Payroll & Employment Guide: Canada

Hiring in Canada

When hiring in Canada—whether for on-site roles or remote workers based in a province—you must determine the correct jurisdiction, register for payroll with the CRA and comply with applicable provincial employment standards.

Key steps when hiring in Canada:

• Confirm whether your organisation falls under federal or provincial regulation (most private employers are provincially regulated).
• Ensure offers and contracts clearly specify the province of work, pay frequency, hours, vacation and statutory holiday treatment.
• Register with the Canada Revenue Agency (CRA) as an employer, obtain a payroll account and collect employee SINs for reporting.
• Set up payroll to calculate, withhold and remit income tax, CPP and EI correctly each pay period.
• Check minimum wage, overtime and leave rules for the specific province where the employee works.

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Employee Benefits

Canadian employers must provide minimum statutory entitlements, and many also offer competitive additional benefits such as extended health coverage and retirement savings plans.

Mandatory / Statutory Benefits (high level):

• Vacation: At least 2 weeks of vacation after 1 year of service and 3 weeks after 5 years, with provincial variations and additional entitlements in some jurisdictions.
• Public holidays: Each province sets statutory holidays; federally regulated workplaces observe at least 10 general holidays.
• Leaves of absence: Provincial laws provide various unpaid or partially paid leaves (sick leave, family responsibility leave, bereavement leave and others).
• Workers’ compensation: Employers must register with provincial workers’ compensation boards and pay premiums to cover work-related injury and illness.
• Pension / retirement: Canada Pension Plan (CPP) is a mandatory payroll deduction with employer matching contributions.

Common employer-provided benefits:

• Extended health and dental insurance packages.
• Group RRSP or pension plan top-ups with employer matching.
• Short-term and long-term disability coverage and life insurance.
• Paid sick days beyond statutory minimums and wellness allowances.
• Flexible work options, remote work arrangements and performance bonuses.

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Taxes in Canada

Canadian payroll combines federal and provincial income tax, CPP and EI deductions. Employers must calculate and remit these source deductions to the CRA on a regular remittance schedule.

Personal Income Tax (federal + provincial):

• Canada uses a progressive federal tax system, with marginal rates across multiple bands (for example, 14.5%, 20.5%, 26%, 29% and 33% at different income levels).
• Each province or territory applies its own progressive tax rates on top of the federal rates, resulting in combined marginal rates that vary by location.

CPP (Canada Pension Plan):

• Both employer and employee contribute to CPP on pensionable earnings, up to the annual maximum.
• CPP has base and additional components (CPP2) following recent enhancements; employers must match the employee share for both portions.

EI (Employment Insurance):

• Employees contribute EI premiums on insurable earnings up to the yearly maximum.
• Employers pay EI at 1.4 times the employee’s EI contribution (with special arrangements in Quebec).

All rates, thresholds and maximums are updated annually by CRA, so payroll calculations should always use current-year tables.

Payroll in Canada

Payroll in Canada requires accurate calculation of earnings, statutory deductions (income tax, CPP, EI) and timely remittance to CRA. Employers must also respect provincial rules on pay frequency and final pay.

Payroll Currency & Cycle:
Payroll is typically run in CAD. Employers may pay weekly, biweekly, semi-monthly or monthly, as long as they comply with provincial minimum pay-frequency rules and the contract clearly states the schedule.

Payslips:
Employees should receive itemised pay statements each pay period showing:

• Gross earnings (salary, overtime, commissions or bonuses).
• Deductions for income tax, CPP and EI.
• Other deductions (benefits, RRSP contributions, garnishments, etc.).
• Net pay and pay period dates.
• Accrued and used vacation where this is tracked on payslips.

CPP & EI mechanics:
Employers must withhold employee CPP and EI according to CRA tables and remit both employee deductions and employer contributions by their remittance due dates (monthly, quarterly or accelerated schedules depending on total payroll).

Reporting & Year-end:
Employers file T4 slips and summaries annually, reporting employment income and deductions for each employee. Records of Employment (ROEs) are filed when employees experience an interruption of earnings.

Looking for a simple way to model payroll costs and deductions for a specific province?

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Legal Regulations

Canada’s labour framework blends federal and provincial rules. Most employers fall under provincial employment standards, while federally regulated industries follow federal labour legislation.

Key compliance points:

• Federal employment standards apply to federally regulated sectors (e.g., banks, telecoms, interprovincial transport).
• Provincial/territorial employment standards cover most other employers and define minimum wage, overtime, hours, leave, notice and vacation requirements.
• Human-rights legislation (federal and provincial) prohibits discrimination and requires accommodation of protected grounds.
• Health & safety laws and workers’ compensation rules require employers to maintain safe workplaces and report incidents.

Because rules differ across provinces and sectors, employers must confirm which jurisdiction applies to each employee and adjust contracts, policies and payroll practices accordingly.

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Work Permits & Visas for Canada

Hiring foreign nationals in Canada typically requires a valid work permit and, in some cases, a Labour Market Impact Assessment (LMIA). Employers must choose the right immigration pathway based on the role, salary and candidate profile.

Common pathways:

• LMIA-based work permits: Employer obtains a positive LMIA showing a need for a foreign worker and then the worker applies for a work permit.
• Global Talent Stream: An expedited program for certain high-demand tech and specialist roles, with faster LMIA processing.
• International Mobility Program (IMP): LMIA-exempt permits for intra-company transfers, international agreements and other categories.
• IEC (International Experience Canada): Youth work permits for citizens of eligible countries on time-limited stays.

Immigration rules change frequently and timing is critical, so employers often partner with immigration counsel or EOR providers to manage compliance and processing timelines.

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EOR & PEO Services in Canada

Using an Employer of Record (EOR) or Professional Employer Organisation (PEO) can help you hire in Canada without immediately setting up a local entity.

Employer of Record (EOR) in Canada:

• Drafts and issues locally compliant employment contracts tailored to each province.
• Runs payroll and remits CPP, EI and income tax deductions to CRA.
• Administers statutory entitlements such as vacation, statutory holidays and leaves.
• Supports terminations, final pay calculations and ROE/T4 reporting.
• May coordinate work-permit applications where immigration services are offered.

PEO Services in Canada:
PEO providers are typically engaged by employers who already have a Canadian entity and want local HR and payroll support while retaining the legal employer role.

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Payroll Calculator

Dhi ADT’s Canada payroll calculator helps you estimate gross-to-net pay and total employment cost, including employer CPP and EI contributions and income-tax withholding. You can select the province to reflect local tax and minimum-wage rules.

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