Are you a UK employer looking to hire in Canada? You're not the only one. Canadian skilled workers have long been desirable to international companies, especially to UK companies looking to expand their workforce.
Canada boasts a professional, diverse, and well-educated workforce. 64% of Canadian adults between the ages of 25 and 34 reported having a higher education degree in 2022, ranking Canada as one of the world’s most educated countries. Additionally, in CBRE’s Scoring Tech Talent 2023 report, five Canadian cities were named as top-ranking talent markets, two of which even landed a spot in the top ten.
Similar to that of the UK, Canada’s workforce is also incredibly racially diverse and multilingual, with over 450 different languages spoken in Canada.
However, if you're a UK company planning to hire in Canada, there are many things to consider. Although they may have similarities, The United Kingdom and Canada are two different countries with unique work practices, legal systems, and approaches to hiring. So, let’s get into the details of how a UK company can hire in Canada.
Can UK Employers Hire in Canada?
Yes, there are various ways that a UK employer can go about hiring in Canada. However, some important local laws and regulations must be observed to ensure your company remains compliant with Canadian employment laws.
This section outlines a few methods for UK companies to hire Canadian employees and a few considerations for each approach.
Three Ways UK Companies Can Hire in Canada
Engage Canadian Workers as Contractors
Onboarding Canadian workers as contractors might be the easiest option on paper. However, there are many regulations and conditions that UK companies must contend with to ensure that legal terms and conditions are met.
Independent contractors in Canada are self-employed individuals who provide their services to the company while choosing their own working hours and schedules. Some may even be sole proprietors.
As with the United Kingdom, Canadian contractors are treated separately from a company’s internal employees. Independently hired contractors are not provided a fixed salary or work equipment by their company of hire.
This allows companies greater flexibility and is more cost-effective when hiring for specific services or one-time projects. Independent contractors may also provide their services to a company for extended periods.
If you are a UK employer considering engaging independent contractors, you must be aware of all the legal risks associated with misclassifying contractors as full-time employees. These include paying government misclassification fines if employees are improperly categorized and tax violation fines if taxes are not correctly reported as determined by the Canada Revenue Agency (CRA).
Establish a Foreign Entity in Canada
Another option for UK employers to hire in Canada is to set up a local foreign entity. Establishing an entity in Canada allows you to create a branch or subsidiary to hire workers directly. Setting up a foreign entity gives UK companies complete control over hiring local workers, managing payroll, and establishing a local branch.
Depending on the nature of the business, your company may need to obtain permits or licenses from Canadian authorities to operate legally in the country.
Establishing a foreign entity is a good option if your company plans on hiring many workers or creating a long-term presence. It is, however, a costly and time-consuming process that requires knowledge of Canada’s legal, corporate, and payroll regulations.
Consulting with local legal professionals or institutions, such as an established Employer of Record (Canadian EOR), is highly recommended if this is the path your company is considering.
Partner With a Legal Employer (Canadian EOR)
The third and arguably easiest option is to engage a trusted Employer of Record (EOR) to hire, pay, and manage your Canadian hires. Because the Canadian EOR partner is already established as a legal entity within Canada, they will help you remain compliant with local labor laws and requirements.
A Canadian EOR will act as the legal employer for your employees in Canada. They will offer global payroll solutions for company employees and take care of tax contributions.
Ultimately, partnering with an Employer of Record is the easiest option. They will help manage everything from employee onboarding to payroll processes while protecting against legal complications so you can focus on growing your business.
Considerations When Hiring in Canada
Though the professional working environment in Canada does not differ greatly from that of the United Kingdom, employers should be aware of some of the key differences that shape Canada’s working culture.
Understanding the implications the Canada Labour Code has on employers in different provinces and federal jurisdictions is important when hiring in Canada. Being well-informed about standard employment practices such as the typical notice period in Canada, paid time off, employer costs, and federal taxes are also crucial to successful business operations.
Language Differences
Though certain aspects of British and Canadian business culture might overlap, chances are you will encounter differences in business etiquette, communication style, and language when onboarding Canadian employees.
