Is it time to hire employees?
Hiring employees in a different country can be a painstaking and resource-intensive process. However, with the rise of remote work, it can be beneficial for your company to tap into the diverse global talent pool to build a presence in different markets and expand your reach.
Canada is an important global market, and the country is home to many skilled Canadian workers who can help you expand your business and increase productivity. If you want to reach a key North American market, Canada is an attractive destination for many international companies.
The Canadian economy has strengths in several desirable industries and a relatively large skilled workforce. The country’s economic strengths and close proximity to other major global superpowers makes it a good choice for companies who want to hire abroad.
Hiring in Canada is a daunting task – even for the most experienced legal employer. There are many steps you’ll need to take to remain compliant and avoid financial or reputational damage. Here’s everything you need to know as a German employer for recruiting top-tier Canadian talent.
Reasons to Hire in Canada
Global Talent Pool
German companies hiring Canadian workers can benefit from the country's vast and diverse talent pool. Canada is home to over 8 million foreign workers from around the world and attracts around 500,000 immigrants per year. This provides your company in Germany with access to skilled professionals from various nations.
This also means that when your German company establishes a presence in Canada, you can expand your company into new markets. This helps your business gain vital business insights from diverse perspectives.
Canada also has a noticeable time zone difference from Germany of 6 hours. This can help your company increase productivity by extending your company’s working hours around the clock to complete various tasks.
Cost-Effective and Skilled Workforce
Canada has a large, well-educated, skilled workforce. The Canadian education system is world-renowned, ranking 4th in the world for education in 2022. Canadian schools offer a wide range of quality courses, allowing the workforce to hone in-demand talent. This gives your company many choices when hiring skilled Canadian workers to grow your business in Canada from Germany.
Workers from Canada also have strengths in various sectors, including oil, finance, manufacturing, technology, and mining.
On average, skilled Canadian workers also have a lower annual income than other highly developed economic markets, including the United States and Germany. Hiring in Canada gives you the chance to recruit top global talent while potentially saving on employment-related costs.
Important Considerations for Hiring in Canada as a German Company
Attracting top Canadian talent to your company has several benefits. It helps you reach new markets, but there are different rules and regulations you need to meet to remain compliant in Germany. Partnering with an employer of record can help you hire in Canada quickly and easily.
Canadian Employment Law
There are several federal and provincial policy requirements your company must meet to avoid potential fees or other punishments.
Federal employment laws guarantee all full-time Canadian employees receive certain statutory benefits, including paid time off, maternity and parental leave, sick leave, and contributions to social programs. Under the Canada Labour Code, employees also have the right to know about potential workplace hazards, participate, and refuse dangerous work.
Additionally, each provincial jurisdiction has its local Canadian labor laws, and it’s the responsibility of your company to obey these rules and regulations as well.
Provincial employment laws can include:
- Minimum wage requirements
- Overtime rates
- Hours of Work
- File taxes
Classification of Employee or Worker
Your company needs to ensure workers are classified properly when hiring in Canada. Employees are generally employed permanently and have no risk of loss.
An employee is an individual who works for your company and receives regular compensation for labor. Employers typically provide employees with all the required tools or equipment to perform the job.
Canadian skilled employees are entitled to various benefits and protections, such as:
- Canada Pension Plan and Employment Insurance: The Canada Pension Plan is a retirement savings program that’s paid on a monthly basis. The benefit replaces part of a Canadian employee’s income when they retire. The amount received is based on an employee’s average earnings throughout their working life.
- Vacation Pay: Employees are entitled to an annual vacation and general holidays.
- Notice and/or Severance Pay: The Canada Labour Code outlines the requirements for the termination of employees. For employees with at least three months of continuous employment, the employer is required to provide notice.
In Canada, an independent contractor is someone who receives payment for goods or services from a company but is not permanently employed. Workers under this arrangement are not entitled to benefits and are responsible for handling their taxes or contributions to social programs.
Employment Contracts in Canada
Employment contracts in Canada provide a detailed description of the job, the terms and conditions of employment, and the employer’s responsibilities, and help ensure adequate working arrangements. Employment contracts with skilled Canadian workers can be either verbal or written, though both parties might find it beneficial to have a written copy outlining essential areas such as compensation.
Written employment agreements should clearly state:
- The employee’s duties and requirements
- Salary, bonuses, or additional benefits
- Termination and notice
- Hours of Work
- Start date
There are also several different types of contracts you can use when hiring in Canada.
Indefinite Term Contracts
This contract is used for full-time permanent employees and doesn’t have a specified end date. Employees under this type of agreement are entitled to benefits and must receive adequate notice prior to termination.
Fixed-Term Contracts
Fixed-term contracts are meant for shorter-term working arrangements and have a specified end date for the employment relationship. Because the end date was agreed upon, these workers are not entitled to notice or severance pay after the agreement ends. However, if you terminate a fixed-term employee before the end date without just cause, the employee is entitled to damages equaling the remaining value.
Independent Contractor Agreements
These agreements allow you to hire skilled, self-employed Canadian workers for specific projects. The working relationship lasts as long as it takes to complete the contracted project.
Costs of Hiring in Canada
You’ll need to consider several financial obligations when hiring in Canada. In addition to your employee’s basic salary and wages, employers in Canada are responsible for many other costs of hiring.
Salary and Compensation
Employers in Canada must pay employees a federally-mandated minimum wage of CAD 16.65 per hour as of April 1, 2023. However, it’s essential to know that the minimum wage can vary by province.
