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Global Payroll Team
Written by Global Payroll Team
Last updated May 7, 2026
Expert Reviewed
Payroll in Canada
Tax in Canada
Immigration in Canada

Canada map

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Mercans offers complete payroll, PEO and HR services in Canada

Canada remains an attractive market for employers and investors thanks to its stable legal environment, skilled workforce and access to North American and global markets. Employers, trustees and payers generally need to register for a payroll account with the Canada Revenue Agency before paying salaries, wages, bonuses or taxable benefits, and must deduct and remit payroll withholdings and report them on the appropriate information returns.

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Doing Business in Canada

Starting a business in Canada generally involves choosing a legal structure, registering or incorporating, obtaining a business number and tax accounts, and securing any required provincial, territorial or municipal permits and licences. Employers should also assess whether their workforce is governed by federal or provincial or territorial employment standards, as labor rules can differ depending on the industry and location.

Entity Registration & Incorporation Requirements

Choose how your company operates from a range of entity types which suit your individual circumstance. Understand the different business structures available and what is best for your requirements. Register with the Canadian government before you start operating your business.

Banking

Banks are open from Monday to Friday 10 am to 4 pm.

Working Week

For federally regulated employees, standard hours of work are generally 8 hours per day and 40 hours per week, usually worked from Monday to Friday.

Labor Law

The Canada Labour Code sets minimum employment standards for federally regulated businesses and industries, including hours of work, wages, vacations, holidays, leaves and termination. Most other employers are governed by provincial or territorial employment standards legislation.

Main Industries

Energy, financial services, manufacturing, technology, mining, forestry, agriculture and aerospace

GDP Growth

1.5%

Dates & Numbers

yyyy/mm/dd

Official State Name

Canada

Population

41.47 million

Capital

Ottawa

Major Languages

English and French

Currency

Canadian Dollar

Internet Domain

.ca

International Dialing Code

+1

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Canada
Ottawa, CA
11:40 am, May 13, 2026
8°C
moderate rain
85 %
Wind Gust: 0 mph
Clouds: 100%
Sunrise: 5:34 am
Sunset: 8:23 pm

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Payroll

Employees working in federally regulated businesses and industries are protected by wage payment rules under the Canada Labour Code. Canada has a federal minimum wage for the federally regulated private sector, which is adjusted annually and cannot be lower than the applicable provincial or territorial minimum wage.

It is acceptable to provide employees with online pay slips.

Payslip

Payroll records should generally be kept for 6 years from the end of the last tax year to which they relate.

Reports

Employees are generally entitled to at least 2 weeks of annual vacation after 1 year of service, 3 weeks after 5 years and 4 weeks after 10 years.

Annual Leave

Federally regulated employees are entitled to up to 10 days of paid medical leave per year, subject to accrual rules.

Sick Leave

Federally regulated employees may take up to 17 weeks of maternity leave and up to 63 weeks of parental leave, or up to 71 weeks if shared.

Maternity & Paternity Leave

On provision of at least 2 weeks notice, increasing to 1 week per completed year of service after 3 years, up to a maximum of 8 weeks.

Employee Termination

No provision in the law.

13th Salary

$18.15 per hour

Minimum Wage

For federally regulated employees, overtime is generally paid after 8 hours in a day or 40 hours in a week at 1.5x the regular rate.

Overtime

Severance pay is generally the greater of 2 days wages per completed year of service or 5 days wages for employees with at least 12 months of continuous employment.

Severance Pay

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Tax and Social Security

Individuals resident in Canada are generally subject to Canadian income tax on worldwide income, while non-residents are taxed on certain Canadian-source income. Employers generally withhold income tax, Canada Pension Plan contributions and Employment Insurance premiums, with Quebec operating certain separate payroll arrangements.

Tax

Canada applies federal and provincial or territorial taxes. The general federal corporate income tax rate is 15%, while the top federal personal income tax rate is 33%. The federal GST rate is 5%, and in some provinces harmonized sales tax rates increase the combined indirect tax rate up to 15%.