As an employer, you must understand that Canada has two national languages: English and French.
French is mainly used in Quebec, while English is the first language used across the rest of Canada. If your company is looking to hire primarily in Quebec, you may be required to use French to communicate.
Canadian Minimum Wage
The Canadian federal minimum wage varies by province and fluctuates in accordance with economic conditions. Canada’s current federal minimum wage is $16.65. Individual employee wages should be negotiated based on the employee’s specific roles and responsibilities as outlined in their employment contract.
Local Employment Laws
Regulations for overtime pay in Canada can be complex, with most laws falling under provincial control. Some companies might follow both federal and provincial rules. Understanding regulations regarding overtime is crucial to fairly compensating employees and remaining compliant with local labor laws.
Employees are entitled to receive overtime pay when they work over eight hours per day or 40 hours per week. The Canada Labour Code (CLC) is the guideline for these regulations as it outlines proper conduct for employers in areas such as government, telecommunications, and more.
However, certain types of jobs are exempt from federal overtime pay requirements. Employees who occupy managerial roles are an example of this exemption.
Another worker's right that is unique to Canada and only given to certain Canadians falls under Aboriginal Rights. Canadian employees recognized as having Aboriginal or First Nations ancestry are entitled to five days of unpaid leave each year to participate in Aboriginal rituals, events, and traditional ceremonies. They are also allowed certain rights in the workplace.
Employment Contracts and Documentation
Before you hire in Canada, you should create a clear, detailed employment agreement that outlines the terms and conditions of the role for which you are hiring. Canada employment contracts should include responsibilities, expected salary, employee benefits, termination clauses, and any requirements specific to the Canadian province in which you are hiring.
You should also ensure that any potential employees have all the necessary documentation to legally work in Canada before hiring.
Termination Process and Notice Period in Canada
Canada does not support at-will termination outside the outlined probation period. Termination of an employee must be supported by just cause such as mutual agreement, misconduct, or contract expiration.
Rules of termination and the standard notice period in Canada vary by province. Employers are required to give a minimum of one week's written notice for employees of less than one year or severance pay in lieu of notice. The amount of notice required depends on the number of years the employee has worked for the company, as does termination pay.
In provinces such as Ontario and Quebec, employers are required to give a minimum of one month's notice. Employees with more than two years of work history at the same company in Quebec are given additional protections.
Canadian Employer Taxes
Employer taxes are a crucial component of Canada’s compensation structure. For companies that operate outside of Quebec, employers are required to remit 8.23% of an employee's salary to the CRA as payroll and income tax. Quebec’s tax contribution system operates differently, as various factors influence the province’s tax rates.
Employer Costs & Taxes Outside of Quebec
For provinces excluding Quebec, the tax percentage corresponds to specific employer tax categories. These are:
- Employment Insurance (EI): Employers contribute 2.28% to the Employment Insurance fund to ensure employees are supported during unemployment or other types of leave.
- Canada Pension Plan (CPP): Employers pay 5.95% to fund the Canada Pension Plan, which provides retirement, survivor, and disability benefits.
Employer Costs & Taxes in Quebec
Within Quebec, a unique set of employer taxes are followed to serve a specific purpose. These taxes are:
- Employment Insurance (EI): Similar to other provinces, 1.27% is contributed by the employer to support the Canadian Employment Insurance fund.
- Canada Pension Plan (CPP): Within Quebec, employers contribute 6.40% to the Canada Pension Plan.
- Quebec Parental Insurance Plan: 0.692% is contributed to sustain parental leave benefits within the province.
- Health Services Fund: 1.25% - 4.26% is contributed to the Health Services Fund to contribute to healthcare initiatives within Quebec.
- Labour Standards: A 0.06% contribution aids in enforcing labor standards and safeguarding worker rights and safety.
Understanding these employer contributions is essential for the successful operation of international companies within Canada.
These contributions play a significant role in supporting Canadian employees and maintaining a strong and healthy local workforce. Your company must consider these costs when creating a financial plan and drafting employee compensation strategies.
