Canada has a robust economic base, low taxes, abundant natural resources, and a stable political climate. These factors create an environment for international businesses to flourish. When it comes to ease of payment for small to medium-sized businesses, Canada has one of the lowest tax burdens among the G7 countries.
Canada's economy is also one of the most resilient in the world, with a GDP of USD$1.74 trillion as of 2020. Systems such as nationwide worker vaccination programs and financial support for its citizens and businesses by its federal and provincial governments also allowed its economy to rapidly recover from the COVID-19 pandemic.
Hiring in Canada has become increasingly popular among foreign companies as the country offers a diverse and highly skilled labour force. This is due to its large number of higher education institutions and government initiatives, including upskilling support for sustainable technologies and programs for indigenous skills and employment training.
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Canadian Dollar (CAD)
Taxes and Social Security in Canada
Taxes in Canada
Employment laws in Canada require employers to calculate, withhold, remit, and report all employee and employer deductions. This includes tax and social security based on their employees’ salary and is split into Federal and Provincial taxes.
The federal tax rates for 2022 are:
15% on the first CAD$50,197 of taxable income
5% on the next CAD$50,195 of taxable income (on the portion of taxable income over 50,197 up to CAD$100,392)
26% on the next CAD$55,233 of taxable income (on the portion of taxable income over CAD$100,392 up to $155,625)
29% on the next CAD$66,083 of taxable income (on the portion of taxable income over CAD$155,625 up to CAD$221,708), plus
33% of taxable income over CAD$221,708
Provincial and territorial tax rates for 2022
With the exception of Quebec, all provincial and territorial tax rates are calculated similarly to federal tax using Form 428.
According to the Canada Revenue Agency, the following are the provincial tax rates for 2022 (in addition to federal tax).
Canada’s Social Security tax includes both the Canada Pension Plan (CPP) and Employment Insurance (EI). The Province of Quebec, however, has its own social security tax system that differs from the rest of Canada.
Canada Pension plan (CPP)
The CPP is a monthly taxable benefit that provides employees and their families with partial replacement of their income upon retirement, disability, or death.
Employers contribute to earnings that are between the basic exemption amount and the Year's Maximum Pensionable Earnings (YMPE). In 2022, contributions to those earnings are 5.7%.
Contributions to CPP are compulsory for all working Canadians aged 18-70. In 2022, contributions to those earnings are 5.7% by employees.
If an employee earns more than the Year's Maximum Pensionable Earnings, their contributions and those by Western to CPP on their behalf will cease once the limit is reached each year.
The following January, CPP contributions will begin again. This means there will be an increase in the employee’s pay when CPP deductions cease during a year, and they may see a noticeable decrease in pay at the beginning of the following year when deductions begin again.
Non-residents working in Canada are required to make contributions. To be eligible to begin receiving CPP, the employee must be at least 60 years of age and have made at least one contribution to CPP. The amount of CPP they receive depends on their personal contribution history.
Canadians aged 65-70 AND in receipt of CPP benefits may elect to cease contributions by filing Form CPT30.
Employment Insurance (EI)
Employment Insurance (EI) provides workers with temporary income support during periods of unemployment or when they are required to take time off due to events such as pregnancy, caring for a newborn or newly adopted child, a critically ill or injured person, or a family member who is seriously ill with a significant risk of death.
Employers outside of Quebec contribute 2.21% of whilst those within Quebec contribute 1.58% of EI premiums.
Minimum wage in Canada
Canada’s federal minimum wage is $15.55 per hour and applies to Canadians working in federally regulated sectors (banks, federal Crown corporations, postal services, etc.)
The provincial minimum wage will apply if you work in an industry that the federal government does not regulate.
The standard work hours in Canada are eight hours a day and 40 hours a week. Employees are entitled to one full day of rest a week with additional breaks and a rest period on workdays.
Any additional hours put in beyond the standard 40 hours of work per week is considered overtime.
