Canada is a massive nation, and is home to an abundance of both natural resources and a highly diverse talent pool that can help you grow your business.
Additionally, it’s close to the United States, and as a result, shares several cultural similarities with the world’s leading economy. In fact, Canada and the United States have one of the strongest trading relationships in the world.
Italian companies who want to expand their operations overseas can facilitate growth by recruiting top-ranked Canadian employees.
However, navigating Canada’s federal and provincial labor laws can be complicated, especially for international companies. Going through an employer of record can help you operate on local standards of compliance while expanding your global talent pool.
If you’re an international company looking to access the Canadian market, there are some important things you’ll need to consider before getting started. This guide will tell you everything you need to know as an Italian company hiring in Canada.
Reasons to Hire in Canada
Access to North American Markets
Italian companies who want to hire in Canada can benefit by gaining access to North American markets.
The country’s close proximity to other major economic centers such as the United States and Mexico make it an ideal option for businesses looking to expand and diversify.
Additionally, Canada is part of several international agreements, such as the USMCA. This makes reaching foreign markets more accessible and can expose your organization to new consumers worldwide.
Strong Economy
In 2023, the Canadian economy was ranked as the 8th largest in the world in terms of GDP. The Canadian economy has strengths in a range of different areas, including gas and oil, finance and real estate.
The Canadian business environment is also easy to navigate for foreign companies, as Canada is ranked as the 23rd easiest country in the world to do business in, which measures factors like how easy it is to start a business and paying taxes.
This easier regulatory processes, along with incentives from the Canadian government for foreign companies, creates a business-friendly environment that can help you build a presence in the market.
Skilled Workforce
As of 2022, Canada’s education system was ranked as the 4th best in the world, ahead of other notable countries such as France and Japan. Additionally, Canada has the most educated workforce in the world and several world-class schools.
Canada’s talent pool has strengths across various sectors, making it a good choice for a wide variety of companies who operate in dynamic and diverse fields This means you can attract top talent with innovative perspectives and unique skill sets to your team.
What to Know When Hiring in Canada
Canada’s large talent pool, strong economy, and close ties to other major global markets make it an attractive option for growing businesses.
However, there are a few major things you’ll need to keep in mind when recruiting Canadian workers if you’re looking to avoid noncompliance penalties. Partnering with an employer of record (EOR) can help you fulfill all the legal requirements of hiring a worker.
Properly Classify Your Employees
Italian companies hiring employees in Canada will need to ensure that all employees are correctly classified. Employee misclassification can result in various different penalties such as back-pay for unpaid income tax and social security contributions.
Canadian employees are also covered by federal laws and have a range of additional protections. This is particularly prevalent with the increasing popularity of remote work. An employee is an individual who performs work for your company in exchange for wages, generally this occurs on a permanent basis. Employees work under the direction and control of the employer, and the terms of employment are usually outlined in a contract.
Employees are entitled to certain statutory benefits like paid time off and worker’s compensation. It is the responsibility of the employer to handle all tax deductions and social security contributions.
ompanies can also opt to hire independent contractors. These working arrangements are more flexible and are typically made to complete a project for a specific time period.
Contractors do not count as actual employees, and it is the responsibility of the contractor to handle all tax and social security requirements. Independent contractors can also set their own hours of work and have more autonomy.
Federal and Provincial Labour Laws
When hiring Canadian workers, it’s also important to know that employees are covered by both federal and provincial labor laws. Jurisdictions can have varying regulations for the minimum wage, taxation, termination, notice, and several other terms of employment. However, all permanent employees are entitled to certain statutory benefits. Some sectors also have collective bargaining employment agreements that might impact the terms of employment.
Costs of Hiring Employees in Canada
When hiring employees in Canada, compliance is key. There are several costs you’ll need to keep in mind. Here’s a rough idea of how much you can expect to spend when hiring Canadian workers.
Minimum Wage
Canada has a statutory minimum wage that must be met by employers. As of April 1, 2023, the federal minimum wage in Canada is $16.65 per hour. This applies to federally regulated private sectors like banks, postal and courier services, and transportation, and does not strcitly apply to businesses outside of this regulatory body
Each province also has a minimum hourly wage that must be adhered to. It can be as low as $13 in Saskatchewan and as high as $16.75 in British Columbia. However, the cost of skilled Canadian workers will likely be higher and dependent on their level of experience and expertise.
