If your company is ready to tap into the wealth of remote talent in the Great White North, you’d better familiarize yourself with Canadian labor laws first, eh?
Canada's talented workforce and business-friendly environment make it an appealing choice for global expansion. But here's the catch: Canada's employment laws operate at both the federal government and provincial levels, creating a complex web of regulations that can confuse even experienced employers hiring employees in Canada for the first time.
Understanding (and following) these laws is essential for building successful teams and avoiding costly compliance mistakes.
Key takeaways:
- Canada operates under a dual system where most employees fall under provincial employment standards.
- Minimum wage, overtime rules, and vacation entitlements vary significantly across provinces, making location-specific compliance essential for employers.
- Canadian workers are entitled to various statutory benefits, including parental leave, vacation pay, flexible work arrangements, and strict termination guidelines.
Labor Laws in Canada: What You Need to Know
One of the most important things to know about Canada's labor laws is that they are primarily governed at the provincial or territorial level. Each province has its own employment standards legislation, which covers minimum wage, overtime, vacation pay, and termination requirements.
However, some industries (like banking, telecommunications, and interprovincial transportation) fall under federal jurisdiction, regulated by the Canada Labour Code.
Beyond the federal-provincial divide, Canadian employment law emphasizes strong worker protections, including comprehensive human rights legislation prohibiting discrimination across all jurisdictions.
Who Is Covered by the Employment Laws in Canada?
Canadian employment laws apply to all workers, with each province maintaining its own employment standards act that governs minimum employment conditions.
Certain categories of workers may have limited coverage or exemptions, including independent contractors, certain professionals (like lawyers and doctors in some provinces), and managerial employees for specific provisions (like overtime).
Employment Contracts & Probation Periods
The most common types of employment contracts in Canada are indefinite-term and fixed-term. Contracts typically include job title and duties, compensation and benefits, working hours and location, and termination provisions.
While not all provinces formally recognize probation periods, employers often include them in contracts, and they usually last three to six months. During this time, termination is easier, but basic standards like minimum wage still apply.
However, terminations can’t be discriminatory or violate human rights. Some provinces, like Ontario, waive specific notice requirements for employees in their first three months.
Working Hours & Wages
Minimum wage rates vary significantly across Canada. As of 2025, they include:
- British Columbia: CAD 17.85/hour (highest in the country)
- Ontario: CAD 17.20/hour
- Quebec: CAD 16.10/hour
- Alberta & Saskatchewan: CAD 15.00/hour
Forty hours is the standard workweek across Canada, or eight hours per day, though this varies by province. Most jurisdictions require overtime pay at 1.5 times the regular rate.
Mandatory overtime pay typically kicks in after 44 hours per week in some provinces, like Ontario. In Alberta, employees are entitled to overtime pay after working more than eight hours in a day or more than 44 hours in a week, whichever is greater.
Health & Safety Standards
Canadian labor laws emphasize workplace health, safety, and equity through comprehensive occupational health and safety legislation. Employers must provide a safe, harassment-free work environment and implement violence and harassment prevention programs. This includes conducting risk assessments and developing policies to address workplace hazards.
Employers must follow Canadian Occupational Health and Safety (OHS) laws specific to their jurisdiction, including safety training, protective equipment, and incident reporting requirements.
Human rights legislation prohibits discrimination based on protected grounds, including race, gender, disability, religion, age, and sexual orientation. Employers must also accommodate employee needs related to these protected grounds unless they can prove doing so would cause undue hardship.
Flexible Work Arrangements
Canadian law grants employees the right to request changes to their work conditions, including:
- Work hours
- Work location (including remote work)
- Reduction in work hours
- Job-sharing arrangements
Employees can formally request flexible work arrangements once they've completed six months of continuous employment. The employer must respond in writing within 30 days, either approving the request or denying it with specific reasons based on grounds such as:
- Significant costs
- Negative impact on quality or customer service
- Inability to reorganize work among existing staff
Employees are also protected from employer reprisals, so they don’t have to worry about facing negative consequences for submitting a flexible work request.
Employer Taxes
Employers in Canada must contribute to several mandatory social programs based on employees' gross salaries.
The Canada Pension Plan (CPP) requires employers to match employee contributions of 5.95% (2025 rate) up to annual maximum pensionable earnings of $71,300. Quebec employers contribute to the Quebec Pension Plan (QPP) at similar rates.
2025 Employment Insurance (EI) premiums are 1.64% of insurable earnings for employees, with employers paying 1.4 times the employee rate (2.282%). Workers' compensation premiums vary by province and industry risk level, ranging from less than 1% to over 4% of payroll.
Independent contractors are responsible for making their own CPP/QPP contributions and do not participate in the EI system unless they opt into special benefits.
Termination Guidelines & Severance Pay
Termination rules in Canada differ quite a bit depending on the province, but one thing is consistent. If an employee is being let go without just cause, the employer needs to provide either advance notice or pay in lieu of notice.
The longer an employee has worked for a particular company, the more notice of termination they're usually entitled to. For instance, in Ontario, there is a one-week notice period per year of service, up to eight weeks.
