Thinking about tapping into Canada’s incredible talent pool? You’re not alone. For US companies and global startups, hiring in Canada is a smart move. But navigating a different country’s employment laws, payroll taxes, and HR requirements can feel overwhelming. This is where using a canada employer of record comes in. It’s a straightforward solution that lets you hire Canadian talent quickly and compliantly, without the headache of setting up a local company.

This guide walks you through everything you need to know, from the core benefits to the nitty gritty of payroll and provincial laws.

What is an Employer of Record in Canada?

A canada employer of record (EOR) is a third party organization that legally employs workers on your company’s behalf. Think of it this way: you find the perfect candidate in Toronto or Vancouver, and you manage their day to day work, projects, and performance. The EOR, meanwhile, handles all the official employment responsibilities.

This includes:

• Running payroll and withholding the correct taxes
• Administering benefits
• Ensuring compliance with federal and provincial labor laws
• Managing the employment contract

This setup is perfect for businesses, especially foreign companies, that want to hire Canadian talent without establishing a legal entity in the country. With the rise of remote work, EOR services have become essential for global expansion. Platforms like Bolto act as your EOR partner, handling all the local HR and legal tasks so you can focus on building your team.

The Benefits of Using a Canada Employer of Record

Partnering with a canada employer of record offers some serious advantages for companies expanding northward.

• Speed to Market: Setting up a new legal entity can take months and involves a lot of red tape. An EOR already has a registered entity, allowing you to onboard new employees in a matter of days.
• Major Cost Savings: You can avoid the significant expenses associated with incorporating a business, like legal fees, registration costs, and opening local bank accounts.
• Compliance Peace of Mind: Canadian labor law is complex and varies by province. An EOR is an expert in these regulations, managing everything from compliant contracts to tax withholding and employment standards, which mitigates your legal risk. The EOR typically assumes liability if a compliance issue pops up.
• Reduced Administrative Burden: The EOR takes payroll, benefits administration, and other HR tasks off your plate. This frees up your internal teams to concentrate on core business growth instead of administrative paperwork.

Canadian EOR vs. Setting Up a Legal Entity

When hiring in Canada, your two main options are using an EOR or establishing your own local company. The difference is significant.

Setting up a Canadian subsidiary is a long process that can take weeks or even months. It requires you to incorporate a business, register with the Canada Revenue Agency (CRA), open local bank accounts, and stay on top of ongoing provincial and federal compliance rules. Any mistake can lead to fines or legal trouble.

A canada employer of record lets you bypass all of that. You don’t need to create your own entity because the EOR uses its existing, fully compliant Canadian business structure to employ your team members. This means you can onboard talent in days, not months. While you pay a service fee to the EOR, it’s often more cost effective than the ongoing costs of maintaining your own entity, especially when hiring just a few employees. Many companies use an EOR as a bridge to enter the market quickly, and only consider establishing their own entity once they scale significantly.

How to Hire and Onboard in Canada Through an EOR

The process of hiring through a canada employer of record is designed to be simple and efficient.

1. Provide Hire Details: First, you give your chosen EOR the details of your new hire, including their role, salary, and start date.
2. Compliant Contract: The EOR then drafts a locally compliant employment agreement that meets all federal and provincial standards, covering everything from compensation to termination clauses.
3. Onboarding: Once the contract is signed, the EOR officially onboards the employee onto its Canadian entity. This involves collecting necessary documents like tax forms and a Social Insurance Number (SIN) and setting them up in the payroll system. The EOR also registers them for government programs like the Canada Pension Plan (CPP) and Employment Insurance (EI).
4. Ongoing Management: From there, the EOR manages all ongoing HR administration. You manage the employee’s daily tasks, and the EOR handles payroll, taxes, and legal compliance in the background. If the employment relationship ends, the EOR also manages the offboarding process according to Canadian law.

Platforms like Bolto streamline this entire process, allowing you to get a fully compliant Canadian employee ready to work in just a couple of days. Ready to get started? Explore how Bolto makes global hiring simple.

How to Choose an EOR Provider in Canada

Not all EORs are created equal. When selecting a partner, consider these key factors:

• Expertise in Canadian Law: Ensure the provider has deep, proven knowledge of Canada’s complex federal and provincial employment laws. This is especially important for navigating rules in places like Quebec.
• Transparent Pricing: Surprises are no fun. Choose a provider with a clear, upfront pricing model. Some charge a flat monthly fee per employee, while others use a percentage of salary. Bolto, for instance, offers a flat rate of $599 per employee, with no hidden fees for onboarding or offboarding.
• Quality of Support: When you have a question about payroll or a local holiday, you need answers fast. Look for an EOR that provides responsive, dedicated support.
• Reputation and Security: Your EOR will handle sensitive employee data, so they need robust security protocols. Check their reputation by looking for testimonials or case studies from companies similar to yours. For example, See how Rebet built a full engineering team in under five weeks.

Running Payroll and Taxes in Canada via EOR

One of the biggest lifts an EOR takes on is payroll and tax compliance. This is a multi layered process in Canada. If you’re comparing tools, see our guide to the best global payroll services.

The EOR places your employee on its payroll system and handles all calculations. This includes withholding federal and provincial income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums. The EOR then remits these deductions to the Canada Revenue Agency on schedule.

Employers in Canada also have their own contributions to make.

