disguise,” as this could have significant legal and tax implications.

Remember, each of these options has its pros and cons, and the best choice depends on your specific needs and circumstances. Consulting with an HR professional or legal expert can provide you with guidance tailored to your situation.

What are the steps businesses need to take to hire employees in Canada?

Hiring employees in Canada involves several steps to ensure you select the right candidate and comply with all legal requirements. Here are the general steps:

  1. Defining the Role: Identify the skills and qualifications required for the job. Create a detailed job description outlining the responsibilities, necessary qualifications, and expectations.
  2. Advertising the Job: Post the job on various job boards, your company’s website, or through recruitment agencies. You could also use social media and networking events to find potential candidates.
  3. Screening Applicants: Review resumes and cover letters, conduct initial phone screenings, and shortlist candidates for interviews.
  4. Interviewing Candidates: Conduct in-person or virtual interviews to assess the skills and fit of the candidates. You may need multiple rounds of interviews, including with different stakeholders in your company.
  5. Checking References: Contact the candidates’ references to verify their employment history, skills, and work ethic.
  6. Making a Job Offer: Once you’ve selected a candidate, prepare a written job offer. This should include the job title, compensation, start date, and any conditions (like a probationary period or background checks).
  7. Preparing an Employment Agreement: The agreement should outline the terms and conditions of employment. It should include details about job duties, hours of work, salary, benefits, vacation and sick leave, termination conditions, and any other relevant terms.
  8. Onboarding the Employee: This involves setting up the employee in your payroll system, providing necessary training, introducing them to their colleagues, and providing the tools they need to do their job.
  9. Registering for Payroll: You need to register for a payroll account with the Canada Revenue Agency (CRA) and set up payroll. This involves deducting income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums from the employee’s pay and remitting them to the CRA. You also need to contribute to CPP and EI.

Remember, the hiring process can vary depending on the type and size of your business, the role you’re hiring for, and the province you’re in. You should consult with a legal expert or HR professional to ensure you’re meeting all requirements.

Hire employees in Canada — the right way

Hiring employees in Canada means having a details understanding of employment regulations, market conditions, and specific cultural factors that impact on employment in Canada. To streamline hiring in Canada, many companies will benefit from a Canada PEO or Canada EOR solution.

Check out our Canada PEO and Canada EOR guides to find out who might be the best provider for you. 

Canada Business Guides


In Canada, all residents have access to medically necessary health care services through the public health care system, which is primarily funded by taxes. However, the public system does not cover everything. Many employers provide supplementary health insurance as part of their benefits package to cover things like prescription drugs, dental care, vision care, and other health-related services not covered by the public system. While it's not legally required in most cases, providing health insurance can help attract and retain employees.

Yes, but hiring foreign workers involves additional steps. In many cases, you'll need to obtain a positive Labour Market Impact Assessment (LMIA) to show that there is a need for a foreign worker to fill the job and that no Canadian worker is available. The foreign worker will also need to obtain a work permit. There are some exceptions to the LMIA requirement for certain types of jobs and under certain international agreements.

Employers in Canada have a legal obligation to ensure the health and safety of their employees. This includes providing a safe work environment, proper training, and appropriate safety equipment. You also need to comply with specific standards and regulations set out in the Occupational Health and Safety Act of your province or territory. If an employee is injured at work, workers' compensation insurance typically covers their medical costs and lost wages.