In many cases, if there’s a mutual separation or the employee has been with a company for at least a year, severance pay also comes into play. This usually works out to two days’ wages per year of service, or at least five days’ wages — whichever is higher — but again, the exact rules can vary by province.
Health Insurance
Every Canadian has access to the public healthcare system. This covers the basic health needs of all Canadians, including hospital stays. Healthcare is funded and mandated at the federal level, but managed by the individual provinces and territories, with specific requirements in each province.
While basic health benefits are provided by the government, other medical services such as eye care, dental work, and medications aren’t covered. Employers often provide private supplementary health insurance to cover those services as a way to attract and retain talent.
Paid Leave Laws
Companies that employ Canadian workers must follow several mandatory paid leave laws.
Vacation and Holiday Leave
Canadian employees are entitled to minimum vacation time and pay that increases with years of service.
Most provinces mandate two weeks (4% of gross wages) of vacation time and pay after one year of employment, increasing to three weeks (6%) after five to 10 years, depending on the jurisdiction.
Canada recognizes several national statutory holidays:
- New Year's Day
- Good Friday
- Easter Monday
- Victoria Day
- Canada Day
- Labour Day
- Thanksgiving Day
- Remembrance Day
- Christmas Day
- Boxing Day
Additional public holidays vary by province, such as Family Day in several provinces.
Sick Leave
Sick leave requirements vary dramatically across Canada. While British Columbia mandates five paid days of sick time, Quebec offers two days off after three months of service. Some other provinces only require unpaid leave, including Ontario, which provides three unpaid sick days.
However, in most cases, employers will voluntarily pay employees for any days missed due to illness.
Parental Leave
Mothers are entitled to 15 weeks of paid maternity leave. Parental leave is available after that, and can be shared between parents. Employees can choose either 40 weeks at 55% of their average weekly earnings or 69 weeks at 33%. If sharing the leave, each parent must choose the same option.
Fathers/non-birthing parents can access the full parental leave allocation if the birthing parent doesn't claim it, plus an additional five weeks (standard option) or eight weeks (extended option) of "use it or lose it" leave.
Independent Contractors in Canada
Companies can also hire independent contractors in Canada, but must carefully structure these relationships to avoid misclassification.
The Canada Revenue Agency and provincial authorities have several factors they use to evaluate the employment relationship and determine if a worker is truly functioning as a contractor, including:
- Control over work
- Ownership of tools
- Chance of profit/risk of loss
- Integration into the business
Whether someone qualifies as an independent contractor is not solely dependent on what the contract says, but how the working relationship looks in practice.
If the authorities believe a contractor was misclassified, they may be retroactively deemed an employee, triggering significant liabilities for unpaid CPP, EI, and workers' compensation premiums, plus penalties and interest.
Penalties for Not Following Canadian Labor Laws
Violations of Canadian labor laws can result in significant penalties. Federal jurisdiction violations can lead to fines up to $250,000 per instance, with potential imprisonment for serious offenses. Administrative monetary penalties for first offenses start at $500-$1,000 per violation but can escalate quickly for repeat offenders.
Provincial penalties vary but typically include fines ranging from $350 to $1,500 per employee for employment standards violations, with corporate fines reaching $100,000 or more. Directors and officers face personal liability for unpaid wages.
How to Stay Compliant When Hiring in Canada
To ensure compliance when hiring Canadian employees, you have a couple of options:
You can establish your own legal entity, which involves incorporating federally or provincially, registering for various tax accounts, obtaining necessary business licenses, and establishing workers' compensation coverage.
This process typically takes anywhere from three months to a year and can cost between $10,000-$50,000 (or more!) in setup fees, plus ongoing compliance costs.
Opening an entity might make sense if you plan on hiring a significant number of Canadian employees (think 20+). However, due to the time commitment, it will be a while before you can make your first Canadian hire.
On the other hand, you can hire remote employees in Canada with an Employer of Record (EOR) and have them onboarded and working in a matter of days, not months.
An EOR serves as the legal employer for your Canadian employees, ensuring compliance with provincial and federal laws and handling all HR-related duties, including:
- Creating legally compliant contracts
- Equipment provisioning
- Onboarding
- Payroll processing
- Tax remittances
- Employee benefits administration
An EOR can also assist with background checks and visa and work permit applications.
Partnering with an EOR rather than opening an entity allows companies to begin hiring immediately, while also reducing risk and administrative burden.
Hire in Canada with RemoFirst
If you're ready to hire remote employees (or contractors) in Canada, RemoFirst can help.
We help companies compliantly employ workers in over 185 countries and contractors in 150+ countries, including Canada, without the need to set up a local entity. From employment contracts and payroll to benefits administration, we ensure your business is fully compliant across all Canadian provinces and territories.
Our expert team stays on top of federal and provincial laws, pays your team in Canadian dollars, manages statutory benefits and leaves, and keeps employment documentation current.
We also offer private healthcare plans that supplement provincial coverage, so you can provide your Canadian team with a competitive, well-rounded benefits package.
Book a demo to see how RemoFirst can help you hire in Canada and around the world.
