Effortless Hiring in Canada

Employment Laws

While Canadian law does not mandate written employment agreements, they are widely used as a best practice. These agreements typically include:

• Contract Duration: Fixed-term or indefinite.
• Remuneration and Payment Terms: Salary, payment schedule, and overtime policies.
• Probationary Period: Duration and applicable terms.
• Employee Duties: Job responsibilities and expectations.
• Termination Notice Period: Required notice for contract termination.
• Statutory Leaves: Entitlements such as maternity or sick leave.

It is important to note that employment laws in Canada vary by province, and while federal law applies to certain industries, most employment matters fall under provincial jurisdiction.

Onboarding Process

Employers in Canada typically:

• Prepare employment agreements.
• Register employees with provincial or federal tax and social benefit authorities.
• Ensure compliance with local labor laws and standards.

Types of Employment Contracts

1. Fixed-Term Contracts: Define a specific period of employment.
2. Indefinite-Term Contracts: No set end date; common for long-term employment.

Probationary Periods

• Probationary periods vary by province, typically ranging from 3 to 6 months.
• During probation, employers can dismiss employees without notice or payment in lieu of notice, but it is advisable to specify the terms in the employment contract.

Working Hours

The Canada Labour Code establishes standard working hours as:

• 8 hours per day
• 40 hours per week

Employers must comply with both federal and provincial regulations regarding working hours, which may vary.

Employee Income Tax in Canada

• The tax year in Canada aligns with the calendar year, and individual tax returns must be filed by April 30. For the self-employed, the deadline is June 15.
• Individuals are considered Canadian tax residents if they stay in the country for at least 183 days in a year.
• Residents: Taxed on their worldwide income.
• Non-Residents: Taxed solely on Canadian-sourced income.

2023 Federal Income Tax Brackets:

• Up to CAD 53,359: 15%
• CAD 53,359 to CAD 106,717: 20.5%
• CAD 106,717 to CAD 165,430: 26%
• CAD 165,430 to CAD 235,675: 29%
• Above CAD 235,675: 33% Tax brackets also vary by province and must be combined with federal rates.

Employer Contributions

Employers and employees contribute to programs like the Canada Pension Plan (CPP) and Employment Insurance (EI).

1. Canada Pension Plan (CPP):

• Employees contribute 5.95% of their earnings above a basic exemption of CAD 3,500, up to the Yearly Maximum Pensionable Earnings (YMPE), which is set annually (for example, it was approximately CAD 66,600 in recent years).
• Employers match employee contributions.
• Self-employed individuals pay both the employee and employer contributions, totaling approximately 11.9% of their earnings between the minimum and maximum limits.

2. Employment Insurance (EI):

• Employees contribute a percentage of their earnings to EI, which provides temporary financial assistance to unemployed workers.

Social Programs

• Health Insurance: Canada provides free universal healthcare (Canadian Medicare) funded and managed by provinces, covering most medical services for residents.
• Pension: The CPP offers a monthly benefit for retirees who meet eligibility requirements:
• Minimum age: 60 years.
• Contributions: At least one valid contribution to the CPP.
• Calculation factors: Average career earnings, contribution levels, and retirement age.

How Cadana Simplifies Tax Compliance in Canada

Cadana ensures seamless tax management in Canada by:

• Calculating and withholding income taxes, CPP, and EI contributions.
• Filing tax returns and remitting taxes on time.
• Issuing accurate tax forms to employees.

As your Employer of Record (EOR), Cadana simplifies compliance with Canadian tax laws, allowing you to focus on business growth while ensuring payroll accuracy and regulatory adherence.

Employee Income Tax in Canada

• The tax year in Canada aligns with the calendar year, and individual tax returns must be filed by April 30. For the self-employed, the deadline is June 15.
• Individuals are considered Canadian tax residents if they stay in the country for at least 183 days in a year.
• Residents: Taxed on their worldwide income.
• Non-Residents: Taxed solely on Canadian-sourced income.

2023 Federal Income Tax Brackets:

• Up to CAD 53,359: 15%
• CAD 53,359 to CAD 106,717: 20.5%
• CAD 106,717 to CAD 165,430: 26%
• CAD 165,430 to CAD 235,675: 29%
• Above CAD 235,675: 33% Tax brackets also vary by province and must be combined with federal rates.

Employer Contributions

Employers and employees contribute to programs like the Canada Pension Plan (CPP) and Employment Insurance (EI).

1. Canada Pension Plan (CPP):

• Employees contribute 5.95% of their earnings above a basic exemption of CAD 3,500, up to the Yearly Maximum Pensionable Earnings (YMPE), which is set annually (for example, it was approximately CAD 66,600 in recent years).
• Employers match employee contributions.
• Self-employed individuals pay both the employee and employer contributions, totaling approximately 11.9% of their earnings between the minimum and maximum limits.

2. Employment Insurance (EI):

• Employees contribute a percentage of their earnings to EI, which provides temporary financial assistance to unemployed workers.