The typical workday in Canada lasts eight hours, and the country follows a standard Monday-to-Friday 40-hour work week. Employees who work more than 40 hours in a single week are entitled to overtime pay or additional benefits, which can be:
- Pay equal to 1.5x the worker’s regular hourly wage
- Time off with pay equal to 1.5 hours of time off for every hour worked
Most employees can work a maximum of 48 overtime hours per week. Certain professions may have different rules for overtime, including drivers in the trucking industry, employees in the shipping industry, railway workers, and more.
Payroll and Tax
German companies who want to hire in Canada are also responsible for all applicable tax deductions and social security contributions. Companies follow a biweekly payroll cycle, out halfway through and at the end of each month.
Employees are taxed on a progressive scale, depending on their yearly income. As of 2023, federal Canadian income tax rates are:
- 15% for income up to $53,359
- 20.5% for income between $53,359 and $106,717
- 26% for income between $106717 and $165430
- 29% for income between $165430 and $235675
- 33% for income over $235675
Additionally, employers must ensure that they handle provincial or territorial income tax requirements for employees.
Your company is responsible for handling other payroll taxes. This includes:
- 2.28% as a contribution to Employment Insurance
- 5.95% as a contribution to the Canada Pension Plan
If you’re hiring in Quebec, you’ll also be liable for additional employer costs and taxes:
- 1.27% for Employment Insurance
- 6.4% for the Canada Pension Plan
- 0.692% for the Quebec Parental Insurance Plan
- 1.25%-4.26% for the Health Services Fund
- 0.06% for Labor Standards
Termination and Severance
Permanent skilled workers in Canada are not subject to at-will termination and cannot be dismissed without just cause. Employers who do not comply may be subject to legal repercussions and additional penalties. Just cause can include theft, insubordination, and failure to meet the position’s requirements.
Generally speaking, Canada has a 3-month probation period for employer-employee relationships. During this time, the worker or employer can terminate the agreement without penalty. Probationary periods can also vary by province.
In Canada, your company must provide a minimum of 2 weeks’ notice to employees before termination, or you can pay two weeks’ wages at the regular rate instead of providing written notice. Certain provinces, such as Ontario and Quebec, require at least one month’s notice.
Canadian employees who have worked consecutively for at least 12 months qualify for severance pay. Severance should be two days’ pay at the employee’s regular wage for each full year of employment and must be at least five days’ pay. Employees who are let go without cause may qualify for termination pay.
Benefits
Full-time Canadian workers are entitled to certain benefits. Mandatory benefits include:
- Paid time off
- Contributions to social security programs
- Minimum wage and overtime pay
- Additional leave entitlements
Vacation and Time Off
Federal legislation provides permanent workers in Canada with at least two weeks of paid time off after one year of employment. Additionally, employees qualify for three weeks of paid time off after five years of employment and four weeks after ten years. However, holiday leave entitlements can vary based on the jurisdiction. Employees who do not take vacation time, they may receive payment equal to the amount instead.
Skilled Canadian workers may take various other kinds of leave. Employees are entitled to 15 weeks of maternity leave, along with up to 63 weeks of unpaid parental leave or 71 weeks if the leave is shared between parents. Workers can also take up to 17 weeks of sick leave.
Canada has provincial holidays and statutory paid holidays for:
- New Year’s Day (January 1)
- Good Friday
- Victoria Day (last Monday of May)
- Canada Day (July 1)
- Labor Day (First Monday of September)
- Thanksgiving (First Monday of October)
- Remembrance Day (November 11)
- Christmas Day (December 25)
- Boxing Day (December 26)
Hiring Canadian Employees
Now that you have a better understanding of the federal and provincial requirements needed to stay compliant, you might be wondering how to hire top Canadian talent. International companies looking to build a presence in Canada can either set up their legal entity or partner with an employer of record to handle all the logistics of hiring international workers.
Set Up a Local Entity
International companies can set up a local entity in Canada to legally hire talent. Your company is responsible for handling all employment and HR-related requirements, including taxation, employee benefits, and payroll. This is a good option if your company is trying to build a physical presence in the country and hire a larger team.
There are several different types of business structures you can incorporate depending on your company, including corporations and partnerships.
To set up a local entity, your company must register with authorities such as the Canada Revenue Agency and submit the required documents. Your organization is also responsible for paying the associated fees to receive your certification.
Partner with an Employer of Record
Engaging a knowledgeable EOR in Canada can help you hire talent and comply with complicated labor laws. An employer of record acts as a legal employer for your skilled Canadian workforce. Your EOR handles complex employment matters such as taxation, benefits administration, payroll, employment contracts and more, allowing you to focus on managing your team and expanding your reach. This also allows you to stay up-to-date with changes in legislation.
Employers of record have in-depth knowledge of local labor laws and can help you attract top talent from around the world. Additionally, your EOR in Canada can help you quickly onboard your new hires, making the entire process of growing your team more seamless and efficient.
EORs are also more cost-effective and less time-consuming than setting up your local entity. They can help provide critical insights into the specific nuances of the Canadian market.
Hiring in Canada is an excellent way for German employers to complement the already highly-skilled Canadian workforce.
Consider Borderless: Manage, Pay & Hire Employees
Borderless is an EOR that can help you recruit and hire skilled Canadian workers quickly and effortlessly. We offer many benefits for your company and can handle all aspects of the hiring process, including onboarding, payroll, taxation, and employee benefit administration.
Borderless can also help connect you with top talent from around the globe and keep you up to date with always-changing employment laws and regulations.
If you’re looking to hire in Canada, book a demo with Borderless today to see how we can help you access top global talent without worrying about complicated local labor laws.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
