By Globalization PartnersSeptember 2020
Reading Time: 9 minutes
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If you’re looking to expand your business into new countries or hire some remote employees in other parts of the world, Canada is an excellent country to consider. It’s larger than the whole of the European Union and is home to approximately 38 million people.
If you’re looking to expand into this nation, we’ve created a guide to hiring employees in Canada to help. We’ll look at some basics of the legal requirements you’ll need to pay attention to, as well as some cultural and logistical considerations to help you through the process.
What to Know Before Hiring in Canada
If you’re looking to hire employees in Canada for the first time, there are some important aspects of Canadian work culture and employment laws you should understand. We’ve compiled some of the key things to know when hiring someone in Canada to help you prepare.
1. Cultural Differences
Depending on where your company is located, you may encounter some cultural differences with your Canadian employees. Canadian work culture is similar to American work culture, which many countries are familiar with. For example, it is polite to make eye contact and shake a person’s hand when you meet them.
However, Canadian work culture is not exactly the same as American work culture. For example, Canadians tend to work a bit less than Americans and may take more breaks during the workday.
2. Language Differences
Depending on the language your country operates in, you may also encounter linguistic differences with Canadian workers. Canada has two national languages: English and French.
You will primarily encounter French-speaking Canadians in the province of Quebec, especially in the Greater Montreal region. This may be a positive for companies from other French-speaking nations, so these companies may want to look for employees from Quebec or other provinces where French is commonly spoken. It’s also important to note that many Quebecois who speak French also speak English. As of 2016, 44.5% of Quebecois were English-French bilingual.
3. Provincial vs. Federal Laws
In Canada, you must pay attention to both federal laws that govern employment and the laws of the province where you are setting up a branch or subsidiary. Canadian federal law includes requirements for health and safety, minimum leave, and other basic aspects of employment. In addition to these overarching rules, various provinces have their own minimum wage rates, sick leave requirements, and other employment-related regulations.
Make sure you are aware of Canadian federal law as well as the laws of the province your company is operating in so you can meet all the relevant legal requirements.
4. Minimum Vacation Leave and Vacation Pay
The requirement for vacation leave is dictated by federal law in Canada, so this requirement applies to all Canadian employees. According to the Canada Labour Code, employees who have worked for a company for one year are then entitled to at least two weeks of vacation leave. Once an employee has worked for a company for five consecutive years, they should then receive at least three weeks of leave per year. After staying with a company for 10 years, an employee must receive at least four weeks of vacation.
In Canada, employers calculate vacation pay by looking at an employee’s earnings over their most recent year of employment and multiplying that number by a percentage. For employees entitled to two weeks of leave, the percentage is 4%. For three weeks of leave, it is 6%.
5. Canada Pension Plan
Canadian employees over the age of 18 who make more than $3,500 per year must contribute to the Canada Pension Plan (CPP). The exception to this rule is Quebec, which has its own pension plan. For other provinces, employers with Canadian employees must cover half of the contributions to their employees’ pensions, and their employees cover the other half.
The amount employees must contribute to the CPP depends on how much they make. Specifically, it is based on pensionable earnings, which fall between a minimum requirement and a maximum ceiling. It is up to employers to deduct the correct amount from an employee’s pensionable earnings.
6. Employment Insurance
Employment Insurance (EI) provides financial help to people who are temporarily out of work. As with pension contributions, employers also have to calculate the right amount and deduct EI premiums from employees’ paychecks. This is true for any employees in “insurable employment,” which applies to most Canadian employees.
Each month, employers deduct a certain dollar amount from employees’ paychecks and also pay an employer share of premiums. Employers stop deducting the premiums from employee’s paychecks once the employee’s earnings go beyond the maximum insurable earnings or once they have contributed the maximum premium amount.
7. Income Tax
As with any country, Canada has its own tax laws. Employers must withhold income tax from employees’ paychecks. Canadian tax law can be a bit complex, and it is up to employers to deduct the right amount from their employees’ paychecks for income tax.
This is one of the reasons it’s helpful to work with a global professional employer organization (PEO) who is familiar with Canadian tax law and any other deductions that may need to be taken out of employees’ paychecks.
The Cost of Hiring an Employee in Canada
Hiring employees always costs a company, but by choosing the right employees for your organization, you’ll experience a good return on your investment. Some possible costs you can incur when hiring an employee in Canada include:
- Research: Whenever you’re expanding into a new country, you will have to do some extensive research to ensure you understand all the legal requirements and other considerations. This guide is a great start, but you’ll need to pay employees to work on conducting further research.
- Establishing your business: If you choose not to work with a PEO and instead want to set up a presence in Canada as either a branch or subsidiary, this is another cost you’ll incur before you even begin the hiring process. You’ll also have to pay fees to incorporate your business in Canadian provinces.
- Hiring agency: There are teams of people and various software programs that can help you go from a large candidate pool to a shortlist of the best candidates. Of course, partnering with an agency or purchasing software comes at a financial cost.
- Posting the job ad: Posting your job ad may also cost some money. However, Canada has a public job board called Job Bank where you can post job ads for free. You may also find other free sites where you can advertise the job.
- Legal checks: If you have to conduct background checks or verify that an applicant has a legal right to work in Canada, these checks can add to the overall cost to hire your new employees.
- Hiring committee’s time: Internal hiring committees may create the terms of the new position, write the job ad, evaluate applications, and interview candidates. All of these activities take place during paid working hours that employees could otherwise spend on different tasks.