15%

Corporate Income Tax

33%

Personal Income Tax

5%

Sales Tax

≤ 15%

VAT

Social Security

Canada’s payroll social security system is mainly funded through CPP or QPP and EI contributions. In 2026, outside Quebec, the employee CPP contribution rate is 5.95% on pensionable earnings below the first ceiling, plus CPP2 where applicable, and the employee EI premium rate is 1.63%. Employers generally match CPP and pay EI at 1.4 times the employee rate.

15.81%+

Social Security Rate

8.23%+

Social Security Rate for Employers

7.58%+

Social Security Rate for Employees

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Employment Law

Before paying an employee, employers generally need a payroll account, the employee’s SIN and the relevant payroll tax forms. Employers must calculate and remit income tax, CPP or QPP and EI, and comply with applicable federal, provincial or territorial employment standards.

Employment Agreement

Federally regulated employers must comply with the Canada Labour Code and related regulations, while most other employers are governed by provincial or territorial law. Written employment agreements are commonly used to set out wages, hours, duties, benefits and termination terms, subject to statutory minimum standards.

Working condition

The Code provides rights and protections for employees in federally regulated workplaces on issues such as hours of work, overtime, leaves, general holidays and flexible work arrangements. Standard hours are generally 8 per day and 40 per week, although certain industries have special rules.

Leaves

Federally regulated employees may be entitled to a wide range of statutory leaves, including maternity leave, parental leave, medical leave, bereavement leave, compassionate care leave and others. The Code establishes minimum requirements, but provincial or territorial rules and workplace policies may differ outside federal jurisdiction.

Employment termination

The Code outlines the procedures to follow when terminating the employment of individual employees or for a group termination involving 50 or more employees. Federally regulated employers must generally provide written notice or pay in lieu and, where applicable, statutory severance pay.

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2 – 8 weeks

Minimum notice period for terminating employment

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10 Days

Total number of public holidays

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40

Working hours per week

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10

Total number of days for Compassionate & Bereavement Leave

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Immigration

Businesses have a number of options when hiring in Canada, including permanent residence pathways and temporary work permit routes. Foreign nationals may hold employer-specific or open work permits, and permanent residents are generally authorized to work for any employer in Canada.

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Residency permits

A work permit is usually required in Canada unless a specific exemption applies. Work permits can be issued under a variety of programs, including LMIA-based routes, LMIA-exempt categories under international agreements or public policy, and open work permit categories.

Work Permit validity

1 – 2 years

Required Documents

a valid passport or travel document for the full period of the intended stay

a job offer or employment documents where required

a Labour Market Impact Assessment if required for the work permit category

proof of status documents such as a visitor visa or eTA where applicable

supporting employer letters or invitation documents where relevant

proof of funds and other supporting immigration documents as required by the route

Compliant, reliable, error-free and touchless payroll in Canada

Build the best team and hire top talent compliantly in Canada. Get in touch with Canada payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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    FAQs

    What is an Employer of Record (EOR) in Canada and how does it work for foreign businesses?

    An Employer of Record (EOR) in Canada acts as the legal employer for foreign companies. It manages employment contracts, payroll, taxes, social security, and compliance with local labor laws, allowing companies to hire employees quickly without establishing a local legal entity.

    Why should companies use an EOR instead of setting up a legal entity in Canada?

    Using an EOR avoids the time and costs of setting up a local company. It provides fast market entry, reduces administrative work, ensures legal and tax compliance, and is ideal for businesses testing the Canadian market or hiring a small team.

    How does payroll outsourcing in Canada ensure compliance with local tax and employment laws?

    Payroll outsourcing ensures accurate salary processing, tax filings, and social security contributions according to Canadian law. It reduces compliance risks, avoids penalties, and provides expertise on local labor and tax regulations.

    Can an Employer of Record in Canada hire employees and manage work permits for international companies?

    Yes, an EOR can legally hire employees for foreign companies and manage work permits. It handles HR operations, payroll, and compliance with local labor and immigration laws, enabling smooth operations without a local entity.

    What are the main benefits of using EOR and payroll services in Canada for global expansion?

    EOR and payroll services enable faster hiring, local compliance, reduced legal and financial risk, and access to market expertise. They allow companies to expand into Canada efficiently while focusing on business growth.

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