Businesses can ensure they remain compliant with local laws and regulations by partnering with an Employer of Record (Canadian EOR). They will handle all the legal considerations accompanying employee compensation and ensure you remain compliant with Canadian laws.
Personal Leave Entitlements and Paid Time Off
Personal leave entitlements, statutory leave, and paid time off in Canada vary depending on the location and employee’s personal circumstances.
Understanding and complying with these entitlements is important for the successful operation of UK companies. Let's take a look at some of the common entitlements of Canadian employees.
Public Holidays
Canada observes the following 13 public holidays each year. The exact number of public holidays varies per province, but standard holidays include:
- New Year: January 1
- Good Friday: April 7
- Easter Monday: April 10
- Victoria Day: May 22
- Saint-Jean-Baptiste Day: June 24
- Canada Day: July 1
- Civic Holiday: August 7 (excluding Quebec)
- Labour Day: September 4
- National Day for Truth and Reconciliation: September 30
- Thanksgiving Day: October 9
- Remembrance Day: November 11
- Christmas Day: December 25
- Boxing Day: December 26
Statutory Leave
Full-time employees in Canada are entitled to an average of ten days of paid vacation per year. This number of days can vary depending on the province of employment, and the length of the employee's stay with the company. The longer an employee has been with a company, usually – but not always – translates to entitlement to a longer statutory leave.
Personal Leave
Requests for days off due to personal reasons or commitments are usually paid as long as the number of requested days off is within reason. Most companies observe the rule of three paid days off per year after working for the same employer for three months. However, regulations vary from province to province.
Sick Leave
Up to 17 weeks of paid medical leave per year is allowed. Employees who fall ill can comfortably take time off to recover and still be compensated. Certain provinces in Canada offer a set number of paid sick days, while others leave it to the company’s discretion.
Maternity Leave
Fifteen weeks plus an additional 40 weeks of parental leave are given to expecting employees. This also applies to employees who are becoming a parent through adoption. Employees are entitled to time off to care for their new family members by law. The length of this leave and pay may vary by province and individual sector.
Bereavement Leave
Bereavement leave allows employees who experience the loss of a loved one time off to grieve. Most companies follow the rule of three paid days off per year after three months with the same employer. The duration can vary by province.
Each of the above-mentioned time off allowances can differ by province and territory in Canada. It's important to check the local regulations of the province or territory in which you plan to do business and stay updated on any changes.
Potential Risks for UK Companies Hiring in Canada
This section will briefly outline a few risks that UK companies might face when looking to hire in Canada.
Employee Misclassification
Misclassification is one of the most common issues among companies that hire internationally. Employers must ensure that all employees, whether engaged as a contractor or hired full-time as employees, are classified correctly.
To avoid fines and tax implications, consider working with a legal expert, such as a Global Employer of Record who can help you avoid misclassification through proper contracts, accurate reporting, and correct payroll deductions.
Incorrect Payroll Contributions and Deductions
UK companies operating in Canada must correctly calculate, deduct, and contribute the correct amount of government-required contributions each year. Incorrect tax reporting will likely result in legal complications and fines for your company.
Compliance with Provincial Regulations
Canadian employers are subject to both federal and provincial labor laws. You should be aware of the specific regulations that apply in the province where your employees will be based.
Maintaining Compliance in Canada
Expanding your workforce to Canada comes with many benefits, but it requires a thorough understanding of Canada’s professional and legal landscape. Ensuring that your company complies with every Canadian regulation can be tricky, but partnering with Borderless can help alleviate some of the confusion.
Why Choose Borderless?
As an established EOR, we can help you hire in 170+ countries, including Canada. Borderless is highly knowledgeable and experienced in managing the ins and outs of global employment. As your personal EOR, Borderless can assist your company in hiring employees, arranging employment agreements, and managing remote workers in Canada, ensuring compliance and proper support for your Canadian workforce.
See for yourself how Borderless can help simplify hiring abroad. Book a demo today!
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.
