Expanding your business to Canada presents an exciting opportunity to tap into a highly skilled workforce and a stable economy. However, hiring in a new country comes with challenges, like complying with local labor laws, tax requirements, and payroll regulations. This is where an Employer of Record (EOR) can simplify the process and help you hire in Canada seamlessly, without setting up a legal entity.
With a best-in-class EOR, coupled with G-P Gia™, our AI-based global HR compliance advisor, companies can leverage deep expertise in employment law, talent insights, and workflows to build and manage global teams anywhere.
In this blog, we’ll walk you through everything you need to know about hiring in Canada with an EOR.
Why are companies expanding to Canada?
Canada offers a diverse market and a highly educated workforce with strong bilingual capabilities and expertise in sectors like technology, finance, healthcare, and manufacturing. This talent pool makes Canada an attractive choice for companies looking for specialized professionals.
Beyond talent, Canada provides business-friendly policies, proximity to the U.S., access to other global markets through trade agreements, and a stable economic environment.
However, expanding into any new country, including Canada, brings complexity. Companies may struggle with local provincial hiring regulations, payroll management, tax compliance, and Canada’s unique labor laws. Partnering with an EOR can be a valuable solution to address these challenges while ensuring compliance.
Navigating Canada’s employment laws
Before you begin hiring in Canada, it’s essential to understand the country’s employment laws, which can vary between provinces. The Canadian labor landscape is regulated by a mix of federal and provincial laws, covering areas such as wages, employee benefits, and working conditions. Some of the key regulations to consider include:
- Minimum wage: Each province sets its own minimum wage, and employers must comply with local rates.
- Working hours: Regulations on standard working hours and overtime differ across provinces, with some requiring overtime pay after 40 hours per week and others after 44 hours.
- Termination rules: Canadian law mandates clear guidelines for notice periods and severance pay, which vary depending on the employee’s length of service.
- Tax and social security contributions: Employers are responsible for remitting payroll taxes, including federal and provincial income taxes, as well as contributions to social security programs like the Canada Pension Plan (CPP) and employment insurance (EI).
Understanding and complying with these regulations is crucial to avoid penalties and ensure smooth operations. This is where an EOR’s expertise comes into play, helping you manage the complexities of Canadian labor law.
The critical role of an Employer of Record (EOR)
An Employer of Record (EOR) is a third-party organization that handles employment responsibilities on behalf of a company. When expanding to Canada, partnering with an EOR enables you to hire local employees without establishing a legal entity. As the legal employer, EORs manage everything from payroll and taxes to compliance with local labor laws, while your company maintains control over the day-to-day team management.
This arrangement is especially beneficial to companies looking to enter the Canadian market quickly, without the administrative burden and cost of incorporating locally. Whether your company is looking to hire a few employees or build a larger team, EORs provide a flexible solution that allows leaders to expand without the risk.
EOR vs. entity setup
Once you’ve decided to expand to Canada, the next step is determining the best way to execute those plans. Companies generally have two options:
- Partner with an EOR.
- Establish an in-country entity.
Here’s a quick comparison to help you choose the right approach:
| Criteria | EOR | Entity Establishment |
|---|---|---|
| Setup time | Typically within days by leveraging the EOR’s global entity infrastructure | Lengthy process, often taking months |
| Compliance | EORs assure compliance with labor laws | Companies are fully responsible for compliance |
| Cost | More cost-effective and customizable solutions | High initial setup costs and ongoing expenses |
| Payroll and tax management | EORs handle payroll, taxes, and deductions | In-house teams must manage all payroll and tax reporting obligations |
| Employment contracts | EORs provide locally compliant employment contracts and contractor agreements | Companies must create and manage contracts in line with Canadian law |
| Scalability | Easily scalable for rapid hiring and market testing | Challenging to scale quickly due to setup and regulatory hurdles |
| Exit flexibility | Easier exit as EORs streamline termination and severance requirements | More complex exit, including potential entity dissolution costs |
How an EOR assures compliance in Canada
One of the biggest advantages of working with an EOR is staying compliant with Canada’s federal and provincial regulations. An EOR takes on the administrative burden of managing payroll, taxes, and employee benefits, so that your company meets all legal obligations.
How an EOR Simplifies Compliance in Canada
- Labor law oversight
- Payroll and tax management
- Employment contracts
- Worker classification
- Health and safety standards
- Benefits administration
- Termination and severance
The process of hiring in Canada with an EOR
Hiring in Canada with an EOR is a straightforward process that allows your HR teams to focus on talent acquisition without worrying about the technical aspects of employment. Here are the typical steps involved:
- Recruitment and selection: Your company identifies and selects the best candidates. The EOR can assist with recruitment tools if needed.
- Employment contract drafting: The EOR drafts employment contracts that are compliant with Canadian laws and tailored to each province’s requirements.
- Onboarding: The EOR handles the administrative aspects of onboarding, such as setting up payroll, managing benefits, and ensuring compliance with local regulations. This allows your company to focus on the onboarding experience, including training, mentorship, and team integration.
- Payroll and benefits administration: The EOR takes care of paying employees, making the necessary tax deductions, and managing benefits such as health insurance and retirement contributions.
- Ongoing compliance management: The EOR continues to manage all aspects of compliance and is constantly aware of updates to employment laws to ensure timely tax remittances.
Benefits of using an EOR to hire in Canada
There are several key benefits to using an EOR to hire in Canada:
- Time and cost savings: Setting up a legal entity in Canada can be time-consuming and expensive. With an EOR, companies can hire without the added overhead.
- Simplified compliance: Employment laws and tax regulations in Canada can be complex and vary by province. An EOR assures compliance with all applicable laws, minimizing the risk of penalties.
- Access to local expertise: An EOR is familiar with the nuances of Canadian labor laws and can provide guidance on best practices for managing your workforce.
What makes G-P the undisputed EOR industry leader?
As the recognized leader in global employment, we deliver industry-leading global employment products and EOR solutions, so you can hire, onboard, and manage global teams in 180+ countries – regardless of entity status. By partnering with us, you gain:
- Unmatched compliance expertise
Our dedicated team of HR and legal experts manages global compliance — including employment, tax, benefits, and local labor laws — so you don’t have to. - Best-in-class integrations
G-P integrates seamlessly with your preferred HCM, payroll, PEO, and consulting service providers, creating a single source of truth that consolidates your global team data in one place. - AI-enabled HR technology
Gia combines our 13+ years of global employment expertise with cutting-edge AI technology to provide context-specific answers to your toughest HR questions in over 50 countries and all 50 U.S. states.
Gia not only provides context-specific guidance but also creates actionable documents like customizable contracts,templates, and toolkits, saving you the complexity and cost of working with multiple tools and advisors.
With Gia and our industry-leading suite of global employment products, we help companies of all sizes build and manage global teams anywhere in the world, quickly and compliantly.
Contact us to learn more or book a demo.