Overtime
A typical workday in Canada lasts for 8 hours, and a workweek lasts for 40 hours. If an employee in an eligible position works more than 40 hours in a single week, they are entitled to overtime pay.
Certain senior or managerial positions are exempt from overtime pay requirements depending on the province. Workers who work more than 40 hours in a week are entitled to:
- At least 1.5x their regular hourly wage, or
- Time off with pay that’s equal to 1.5 hours of time off for every hour worked
Payroll and Taxes
Employers are responsible for handling the payroll deductions and social security requirements for their Canadian workers. In Canada, employees get paid twice monthly on the 15th and end of the month.
You will need to pay federal taxes and provincial taxes for employees. The income tax brackets in 2023 are:
- 15%: for incomes up to $50,197
- 20.5%: for incomes between $50,197 and $100,392
- 26%: for incomes between $100,392 and $155,625
- 29%: for incomes between $155,625 and $221,708
- 33%: for incomes above $221,708
Employers are responsible for handling provincial or territorial tax requirements. You will also be required to cover certain employer costs and taxes for every employee, including:
- 2.28% for Employment Insurance
- 5.95% for the Canada Pension Plan
If you’re hiring Canadian workers in Quebec, you’ll have to pay:
- 1.27% for Employment Insurance
- 6.4% for the Canada Pension Plan
- 0.692% for the Quebec Parental Insurance Plan
- 1.25% to 4.26% for the Health Services Fund
- 0.06% for Labour Standards
In contrast with Italy, companies in Canada have no obligation to provide a 13th or 14th month salary bonus. Instead, bonuses are at the discretion of the employer and are typically based on performance.
Vacation and Other Time Off
Permanent Canadian employees and workers are legally entitled to various forms of time off throughout the year and workers can take up to 2 weeks of paid vacation annually after completing 1 year of employment with the same employer.
Additionally, workers can take up to 3 weeks of vacation annually after 5 consecutive years and 4 weeks after 10 consecutive years with the same company.
Vacation pay is based on a percentage of the employee’s gross wages:
- 2 weeks: 4% of the worker’s wages
- 3 weeks: 6% of wages
- 4 weeks: 8% of wages
Canadian workers who are pregnant, have recently given birth, or adopted a child are entitled to up to 15 weeks’ of maternity leave.
New parents are entitled to up to 40 weeks of parental leave, which can be extended up to 69 weeks split between both parents at a reduced payment. Workers can also take up to 17 weeks of sick leave.
The 13 Statutory Public Holidays in Canada
Canada has 13 statutory public holidays. Each province may have additional public holidays that must be considered.
- January 1 (New Year’s Day)
- Good Friday
- Easter Monday
- Last Monday of May (Victoria Day)
- Saint-Jean Baptiste Day
- July 1 (Canada Day)
- Civic Holiday (early August)
- First Monday of September (Labour Day)
- September 30 (National Day for Truth and Reconciliation)
- Second Monday of October (Thanksgiving Day)
- November 11 (Remembrance Day)
- December 25 (Christmas Day)
- December 26 (Boxing Day)
Employees with an Indigenous background are entitled to up to 5 days of unpaid leave per year for cultural reasons such as participating in rituals or events, hunting, and fishing.
Workers can also take up to 3 days for bereavement if needed.
Termination and Severance Pay
Canada doesn’t have at-will termination, meaning companies have to provide employees with a notice period before ending the employment agreement.
To fire a Canadian worker, you also need a justifiable reason to do so, such as:
- Misconduct (theft, insubordination, etc.)
- Harassment
- Poor performance
- Mutual agreement
Failure to follow the rules and regulations could result in noncompliance. The required notice period is 2 weeks unless stated otherwise in the employment agreement, or an employer can provide payment instead of notice.
When hiring in Canada, you should also know that the probationary period is typically 3 months. Either an employer or an employee can end the working arrangement during this time without facing penalties, though it can vary between provinces.
Workers in Canada who have completed at least 12 months of consecutive employment with a company are entitled to severance pay. Termination pay is required when an employee is let go without cause.
