Canada Employer of Record: Complete Guide for 2025

Hiring employees in Canada involves more than offering a job and paying a salary. Employment in Canada is regulated by both federal and provincial laws, each with its own rules for payroll, benefits, and termination.

For companies based outside of Canada, or even those operating across multiple provinces, navigating this legal structure can be complex. Each province has its own employment standards, tax requirements, and workplace regulations.

A Canadian Employer of Record (EOR) offers a way to legally hire workers in Canada without setting up a local business entity. This guide explains what an EOR is, how it works, and what to expect when using one in Canada.

What Is a Canadian Employer of Record?

A Canadian Employer of Record (EOR) is a company that legally employs workers in Canada on behalf of another business. The EOR handles all employment paperwork, legal compliance, and payroll processing while the client company directs the employee's daily work.

When using an EOR service in Canada, the EOR becomes the legal employer on paper. This means the EOR takes responsibility for:

• Legal compliance: Following all federal and provincial employment laws
• Payroll processing: Calculating wages and withholding proper taxes
• Benefits administration: Managing statutory benefits like Canada Pension Plan
• Employment contracts: Creating legally compliant agreements
• Tax reporting: Filing required documents with tax authorities

An EOR is different from a Professional Employer Organization (PEO). With a PEO, there's usually a co-employment relationship that might still require you to register a Canadian entity. An EOR completely eliminates this need.

The main advantage of using an employer of record Canada service is that it allows companies to hire Canadian workers without creating a legal entity in the country. This saves time, money, and administrative headaches while ensuring full compliance with local laws.

Why Choose an EOR in Canada?

Companies choose to work with an Employer of Record in Canada for several practical reasons. The most common is speed as an EOR allows businesses to hire Canadian employees in days rather than the months it typically takes to establish a legal entity.

Canada's employment system operates under both federal and provincial regulations. This dual structure creates a complex compliance landscape where rules for holidays, minimum wage, and termination vary by province. An EOR manages these variations automatically.

The cost difference between setting up a Canadian entity and using an EOR is significant. Entity setup involves registration fees, legal expenses, accounting costs, and ongoing administrative work. An EOR bundles these functions into a predictable monthly fee.

An EOR also helps companies tap into Canada's skilled workforce. Canada has strong talent pools in technology, finance, healthcare, and creative industries. Using an EOR makes it possible to hire these professionals without establishing a permanent office.

Companies commonly use Canadian EOR services when:

• Testing the market before committing to a permanent presence
• Hiring remote workers across different provinces
• Employing staff for project-based work
• Converting contractors to employees to avoid misclassification risks

How to Hire Through an EOR in Canada

The process of hiring through a Canadian EOR follows a straightforward path that makes employment simpler while ensuring compliance with all relevant laws.

1. Define Your Hiring Needs

Before engaging an EOR, clarify exactly what you need. Consider:

• Employment type: Full-time, part-time, or project-based
• Worker location: Which Canadian province they'll work from
• Compensation structure: Salary, bonuses, and benefits
• Timeline: When you need the employee to start

These details help determine whether an EOR is the right solution and which provider might best meet your needs.

2. Select an EOR Partner

When choosing an Employer of Record Canada service, evaluate providers based on:

• Technology platform: Look for modern systems with employee self-service
• Provincial expertise: Ensure they understand regulations in your target provinces
• Support quality: Check if they offer dedicated account management
• Pricing structure: Compare flat-fee vs. percentage-based models
• Contract flexibility: Review minimum commitments and cancellation terms

The best EOR partners combine technological efficiency with human expertise to navigate Canada's complex employment landscape.

3. Create Compliant Employment Contracts

After selecting an EOR, the next step is drafting employment agreements that follow Canadian standards. These contracts must include:

• Job description and duties
• Compensation details
• Working hours and location
• Vacation entitlement
• Termination conditions
• Provincial governing law

In Quebec, contracts must be provided in French unless the employee explicitly agrees otherwise. The EOR prepares these documents to ensure they meet all legal requirements in the employee's province.

4. Onboard New Employees

Once contracts are signed, the onboarding process begins. The employee provides:

• Government ID
• Social Insurance Number
• Banking information
• Tax forms
• Work eligibility documentation

The EOR registers the employee with relevant government agencies and sets up payroll. This process typically takes 3-5 business days, much faster than the months required to establish a legal entity.

5. Manage Ongoing Employment

After onboarding, the EOR handles all administrative aspects of employment while you manage the employee's work. The EOR processes payroll on Canadian schedules (typically bi-weekly or semi-monthly), administers benefits, and ensures ongoing compliance with changing regulations.

EOR Canada Cost Factors

The cost of using an Employer of Record in Canada includes several components beyond the base service fee. Understanding these elements helps companies budget accurately for Canadian employment.

Base Service Fees

EOR providers typically charge in one of two ways:

• Percentage model: A percentage of the employee's monthly salary (usually 5-15%)
• Flat fee model: A fixed monthly amount per employee (typically $200-$500 CAD)

Larger companies often negotiate volume discounts when hiring multiple employees. Some providers also offer tiered pricing based on salary ranges or service levels.

Mandatory Employer Contributions

Beyond service fees, employers must cover these required costs in Canada:

• Canada Pension Plan (CPP): 5.95% of earnings up to the annual maximum
• Employment Insurance (EI): 1.75% of insurable earnings
• Workers' Compensation: Varies by province and industry (0.25-15%)
• Provincial health taxes: Required in certain provinces like Ontario and Quebec

These contributions are calculated and processed by the EOR but funded by the client company.

