Employer of Record in Canada: 2026 Cost and Compliance Guide

Canada is the most common first international market for US companies, with a large English- and French-speaking talent pool and time zones that match North America. Employer costs are moderate: Canada Pension Plan (CPP) and Employment Insurance (EI) contributions, plus provincial health taxes and workers' compensation.

The complication is that employment law is mostly provincial. Vacation, public holidays, overtime, notice and severance depend on where the employee works, and Quebec runs its own pension plan (QPP), parental insurance and French-language rules.

An Employer of Record (EOR) can employ your hire under a provincial contract and run payroll, so you don't need to incorporate first. This guide uses Ontario for employment rules, with differences noted. Figures link to official sources. We do not test or use the providers listed; see our methodology.

An Employer of Record is a company with a Canadian entity that employs staff on behalf of foreign businesses. It issues the employment contract, runs payroll, withholds income tax, pays CPP, EI and provincial levies, registers with the provincial workers' compensation board, and handles termination under provincial employment standards.

You direct the employee's work; the EOR carries the formal employer obligations and invoices you monthly.

Canadian courts often award common-law reasonable notice on dismissal that is far longer than the statutory minimums. The employment contract, and how well its termination clause is drafted, largely decides what a termination costs.

Canadian employment cost has three layers: gross salary, employer contributions (CPP, EI, provincial health tax and workers' compensation) and the EOR fee.

CPP and EI stop at annual earnings ceilings, so the employer rate falls as salary rises. Provincial health taxes depend on the province where the employee works; choose it in the estimator.

Annual cost at example salaries

What these figures include and exclude

• Figures are for an employee outside Quebec. In Quebec the employer pays QPP instead of CPP, lower EI, Quebec Parental Insurance Plan premiums, the Health Services Fund, the CNESST labour standards levy and workforce training contributions, so get a Quebec-specific quote.
• CPP, CPP2 and EI stop once annual earnings reach their ceilings, so employer contributions are a smaller share of higher salaries.
• Employee CPP and EI contributions and income tax are deducted from the employee's pay and are not employer costs.
• Vacation pay (at least 4% of earnings in Ontario, 6% after five years) is paid as part of wages, not on top of salary.
• Termination can add significant cost: statutory notice and, in Ontario, severance pay for longer-serving employees, plus any common-law notice the contract doesn't exclude.

Estimate your own cost

Enter a salary to see the estimated annual cost, including mandatory employer contributions and an EOR fee. Change the fee to match the quotes you receive.

Most employees are covered by their province's employment standards; federally regulated sectors (such as banks, telecoms and interprovincial transport) follow the Canada Labour Code. Rules below are for Ontario unless stated.

Vacation (Ontario)

At least 2 weeks of vacation time after each 12-month vacation entitlement year, and 3 weeks once the employee has 5 or more years of employment. Vacation pay is at least 4% of gross wages (6% with 5 or more years) and is earned from the first hour worked, even if the employee leaves before completing a year. Employers may set an alternative entitlement year (such as the calendar year), with pro-rated vacation for the stub period before it.[6]

Public holidays (Ontario)

9 public holidays a year: New Year's Day, Family Day, Good Friday, Victoria Day, Canada Day, Labour Day, Thanksgiving Day, Christmas Day and Boxing Day. Qualifying employees, however recently hired, take the day off with public holiday pay (regular wages and vacation pay from the previous four work weeks, divided by 20), or can agree in writing to work it for premium pay or a substitute day off. Easter Monday, the August Civic Holiday and Remembrance Day are not required.[7]

Sick leave (Ontario)

Up to 3 days of unpaid, job-protected sick leave each calendar year for personal illness, injury or medical emergency, once the employee has worked for the employer for at least 2 consecutive weeks. Since 28 October 2024, employers cannot require a medical note for this leave.[8]

Hours of work (Ontario)

Up to 8 hours a day (or the established regular workday, if longer) and 48 hours a week. Either limit can be exceeded only by an electronic or written agreement, made after the employer gives the employee the Ministry's hours of work and overtime information sheet; the employee can cancel it with 2 weeks' written notice. Employees must get at least 11 consecutive hours off each day, 8 hours between shifts, and 24 consecutive hours off each week (or 48 in every two weeks). An agreement to work longer hours doesn't remove the obligation to pay overtime.[9]

Overtime (Ontario)

1.5× the regular rate for hours over 44 in a work week, including for employees on a fixed salary (the salary covers hours up to 44). By written or electronic agreement, overtime can be banked as 1.5 hours of paid time off per overtime hour, taken within 3 months (or 12 months if agreed); unused banked time is paid out when employment ends. Managers and supervisors whose work is managerial or supervisory are exempt, and some other job categories are exempt or have a higher threshold (Ontario's special rule tool lists them).[10]

Notice of termination (Ontario)

After 3 months' continuous employment, written notice or pay in lieu: 1 week (under 1 year), 2 weeks (1 to under 3 years), then 1 week per year of service up to 8 weeks (8 years or more). During the notice period the employer cannot cut pay or change terms, must keep up benefit plan contributions, and must pay at least regular wages for a regular work week. Special rules apply when 50 or more employees are terminated within four weeks. Common-law reasonable notice can be much longer unless the contract validly limits it.[11]

Severance pay (Ontario)

Owed when employment is severed and the employee has worked for the employer for 5 or more years (all time with the employer counts, continuous or not), if the employer has a global payroll of at least C$2.5 million or severed 50 or more employees in six months because all or part of the business permanently closed. The amount is regular wages for a regular work week times completed years of service plus completed months of an incomplete year ÷ 12, up to 26 weeks. Notice weeks, worked or paid in lieu, count toward service. It is on top of termination notice, and an employee who resigns with 2 weeks' written notice during the statutory notice period keeps the right to it.[12]

CPP and EI coverage

Employers deduct and match CPP and pay EI premiums for most employees; Quebec employees contribute to the QPP instead of the CPP.[1]Verify

These EOR providers publish information about employing in Canada. Prices are their own published starting rates in USD, from our pricing tracker. Quote-only providers are marked.