Canadian employees are entitled to 2 days’ regular wages for every year worked for the employer, and the minimum benefit is 5 days’ wages.
Benefits and Employment Insurance
Permanent Canadian workers are entitled to certain benefits, including:
- Paid time off
- Worker’s compensation insurance
- Survivor insurance
- Employment insurance
- Pension contributions
Many companies also opt to provide supplementary benefits packages that cover additional costs such as dental, vision, and medications. This can make it easier for you to recruit and retain skilled Canadian workers.
How to Hire an Employee in Canada as an Italian Company
Now that you have a better understanding of how much it costs to hire a Canadian worker, you now begin research into the hiring process.
There are several important factors you’ll need to ensure are met to remain compliant with Canada’s federal and provincial labor laws. An employer of record (EOR) such as Borderless can make this entire process much more efficient.
Employment Agreements
Employment contracts are necessary to begin a working relationship and can be either verbal or in writing.
However, both the employer and employee can benefit from having certain terms, such as compensation, clearly defined in writing to avoid confusion.
An employment contract should clearly state:
- The position and job responsibilities
- Compensation and payment schedule
- Working hours
- Paid time off and other benefits
- Termination clauses
- Probationary period
- Duration of contract if applicable
There are a few different kinds of contracts you can use to hire skilled Canadian workers:
Full-time contract
A full-time or indefinite employment contract is the most common form of employment relationship. Employees are hired on a permanent basis to perform a task in exchange for compensation. Permanent workers are entitled to benefits such as paid time off and protection against unjust dismissal.
Fixed-term contract
A fixed-term contract is meant for temporary working arrangements and has a specified end date in the contract. The Canadian worker is not entitled to severance after this period, but the employee is entitled to remuneration equal to the remaining value of the contract if let go before.
Independent contractor agreement
This is meant to hire a worker for a specific project or time period. These workers are not considered employees and must handle their own taxes and social security contributions.
Set Up a Local Entity
One of the ways an Italian company can legally hire in Canada is by setting up their own legal entity. When you do this, you set up your own licensed business in the country, and you are responsible for handling all aspects of the hiring process yourself.
It’s also your responsibility to understand local employment policy and regulations. By failing to comply with local labor laws, you can face penalties, fines, and reputational damage.
To successfully set up your business, you’ll need to take numerous steps, including:
- Registering with the Canadian Revenue Agency (CRA)
- Opening a local bank account
- Consulting with legal experts
- Setting up your own payroll system
This option can be time-consuming and expensive, which might make it less attractive for companies who don’t want to hire a large staff in a specific country. You’ll also need to choose the type of business your company will register as.
What is the Canada Revenue Agency (CRA)?
The CRA is responsible for administering tax laws for the Government of Canada, as well as most provinces and territories.
The CRA's mandate is to:
- Administer tax, benefits and related programs
- Ensure compliance on behalf of the governments throughout Canada
- Contribute to the overall economic and social well-being of Canadians
The CRA administers:
- Tax laws for the Government of Canada, including most provinces and territories
- Social and economic benefit and incentive programs, which are delivered through the Canadian tax system
For more information about the CRA, visit their website.
Use an EOR
On the other hand, Italian companies who want to hire Canadian employees and contractors can engage a quality employer of record like Borderless.
An EOR acts as a legal entity in the country you wish to hire from, allowing you to legally recruit workers from around the world.
They can help to ensure that you:
- Adhere to legal obligations
- Are compliant with local labor laws
- Pay employees correctly
- Hire a new employee correctly
- Comply with payroll taxes
Hire Employees With An EOR
By partnering with EOR in Canada, you get access to a wide and diverse pool of talent without needing to worry about the logistics behind hiring international employees.
Employers of record offer many services and handle all aspects of the hiring process, including payroll, tax withholdings, social security contributions, termination, and more.
Your EOR provides extensive knowledge about complicated local labor laws from around the world. This means you can spend your time managing and developing your staff instead of researching complicated legal practices.
Partner with Borderless
Borderless is an employer of record that provides a comprehensive range of HR services. This can help streamline the onboarding process and help you quickly and efficiently grow your business.
With a comprehensive understanding of how to hire employees in over 170 countries worldwide, Borderless is an ideal partner when recruiting internationally.
Book a demo today to see what we can do for you!
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.