Additional Benefits

Many employers offer supplementary benefits to attract top talent in Canada:

• Extended health insurance: Coverage for prescription drugs, dental, and vision care
• Retirement savings: Group RRSPs or pension contributions
• Additional paid time off: Beyond provincial minimums
• Wellness programs: Mental health support, fitness allowances

The EOR can administer these benefits and include their cost in the monthly invoice.

Key Compliance Areas in Canada

Canadian employment compliance spans federal and provincial regulations. An EOR navigates these requirements to keep companies protected from legal risks.

Employment Standards

Each Canadian province has its own employment standards legislation covering:

• Minimum wage: Ranges from $13.75 to $16.65 CAD per hour depending on province
• Working hours: Standard workweek and overtime thresholds
• Vacation pay: Minimum 2 weeks (4% of wages) in most provinces
• Public holidays: Between 9-13 paid holidays depending on province

The applicable standards depend on where the employee physically works, not where the company is based. An EOR applies the correct rules for each employee's location.

Tax Compliance

Canadian payroll involves several tax obligations:

• Income tax withholding: Federal and provincial taxes at progressive rates
• Social contributions: CPP and EI payments
• Annual reporting: T4 slips and remittance summaries
• Provincial requirements: Quebec requires additional forms

The EOR calculates these amounts, withholds them from employee pay, and remits them to the appropriate government agencies on schedule.

Termination Requirements

Canadian termination laws provide strong employee protections:

• Notice periods: Typically 1-8 weeks based on length of service
• Severance pay: Required in certain provinces after specific service periods
• Final pay requirements: Strict deadlines for final wage payments
• Record of Employment: Mandatory documentation for EI benefits

These requirements vary significantly by province. An EOR ensures terminations follow the correct process for each employee's location.

Managing Employee Records and Payroll

Proper recordkeeping is essential when employing workers in Canada. The EOR maintains all required documentation and manages payroll processing according to Canadian standards.

Recordkeeping Requirements

Canadian employers must maintain these records for each employee:

• Personal information and employment history
• Hours worked and wages paid
• Vacation time accrued and taken
• Leaves of absence
• Benefits enrollment

These records must be kept for 3-7 years, depending on the province. They're subject to privacy regulations under the Personal Information Protection and Electronic Documents Act (PIPEDA) and provincial privacy laws.

Payroll Processing

Canadian payroll typically follows these cycles:

• Bi-weekly: Every two weeks (26 pay periods per year)
• Semi-monthly: Twice per month (24 pay periods per year)
• Monthly: Once per month (less common for employees)

The EOR calculates gross pay, applies all required deductions, and issues payments in Canadian dollars. They also handle special payments like bonuses, commissions, and overtime according to Canadian tax rules.

Avoiding Misclassification Risks

One significant advantage of using an Employer of Record in Canada is avoiding worker misclassification issues. This occurs when a company incorrectly treats an employee as an independent contractor.

Canadian authorities look at several factors to determine proper classification:

• Control: Who decides how, when, and where work is performed
• Tools and equipment: Who provides the necessary resources
• Financial risk: Whether the worker can experience profit or loss
• Integration: How essential the worker is to the business

Misclassification can result in:

• Back taxes and interest
• CPP and EI contribution penalties
• Provincial labour law fines
• Legal costs and reputation damage

An EOR eliminates these risks by establishing a proper employment relationship from the start, with all required tax withholdings and benefit contributions.

Experience Next-Generation EOR Solutions

Modern Employer of Record services in Canada combine compliance expertise with advanced technology. These platforms offer features like:

• AI-powered compliance: Automatic updates when laws change
• Real-time payroll processing: Faster payments with fewer errors
• Digital onboarding: Streamlined employee documentation
• Self-service portals: Employee access to pay stubs and tax forms
• Integrated benefits administration: One platform for all employment needs

These innovations make it easier to employ workers across Canada while maintaining full compliance with all federal and provincial regulations.

Borderless AI offers a comprehensive EOR solution that handles all aspects of Canadian employment. Our platform combines AI automation with human expertise to ensure compliant, efficient hiring across all Canadian provinces.

FAQs About Canada EOR

How does an EOR manage employment across multiple Canadian provinces?

An Employer of Record maintains separate compliance systems for each Canadian province, applying the correct labour laws, tax rates, and benefits requirements based on each employee's location. This allows companies to hire across provinces without managing multiple compliance systems.

What is the typical timeline for hiring through a Canadian EOR?

The process of hiring through a Canadian EOR typically takes 5-7 business days from signing the service agreement to employee start date. This includes contract preparation, document collection, and government registration, significantly faster than the months required to establish a legal entity.

How do Canadian employment laws differ from those in other countries?

Canadian employment law features strong worker protections, provincial variations in standards, mandatory social contributions, and specific termination requirements. Unlike some countries, Canada has no at-will employment, requiring proper notice or pay in lieu of notice when terminating employees.

How does an EOR handle payroll taxes in Canada?

An EOR calculates and withholds the correct federal and provincial income taxes from employee pay, adds employer contributions for CPP and EI, and remits these amounts to the Canada Revenue Agency on the required schedule. They also issue T4 tax forms annually and manage any provincial tax requirements.

Can an EOR help with Canadian work permits for foreign employees?

Most EORs provide guidance on work permit requirements but don't directly process immigration applications. They can advise on which permits might be suitable and connect companies with immigration specialists, but the actual permit application typically requires separate immigration expertise.