In Canada, ask which provinces the provider can employ in (especially Quebec), whether it uses its own Canadian entity, and what group health and dental benefits it offers.

For each provider's products, pricing model and fit signals, see the EOR provider directory.

The usual alternative is to incorporate a Canadian subsidiary, either federally with Corporations Canada or in a province, and register it in each other province where it operates. You also need a CRA business number and payroll account, and workers' compensation registration in each province.

Ongoing costs include accounting, annual corporate and tax filings, payroll and benefits administration. The federal corporate tax rate is 15% after the general tax reduction, plus a provincial rate: Ontario's higher rate is 11.5%, so general business income is taxed at 26.5% in Ontario. Canadian-controlled private corporations pay less on their first C$500,000 under the small business deduction, but a foreign-owned subsidiary usually doesn't qualify.

For a step-by-step version of this calculation, see EOR vs local entity: a break-even framework.

1. 1

   Define the role, salary and provinceDay 0

   Agree an annual salary and confirm the province the employee will work from; it decides payroll taxes and employment standards.

2. 2

   Check work authorisationDay 0–2

   Citizens and permanent residents can start straight away. Foreign nationals usually need a work permit, which may require an LMIA; ask the provider whether it supports this.

3. 3

   Compare itemised quotes1–3 days

   Request Canadian quotes covering the fee, deposit, CPP, EI, provincial health tax, workers' compensation, benefits and offboarding. Use the estimator to sanity-check totals.

4. 4

   Sign the service agreement

   Review liability for termination costs (including common-law notice), IP assignment and privacy terms.

5. 5

   Employment contractDays

   The EOR issues a provincial employment contract with a termination clause, and in Quebec a French-language contract.

6. 6

   Ongoing administrationOngoing

   Payroll every two weeks or twice a month, CPP, EI and tax remittances to the CRA, provincial levies, and annual T4 slips.

Rates and rules on this page are based on the following official sources. Numbers in brackets in the tables above link to these entries.

1. 1
   CPP contribution rates, maximums and exemptions

   Canada Revenue Agency

   2026: 5.95% rate, C$74,600 maximum pensionable earnings, C$3,500 basic exemption.

2. 2
   Second additional CPP contribution (CPP2) rates and maximums

   Canada Revenue Agency

   2026: 4% on earnings between C$74,600 and C$85,000, maximum C$416.

3. 3
   EI premium rates and maximums

   Canada Revenue Agency

   2026: C$68,900 maximum insurable earnings, 1.63% employee rate, employer maximum C$1,572.30; 2027 rates.

4. 4
   Employer Health Tax

   Government of Ontario

   Rates from 0.98% to 1.95% (payroll over C$400,000); C$1 million exemption, not available above C$5 million of payroll.

5. 5
   2026 premium rates

   Workplace Safety and Insurance Board (Ontario)

   2026 class rates per C$100 of insurable earnings, the C$1.23 average and the C$121,700 maximum insurable earnings.

6. 6
   Your guide to the Employment Standards Act: Vacation

   Government of Ontario

   Vacation time and vacation pay.

7. 7
   Your guide to the Employment Standards Act: Public holidays

   Government of Ontario

   Ontario's public holidays and holiday pay.

8. 8
   Your guide to the Employment Standards Act: Sick leave

   Government of Ontario

   Unpaid job-protected sick leave.

9. 9
   Your guide to the Employment Standards Act: Hours of work

   Government of Ontario

   Daily and weekly limits on hours of work.

10. 10
    Your guide to the Employment Standards Act: Overtime pay

    Government of Ontario

    Overtime threshold, rate and exemptions.

11. 11
    Your guide to the Employment Standards Act: Termination of employment

    Government of Ontario

    Statutory notice of termination or pay in lieu.

12. 12
    Your guide to the Employment Standards Act: Severance pay

    Government of Ontario

    Who qualifies for severance pay and how much.

13. 13
    Corporation tax rates

    Canada Revenue Agency

    Federal 15% net rate after the general tax reduction, and provincial lower and higher rates (Ontario 11.5%).

14. 14
    Corporations Canada

    Innovation, Science and Economic Development Canada

    Federal incorporation.

Employer costs in Canada are moderate: outside Quebec, CPP, EI, provincial health tax and workers' compensation typically add around 7–11% to salary, falling for higher earners because of the contribution ceilings. Through an EOR, plan for roughly 1.15–1.25× gross salary in total.

The Canada-specific issues are about where and how you terminate: the province decides most employment rules, Quebec is a separate system, and common-law reasonable notice can make a poorly drafted contract expensive.

If you're building a team in Canada, compare an EOR against your own corporation early with our EOR vs local entity guide. For the region, see Mexico and Brazil.