Social Programs

• Health Insurance: Canada provides free universal healthcare (Canadian Medicare) funded and managed by provinces, covering most medical services for residents.
• Pension: The CPP offers a monthly benefit for retirees who meet eligibility requirements:
• Minimum age: 60 years.
• Contributions: At least one valid contribution to the CPP.
• Calculation factors: Average career earnings, contribution levels, and retirement age.

How Cadana Simplifies Tax Compliance in Canada

Cadana ensures seamless tax management in Canada by:

• Calculating and withholding income taxes, CPP, and EI contributions.
• Filing tax returns and remitting taxes on time.
• Issuing accurate tax forms to employees.

As your Employer of Record (EOR), Cadana simplifies compliance with Canadian tax laws, allowing you to focus on business growth while ensuring payroll accuracy and regulatory adherence.

Types of Leave in Canada

1. Annual Leave

Employees in Canada are entitled to annual leave based on their tenure:

• 2 weeks: After 1 year of continuous service.
• 3 weeks: After 5 consecutive years of service.
• 4 weeks: After 10 consecutive years of service.

Additionally, vacation pay is typically calculated as a percentage of earnings (4% for 2 weeks, 6% for 3 weeks, and 8% for 4 weeks) and varies by province.

2. Parental Leave

Eligible parents in Canada can receive Employment Insurance maternity and parental benefits:

a. Maternity Benefits:

• Up to 15 weeks of leave.
• 55% of earnings, up to CAD 650 per week.

b. Parental Benefits (choose between standard or extended options):

• Standard Benefits:
• Up to 40 weeks of leave, shared between parents (maximum 35 weeks per parent).
• 55% of earnings, up to CAD 650 per week.
• Must be used within 52 weeks of childbirth or adoption.
• Extended Benefits:
• Up to 69 weeks of leave, shared between parents (maximum 61 weeks per parent).
• 33% of earnings, up to CAD 390 per week.
• Must be used within 78 weeks of childbirth or adoption.

3. Sick Leave

Employees can receive up to 15 weeks of Employment Insurance sickness benefits:

• 55% of earnings, up to CAD 650 per week.
• A medical certificate is required to prove illness, injury, or medical condition.

In addition, many provinces have specific regulations regarding paid sick leave entitlements, which can vary significantly.

4. Public Holidays

Canada observes several federal statutory holidays that are separate from annual leave entitlements. Federal holidays include:

• New Year’s Day (January 1)
• Good Friday (March/April, varies annually)
• Canada Day (July 1)
• Labor Day (First Monday in September)
• National Day for Truth and Reconciliation (September 30)
• Christmas Day (December 25)

Federal Benefits

Federal employee benefits in Canada are managed by Employment and Social Development Canada (ESDC), which oversees key social programs. These include:

• Health Benefits: Basic healthcare and medical procedures funded through Canadian Medicare, which provides free universal healthcare to all residents.
• Pensions: Contributions to the Canadian Pension Plan (CPP) for retirement and survivor benefits. Employees contribute 5.95% of their earnings, with employers matching this contribution, up to an annual cap.
• Disability Insurance: Coverage for short-term and long-term disability through Employment Insurance (EI), which provides income support for those unable to work due to illness or injury.
• Paid Leave Entitlements: Support for statutory leave, such as maternity, parental, and sick leave, funded through EI.

Both employers and employees contribute to these benefits, ensuring robust support for Canadian residents.

Supplemental Benefits

In addition to federal benefits, many employers offer supplemental benefits to enhance compensation packages and attract top talent. Examples include:

• Health Insurance: Extended coverage beyond Medicare for specialized treatments, dental, and vision care.
• Retirement Contributions: Enhanced pension benefits with employer-matched contributions through Group Registered Retirement Savings Plans (GRRSPs), which are tax-deductible.
• Extended Leave: Paid time off beyond statutory requirements, such as:
• Bonus vacation days
• Additional sick leave
• Personal leave
• Flexible leave policies

Process

• Termination laws in Canada depend on the province or territory, as employment standards vary across jurisdictions. Generally:
• Employers must provide written notice of termination unless the employee is terminated for just cause.
• Employees terminated without cause are entitled to statutory notice or payment in lieu of notice.
• Employers must comply with termination provisions outlined in the employment contract and statutory requirements.

Notice Period

• The notice period is determined by the employee’s length of service:
• 0–3 months: No notice required.
• 3 months–1 year: 1 week of notice.
• 1–3 years: 2 weeks of notice.
• More than 3 years: 1 additional week of notice for each year of service, up to a maximum of 8 weeks.
• Employers may provide pay in lieu of notice, which includes all wages and benefits the employee would have received during the notice period.

Severance Pay

• Severance pay is required for employees who:
• Have worked for the employer for 5 years or more.
• Are dismissed without cause in cases where the employer’s annual payroll exceeds CAD 2.5 million or if 50 or more employees are dismissed within a 6-month period.
• Severance pay is calculated as 1 week’s pay per year of service, up to a maximum of 26 weeks.