Hire in Canada

How to Hire Employees in Canada

Attracting top talent requires building a strong employer brand and ensuring strict compliance with Canadian employment regulations. Here are some best practices to follow: 

• Promote your employer brand on Canadian job boards like jobbank.gc.ca, indeed.com, myworkdayjobs.com, and other professional networking sites like LinkedIn.
• Create a company culture that resonates with Canadian values, such as work-life balance, diversity, and inclusion.
• Emphasize your commitment to fair hiring practices and a discrimination-free workplace.
• Clearly outline your compensation packages and benefits structure, adhering to provincial regulations.
• Integrate compliance into your company culture, prioritizing fair and ethical hiring.

Further, the type of business presence determines how to hire an employee in Canada and the related cost requirements. 

Here are three best practices of how to hire employees in Canada:

• By setting up a local entity
• Through an EOR platform
• Using an AOR

1) How to hire employees by setting up a local entity

You can establish a business presence to hire in Canada. This allows you to operate legally, hire employees, open bank accounts, and comply with Canadian tax regulations. 

You can choose among the three primary business structures: sole proprietorship, partnership, or corporation. 

Branch operations and joint ventures are other alternate structures for foreign businesses in Canada. 

Setting up a legal entity in Canada offers more control and flexibility over hiring, compensation, and company culture. 

Local presence enhances employer branding and attracts talent who value local employers. 

However, the significant downsides to establishing your business presence in Canada are high legal and accounting fees and resource diversification to administrative tasks.

Most companies avoid it by switching to employer-of-record (EOR) or agent-of-record (AOR) solutions. 

How to hire employees via EOR

An Employer of Record acts as a legal employer on your behalf when hiring employees in your preferred region. 

This means the EOR takes care of all the legal and administrative responsibilities associated with employing someone, including payroll processing and deductions, taxes and benefits administration, compensation insurance, and more. 

EOR can give you the flexibility to

• Enter the Canadian market rapidly
• Hire a small to medium-sized team
• Reduce the administrative burden of managing employees 

How to hire contractors through AOR

An Agent of Record is a middleman between your company and independent contractors you hire in Canada. 

Unlike an Employer of Record (EOR), which assumes full legal employment status, an AOR focuses on managing independent contractors' administrative and compliance aspects.

There are alternatives to AORs. You can use online platforms that connect you with independent contractors, but compliance and risk management might be limited.

The table summarizes the primary ways to hire in Canada and their characteristics. 

Cost of Hiring in Canada

You need to consider the following costs to hire employees in Canada:

• Payroll costs vary across provinces, including salary, benefits, and taxes.
• Recruitment and onboarding costs, including job posting fees and other optional agency fees for recruitment, background checks, employee training, equipment charges, etc. 
• Additional considerations involve LMIA checks to hire foreign talents, employer sponsorship requirements for Canadian visas, employer branding initiatives, business establishment charges, or EOR/AOR service fees. 

The table summarizes the cost comparison between setting up a local entity and using an EOR/AOR service. For in-depth analysis, you can use Skuad’s cost calculator.

A Brief About Employment Laws in Canada

Canadian employment law is a shared responsibility between the federal government and individual provinces/territories. Therefore, you must have a holistic understanding of applicable labor laws in your area of operation. 

Here is a list of essential federal laws:

• Canadian Labour Code: Sets national standards for minimum wage, overtime pay, hours of work, vacation time, termination of employment, and occupational health and safety.
• The Canada Human Rights Act: Prohibits employment discrimination based on race, religion, gender, and disability.
• Employment Insurance Act: Provides temporary income support to unemployed workers with a set of criteria.

Canada has ten provinces and three territories. You could experience variations in labor law provisions in the following aspects: 

• Minimum wage rates
• Employment standards like vacation time and other leave policies
• Termination of pay and worker rights
• Safety regulations across industries

Challenges of Hiring in Canada

Finding good hires in Canada has become a challenge for employers. Companies struggle to fill open positions due to a lack of qualified applicants, competition for skilled workers, and lengthy hiring processes. 

