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Canada is an increasingly popular choice of location for businesses looking to take their operations global. Its $1.9 trillion GDP makes it the ninth-largest economy in the world. The country’s workforce is highly educated and skilled, with over half of Canadian adults having a post-secondary degree or diploma.
Canada's economy is also stable and has friendly corporate tax rates. The country's strong ties to the United States mean it has developed largely parallel to the world's largest economy, making it an attractive business destination.
If you are considering setting up a business and hiring employees in Canada, you should understand the ins and outs of the recruitment process. Read on to learn how to hire employees in Canada.
Hiring employees in Canada
Hiring employees in Canada can be complex, especially for those who are new to the country's market. You should consider Canadian labor laws, taxes, employee policies, and more.
Labor Laws
As an employer, you should comply with provincial and federal labor and employment laws. Canada labor laws cover the minimum wage, working hours and overtime, collective bargaining units, termination of employment, and other employee rights.
The federal minimum wage in Canada is $15.55, and it applies to federally regulated industries such as postal services and banks. The provincial minimum wage applies in other non-regulated industries, so you should check with the local government to see if your industry will need to demonstrate compliance.
Taxes
You must register for a payroll account with the Canada Revenue Agency (CRA) and deduct income tax from each employee’s salary and wages. The amount of tax withheld depends on the employee's income level. For example, an income of up to $50,197 is taxed at 15%, while $155,625 to $221,708 is taxed at 29%.
You should also collect and remit employer contributions to the Canada Pension Plan and Employment Insurance. You will remit contributions to the pension plan for all your employees above the age of 18 earning over $3,500 annually.
Employee Policies and Contracts
Creating a comprehensive employee policy manual is important for setting out expectations and clarifying the rights of employees. It should include information on job duties, wages and benefits, vacation entitlement, termination of employment, health and safety, and anti-discrimination laws.
In Canada, it is customary to have an employment contract for each employee detailing the work agreements. You should ensure that the contract complies with provincial and federal laws.
Permanent Establishment Laws
If your business has a permanent establish in Canada, you should remit taxes to the local government based on any revenue the business generates. Your business will be considered a permanent establishment if it has an office or other assets in Canada. However, if you’re operating in Canada and have no permanent establishment, you’ll get relief from taxation under the income tax treaty.
Cost of hiring employees in Canada
The cost of hiring employees in Canada can vary depending on the type of employee you’re looking to hire. But the bottom line is that you will incur other expenses besides wages and salaries during the recruitment and hiring process. Some of the likely costs will include:
- Hiring and training costs: According to a recent report by the Society for Human Resource Management (SHRM), employers incur an average cost of $4,700 per hire. This amount includes the cost of advertising and recruiting, the interview process, and training new hires.
- Benefits: For full-time employees, you're required to offer certain benefits, such as health insurance, retirement plans, and paid leaves. Each employee's benefits can range from 5,000 to 7,000 Canadian Dollars per year.
- Background checks: Part of your hiring expense will be conducting background checks on prospective employees. This usually includes criminal checks, which will cost you CDN$ 25 in federal processing fee. You might also need other checks, such as credit or reference checks.
What a company needs to hire in Canada
Once you understand Canadian labor laws, tax regulations, and the cost of hiring, the next step is to find employees who best fit your global expansion needs. There are different options available, including the following:
Establish a legal entity
Incorporating your business and establishing an entity is the first step to building a presence in Canada. You can either open a branch that closely relates the entity to the parent organization or a subsidiary that operates as a separate legal entity. Whichever option you choose, you’ll need to obtain workers’ compensation insurance, pay local taxes, and obtain the necessary licenses or permits.
Hire independent contractors
When hiring international talent, you can opt for Canadian contractors instead of hiring full-time employees. Independent contractors differ from full-time employees in that they offer their services as self-employed individuals. You won’t have any legal obligation over independent contractors in terms of benefits and taxes.
However, you might be exposed to legal risks like misclassification. This arises when you incorrectly classify employees as independent contractors, denying them their entitlement to benefits. Misclassification of employees can have serious consequences, including substantial back taxes, fines, and penalties.
Utilize an Employer of Record (EOR)
One of the simplest ways to hire employees in Canada is through Employer of Record (EOR) services. An EOR will be the legal employer of your international team, handling all HR activities. They will be your international employees’ employer on paper, but the employees will work for you, and you will retain control and oversight over their daily activities.
Relying on EOR services allows you to streamline onboarding and minimize the legal risks of hiring international talent. It also helps you save time and money, as you will no longer need to set up a legal entity or manage employee contracts in different countries.
Hire employees in Canada easily with Global Expansion
Tapping into the Canadian talent pool is a key step in building your dream global workforce. If the hiring process seems daunting, you should partner with a reliable EOR service provider like Global Expansion.
We will do all the legwork by helping you hire top talent and onboard the new hires. Our SaaS platform will streamline payroll and benefits administration and facilitate compliance with global regulations. With Global Expansion, you will enjoy faster global hiring, skip entity establishment, mitigate misclassification risks, and offer competitive employee benefits.
Contact us today to learn how we can help you hire employees in Canada.