• Canada Pension Plan (CPP): Employers must match the employee’s CPP contributions. As of 2025, this rate is 5.95% of earnings for both the employee and employer, up to an annual maximum.
• Employment Insurance (EI): The employer pays approximately 1.4 times the employee’s EI premium.

These mandatory employer costs typically add up to between 8% and 15% on top of an employee’s gross salary. The EOR calculates these statutory costs, bills them to you, and remits them to the government, ensuring you remain fully compliant.

What Does a Canada Employer of Record Cost?

The cost of using a canada employer of record has a few components. The main cost is the EOR’s service fee.

Based on 2025 market data, this fee typically ranges from $200 to over $800 USD per employee per month. Some providers charge a percentage of the employee’s salary, usually between 10% and 20%.

The total cost to you will be:

• The employee’s gross salary
• The mandatory employer taxes and contributions (like CPP and EI)
• The EOR’s monthly service fee

Transparent providers like Bolto simplify this with a clear, flat rate pricing model, so you can budget accurately without worrying about hidden setup or offboarding fees. See how Bolto’s transparent pricing works.

EOR vs PEO in Canada

It’s easy to confuse an EOR with a Professional Employer Organization (PEO), but they serve different needs.

An EOR acts as the legal employer for your staff, which is ideal for companies that do not have a legal entity in Canada. The EOR takes on all legal responsibility for employment.

A PEO, on the other hand, enters a co employment agreement with you. This model requires your company to already have a registered entity in Canada. The PEO helps with HR and payroll administration, but you and the PEO share employer responsibilities.

Simply put, if you don’t have a Canadian entity, you need a canada employer of record.

Key Canadian Employment Laws to Know

Navigating Canadian employment law is a core function of an EOR. Here are some of the key areas they manage.

Employment Contract Requirements

While written employment contracts are not always legally mandatory in Canada (outside of specific situations), they are a universal best practice. Unlike the US, Canada does not have “at will” employment. This means you cannot terminate an employee without providing notice or pay in lieu, except in cases of serious misconduct. A well drafted contract is critical for defining termination terms and limiting potential liability.

Employee Benefits and Compensation

Canadian compensation includes salary plus mandatory and optional benefits.

• Statutory Benefits: These are government programs funded by payroll contributions, including the Canada Pension Plan (retirement and disability benefits) and Employment Insurance (unemployment, parental, and sickness benefits).
• Supplementary Benefits: While Canada has public healthcare, many employers offer extended health plans to cover things like prescription drugs, dental, and vision care to attract top talent. RRSP matching programs are also a common, though optional, benefit.

Leave Requirements

Canada has generous and legally protected leave entitlements.

• Vacation: Most provinces mandate a minimum of two weeks of paid vacation, which increases with tenure. Saskatchewan is an exception, requiring three weeks from the first year.
• Public Holidays: Employees get paid days off for national and provincial holidays.
• Maternity and Parental Leave: Canada provides extensive job protected leave for new parents, allowing for a combined 12 to 18 months away from work, with income support provided through EI.
• Other Leaves: Employees are also entitled to job protected leaves for sickness, bereavement, and jury duty.

Termination and Severance

As mentioned, “at will” employment does not exist in Canada. When terminating an employee without just cause, you must provide either a notice period or termination pay. The minimum amount is set by provincial law. However, without a contract that limits this, an employee may be entitled to “common law reasonable notice,” which can be significantly more generous, sometimes up to one month of pay per year of service. Some provinces, like Ontario, also have separate severance pay requirements for long tenured employees at larger companies.

Misclassification Risk in Canada

Misclassifying an employee as an independent contractor is a serious compliance risk. If a worker is deemed to be an employee, the company could be liable for back taxes, unpaid benefits, and penalties. Using a canada employer of record eliminates this risk by establishing a formal, compliant employment relationship from day one.

Province Specific Labor Law Variations

A final critical point is that labor laws are not uniform across Canada. Each province has its own employment standards act. For example:

• Quebec has unique language laws requiring contracts to be offered in French.
• Saskatchewan requires three weeks of vacation for all employees.
• British Columbia mandates a minimum of five paid sick days per year.

A reliable canada employer of record will have the local expertise to navigate these provincial differences seamlessly.

Frequently Asked Questions

What is the main benefit of using a Canada employer of record?

The primary benefit is speed and compliance. It allows you to hire Canadian employees in days without the cost and complexity of setting up a legal entity, while ensuring full compliance with all federal and provincial labor laws.

Can I hire employees in Quebec with an EOR?

Yes. A qualified EOR with expertise in Canadian law will be able to manage employment in all provinces, including handling Quebec’s specific requirements like its language laws and the Quebec Pension Plan (QPP).

How quickly can I onboard a Canadian employee with an EOR?

With an established EOR, you can often onboard a new employee in just a few business days. Once you provide the hiring details, the EOR can generate a contract and begin the onboarding process immediately.

Is a Canada employer of record the same as a PEO?

No. An EOR is the legal employer for your staff and is for companies without a Canadian entity. A PEO is a co employer and requires you to have an existing entity in Canada.

What happens if I want to terminate an employee hired through an EOR?

The EOR will manage the entire offboarding process to ensure it complies with Canadian termination laws. This includes providing the correct notice period or pay in lieu of notice, calculating any final payments, and filing the required paperwork like a Record of Employment (ROE).

Ready to build your Canadian team without the red tape? Book a demo with Bolto today.