These hours are eligible for overtime compensation of at least 1.5 times the regular hourly wage. Alternatively, the employee can claim time off with pay that is equivalent to 1.5 hours of time off for every overtime hour worked.
Background checks in Canada
An employer may legally conduct a background check if they have a good reason for doing so. However, they must provide the applicant with clear notice that a criminal record check is part of the application process. They must also get the applicant’s permission before conducting the check.
Background checks involve personal information, so various laws are in effect to ensure candidates' privacy. Each province and territory has its own privacy laws.
Canadian companies that operate within a federally regulated industry, such as banks, airlines, or telecommunication companies, must comply with the Personal Information Protection and Electronic Documents Act (PIPEDA).
Personal Information Protection and Electronic Documents Act (PIPEDA) governs organizations engaged in commercial activity and applies when personal data crosses provincial boundaries or internationally. Personal data includes any factual or subjective information that is recorded. This includes names, ages, IDs, education levels, incomes, social statuses, disciplinary action histories, employment files, financial records, and health histories.
Types of leave available in Canada
Annual leave in Canada is determined by provincial law, but employees typically receive a minimum of nine days depending on the province they’re based in and the length of their tenure.
Pregnant employees are entitled to up to 17 weeks of unpaid time off. In some cases, this period can be extended. Employers are not obligated to pay employees during this time however the employee can make specific claims via their Employment Insurance, and employers have the option to top up these payments.
In the case of a stillbirth or miscarriage, an employee is allowed to take up to 12 weeks of unpaid maternity leave.
The Canadian government allows new parents to take unpaid time off when a baby or child is born or comes into their care. Birth mothers who have taken maternity leave are entitled to up to 35 weeks of leave, while those who did not take maternity leave can take up to 37 weeks of parental leave.
Birth mothers are entitled to take both parental and maternity leave as both are considered different categories of leave entitlements. As the right to parental leave is independent of the right to pregnancy leave, a birth father can, for example, be on parental leave while the birth mother Is on either maternity or parental leave.
While on leave, both parents can apply for parental benefits and continue to earn credit for length of employment, service, or seniority. In most cases, an employee must be given their old job back upon returning from pregnancy or parental leave.
There are no statutory allowances for sick days taken in Canada. However, the Canada Labour Code provides leave for illness or injury as well as work-related illness or injury.
Employees that have completed three months of continuous employment with the same employee are entitled to sick leave protection not exceeding 17 weeks. In general, the code is designed to protect employees against dismissal, lay-off, suspension, demotion, or discipline because of absence due to illness or injury.
On the 20th of May 2021, Canada’s Employment Standards Amendment Act legislated that employees of British Columbia can now receive up to three days of paid leave for any COVID-19-related illness.
For employers that don’t currently have a sick-leave program, the British Columbia government will reimburse them up to CAD$200 per day per worker on sick leave. This program is administered by WorkSafeBC through an online application for employers registered for WorkSafeBC coverage.
Supplementary notes on sick leave in Canada:
Employees are responsible for providing a medical certificate if requested by the employer within 15 days of their return to work.
An employee can opt to interrupt their parental leave, compassionate care leave, leave related to critical illness and leave related to death or disappearance to take sick leave. Under these circumstances, the other leave resumes immediately after sick leave ends. Some employees may be entitled to cash benefits under the Employment Insurance Act (EI).
Apart from the above, Canada also provides its employees with additional leave such as:
Bereavement leave: Three days mandatory
Compassionate care leave: Provincial regulation of approximately eight weeks
Personal emergency leave: Up to 10 days per year
Domestic violence and sexual assault leave: Up to five days
Critical illness leave: Up to 37 weeks
Child death leave and crime-related Child disappearance leave: Up to 104 weeks
Family medical leave: Up to 28 weeks
Public holidays in Canada
Also known as Statutory holidays, public holidays in Canada are observed on a federal and provincial level. There are currently five nationwide statutory holidays followed by an additional six holidays for federal employees. Each of Canada’s 13 provinces and territories also celebrates a multitude of different holidays.