- Training: Hiring a new employee is typically not the end of your company’s hiring costs. Now, you have to train that employee to do their job. The training process is an upfront investment that should eventually pay off.
What Does a Company Need to Hire Employees in Canada?
Before you start the hiring process in Canada, you’ll need some legal requirements in place. The exception to these requirements is if you work with a professional employer organization that can serve as the employer of record for your Canadian employees. If you are expanding your company into Canada, you will need the following in place:
- A branch or subsidiary: Unless you are hiring independent contractors, which is not a wise choice if you want to establish a more traditional employer-employee relationship, then you need a legal business entity in Canada. There are two main options: a branch or a subsidiary. A subsidiary is its own entity while a branch is more closely tied to the parent company.
- Incorporation: To incorporate a business in Canada, you need articles of incorporation either through an individual province or territory or through the federal government. Businesses based outside of Canada must register as an extra-provincial corporation in any province where they plan to do business.
- Payroll deductions account: Businesses must have a business number (BN) and must then use their BN to create a payroll deductions program account with the Canada Revenue Agency (CRA). You will use this account to remit your employees’ deductions from their paychecks to the CRA.
- Permits and licenses: Depending on your industry, there could be specialized permits or licenses that you need to have in place in addition to the basic requirements for all businesses. The Canadian government has an online tool where you can check to see what permits and licenses your business may need to obtain.
- Workers’ compensation insurance: Most businesses also need to have workers’ compensation insurance in place for their employees before they start hiring. To get this coverage, you don’t have to shop around with private insurance companies. Instead, you must register your business with the Workers’ Compensation Board (WCB) in the relevant province. Your premiums will be based on your industry.
Steps to Hiring in Canada
There are some basic steps for how to hire in Canada. We’ve summarized these steps below, along with some tips for hiring in Canada, based on local customs and requirements that govern hiring practices in Canada.
1. Post a Job Ad
The first step is to determine the qualities you’re looking for in a candidate and describe the job they will perform. Compile this information into a detailed job ad. If your ideal candidate could speak either French or English primarily, you may want to publish the ad in both languages. When listing any educational requirements, keep in mind that, in Canada, the term “college” refers to schools that teach specific trades or career skills and grant diplomas while “university” refers to degree-granting institutions.
Once you’ve created the ad, post it on job boards where Canadians will see it. Considering the international context, it is likely best to prompt people to send in their applications by email or via an online platform rather than by postal mail.
2. Evaluate Applications
Once the applications have come in, you need to determine which applicants merit an interview and which should be eliminated from your hiring pool. You can utilize software or an agency to help with the initial screening process, or you can have your team complete this task internally.
American companies will be glad to know that Canadians typically apply for jobs using a resume that fits a similar format to most American resumes. For companies in other countries, where the curriculum vitae (CV) is more standard, these resumes may appear more brief and direct than what you’re used to seeing from applicants in your home country.
3. Interview Candidates
You should then contact the strongest applicants to schedule an interview. If you’re setting up an office in Canada, you can conduct interviews on-site. If you are planning on hiring remote employees in Canada, you may want to conduct these interviews through a video or phone call. These types of interviews have become increasingly common, so a request for a virtual interview shouldn’t come as a surprise to applicants.
If you’re scheduling a virtual interview, make sure you take the time difference into account. Being a large country, Canada is home to several time zones that span a difference of four hours, so make sure you find the correct time zone for each applicant and schedule your interview during an overlap in business hours in your country and their province if possible.
4. Follow Up and Form a Contract
Once you’ve chosen the ideal candidate or candidates to hire, you should follow up with them to offer them the job formally. Make sure you provide any details that have been left unsaid up to this point, including the proposed salary. It is normal for Canadians to negotiate their salary, though many candidates may simply accept your offer. This is also the stage where you should create a contract.
In Canada, you can legally form an employment contract verbally, but having a contract in writing is a good way to make sure you and your employee are on the same page and to help you justify your decision if you ever need to fire an employee. In Canada, you must have just cause for terminating someone’s employment, so if an employee is not fulfilling their obligations, you can refer to the contract.
5. Onboard Your New Hire
Now you can onboard your new hire. You may have paperwork and processes related to your company, but you also need to make sure you complete the required steps for onboarding in Canada.
You must view your new employee’s Social Insurance Number (SIN) card within three days of their start date and record the information on it. Make sure they are a citizen or have a legal right to work in Canada. Employees must also fill out the Form TD1, Personal Tax Credits Return, from the federal government and from their province, so you know how much tax should be taken out of their paychecks. Note that in Quebec, the provincial form is known as Form TP1015.3-V.
Hire Canadian Employees With Help From Globalization Partners
Finding the ideal workers to join your company and help you expand is a big enough task on its own. When you add in the complexities of establishing a legal presence in Canada and abiding by all the relevant laws, you have a gargantuan and time-consuming process ahead. Globalization Partners can streamline the process by serving as the employer of record for your Canadian employees.
With a presence in 187 countries, Globalization Partners can help you expand your business into Canada and many other parts of the world. You choose your new employees, and Globalization Partners handles the onboarding process and all the technicalities of paying your employees, deducting the correct amounts for taxes and benefits. As a trusted professional employer organization, we have the legal and human resources expertise you need to expand your business into Canada. Contact us today to learn more and get started.