The skill mismatch and non-competitive compensation make it harder for you to hire in Canada. 

Let’s elaborate on the top four hiring challenges in Canada:

1. Canadian employment laws

A few aspects of employment laws in Canada make hiring complex: 

• There are regional variations within labor law provisions like minimum wage, permissible overtime hours, leave policy, notice period for termination, and payroll taxes. 
• The unionization rate in Canada is more than double that in the United States.
  • This means you must factor in collective bargaining agreements, which can dictate wages, benefits, working conditions, and grievance procedures. 
• you need to have a well-defined recruitment and selection process to ensure strict compliance with human rights laws that prohibit discrimination based on various factors, such as race, religion, gender, and disability. 

2. Payroll in Canada

The estimated 12.2% employer cost on a USD 60,000 salary highlights additional expenses beyond the base salary:

• The requirement to withhold income tax, contribute to Canada Pension Plan (CPP) and Employment Insurance (EI), and issue T4 slips.
• Accurate payroll necessitates meticulous record-keeping of employee contributions, deductions, and remittances to the Canada Revenue Agency (CRA). 
• There is a steady demand for an increase in salary payments due to Canada's rising cost of living. 
• You must also factor in provincial variation when calculating payroll taxes and compliance requirements. 

However, unlike some European countries, Canada does not have a Value-Added Tax (VAT), which simplifies payroll calculations to some extent.

3. Competitive talent landscape

Companies hire in Canada to address two critical factors: company growth and lack of requisite skills among current employees. This could result in: 

• Candidates demand a more competitive compensation package as there are more open positions and a limited pool of qualified executives. 
• Staying updated on the evolving skill sets like artificial intelligence (AI) and deep learning required in focus industries to identify suitable candidates.
• Adapting to the growing hybrid and distributed work opportunities and navigating various options for hiring foreign talents. 

Additionally, recruiters hire employees in Canada while considering the need for bilingual executives with a less optimistic economic outlook and a smaller talent pool.

4. Beyond the skills gap

While the lack of qualified candidates is a significant hurdle, here are two additional challenges Canadian employers face in today's hiring landscape:

• Foreign talent can be an attractive option for direct hire in Canada. Still, you must conduct a Labor Market Impact Assessment (LMIA) to ensure Canadians are given first preference and meet work permit requirements.

• Consequently, it has resulted in the rise of job posting scams, which risk employer brand reputation and deter recruiters from attracting more genuine and qualified candidates.

Hire in Canada with Skuad

Skuad empowers you to streamline your global hiring journey. Our one-stop-shop hiring solutions allow you to onboard top talent in Canada without needing a local entity. 

Our EOR/AOR solutions can handle all the complexities - payroll processing, tax administration, and compliance with Canadian employment laws -  so you can focus on attracting the best people.

‍Get started with a demo and explore better ways to manage HR compliance in Canada.

FAQs

Q1. How do I hire someone in Canada?

A1. Hiring in Canada involves attracting talent, onboarding new hires, and managing legalities while ensuring compliance. You can either set up a local entity for more control but with higher costs or use an Employer of Record (EOR) like Skuad for a faster and simpler solution with less control. 

Q2. What is the average cost of hiring in Canada?

A2. The average cost per hire in Canada is around 12% on an annual salary of USD 60,000. This includes factors like salary, mandatory benefits, and payroll taxes. For accurate results, you can use Skuad’s cost calculator. 

Q3. How do I pay my employees in Canada from the US?

A3.There are two main ways to pay your Canadian employees from the US:

1. When establishing your company in Canada, You'd need a Canadian bank account and a functioning payroll system for taxes and deductions.

2. When using an Employer of Record (EOR) or Agent of Record (AOR), you can pay the EOR in US dollars, and they will handle payroll processing, taxes, and compliance for a fee. 

Q4. Does a Canadian need a 1099?

A4. Employers must use tax form 1099 issued by the US Internal Revenue Service (IRS) to report miscellaneous income paid to independent contractors who are US citizens or residents. Therefore, Canadians typically don't receive a 1099 form.