Nationwide statutory holidays
New Year’s Day
Federal statutory holidays
National Day of Mourning
National Day for Truth & Reconciliation
Attracting talent in Canada
Businesses around the world have seen tumultuous times due to the uncertainty brought on by the pandemic. In the last two years, values have changed as the Canadian workforce rebuilds its foundation and employees reassess their motivations when it comes to their career plans. This alters the way in which companies approach employee retention.
Work-life balance, for example, now surpasses salary, according to new research by ADP Canada and Maru Public Opinion. 31% of Canadian employers say that a job that encourages work-life balance is of greater importance to them now, while 39% say that work-life balance is more important now compared to before the pandemic.
This shift in priorities and many others are majorly impacting how businesses recruit new talent. To successfully attract and retain employees, employers must recognise and respect the relationship between work and their employees’ personal lives. Both are intertwined, and employees that feel their jobs give them the space to show up in their personal lives are more likely to stay and grow with their current companies.
Apart from the above, Canadian employees now also gravitate towards:
Flexibility in the workplace
Whether it’s how their working hours are organised or where they work, Canadian employees see flexibility as a key motivator when deciding to join or stay with a company.
PwC found that only one in five Canadian employees are eager to return to the in-office model of yesteryear. In Quebec, 40% of workers claim that their ideal model is one that allows them to be either fully or partially remote.
Employees today are more discerning of their leaders and place greater emphasis on self-security. Letting information flow freely fosters trust and bridges the gap between communication and collaboration.
Leadership teams that are honest about their strategy, goals, and challenges not only create space for employees to feel as if they’re part of the decision-making process but also show them that you respect them enough to share your vision and intentions.
Employees want to be involved in work that provides them with both personal and professional growth; however, many feel that 30% of their time is spent performing menial tasks that get in the way of purposeful work.
One of the ways companies can overcome this is to invest in technology that can help to reduce low-value work and free up time for employees to focus on the more fulfilling aspects of their job. And 67% of employees feel that this is the way to go.
Termination of employment in Canada
A two-week notice period is the norm in Canada, and the employer is required to provide the employee with written notice of their intention to terminate the employment. In lieu of that, the employer must pay the employee two weeks' wages at the regular rate.
The above applies to any employee being terminated except for the following reasons:
The employee has not completed three consecutive months of continuous employment
The employee is the one who decides to terminate their employment contract
The employee is dismissed for a just cause
The employee is being laid-off
The employee’s contract with the company ends on a date that is specified in the contract.
In most cases, the standard probationary period in Canada is three months. All employees who have completed a minimum of 12 months of continuous employment with an employer are entitled to severance pay. This is calculated as two days' pay at the employee’s regular rate of wages for each full year of employment, with a minimum of five days’ pay.
The employer is obligated to provide the employee with severance pay under all circumstances except when:
A layoff does not result in termination of employment
An employee’s contract ends on a date that is specified in their contract
The employee is being dismissed for a just cause
The employee chooses to terminate the employment
What are my options for hiring in Canada?
Canada has a diverse and highly educated population. We're here to assist you in finding the best candidates for your company.
Regardless of whether you're looking to hire for an immediate project or need to fill a vacancy in your organisation, our resources and extensive talent database ensure that we can connect you with the right talent for your business requirements.
We provide contract hiring services for companies that require temporary employees to fill specific roles. If you're looking for people who can grow with your business, we offer professional recruitment services that help you find them.
Employer of Record
Hire a Canadian team without establishing a local business entity. Working with an Employer of Record in Canada lets you speed up the hiring process by hiring remote employees. Once your Canadian employee is approved, we handle everything from the onboarding process and benefits administration to calculating payroll contributions and taxes.
Although the information provided has been produced from sources believed to be reliable, Airswift makes no warranties, whether express or implied, regarding the accuracy, adequacy, completeness, legality, or reliability of any information herein. Accordingly, there shall be no liability attached to theuse of the information herein, howsoever arising. For the latest information and specific queries regarding particular cases, please contact our team.
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