Overview

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Canada is the second-largest country in the world and one of the most attractive destinations for international businesses seeking to expand. With ten provinces and three territories, each with its own labor laws and regulations, understanding the Canadian employment landscape is essential before hiring.

This guide provides an overview of what employers need to know when hiring in Canada in 2026, including tax obligations, statutory benefits, leave entitlements, employee rights, payroll requirements, and termination rules.

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Canada at a Glance

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Taxes

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Employers in Canada must deduct and remit three core statutory contributions from employee salaries to the Canada Revenue Agency (CRA): income tax, Employment Insurance (EI), and Canada Pension Plan (CPP) or Québec Pension Plan (QPP) for Québec-based employees.

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Canada Pension Plan (CPP) & Québec Pension Plan (QPP)

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CPP applies to employees outside Québec; QPP applies to those in Québec. Both employer and employee contribute at matching rates. In 2024, Canada introduced a second tier of CPP (CPP2/QPP2) to further boost retirement income.

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⚠ Note: Employer contributions equal employee contributions (matched). CPP2/QPP2 contributions apply only on earnings between the first and second ceiling.

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Employment Insurance (EI) & Québec Parental Insurance Plan (QPIP)

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Employers outside Québec pay EI at 1.4× the employee rate (2.28%). Québec employees and employers contribute to both a reduced EI rate and the QPIP separately. An EOR can calculate and remit all statutory deductions automatically on your behalf.

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Income Tax

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Employers must withhold and remit federal and provincial income tax from employee paycheques each pay period. The amount depends on the employee's province of employment and their completed TD1 Personal Tax Credits Return.

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2026 Basic Personal Amounts (Federal & Provincial)

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Lump Sum Tax Rates

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Benefits

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Canada has a publicly funded healthcare system (Medicare) that covers all residents. However, employers typically supplement this with additional benefits to attract and retain talent. Statutory benefits that must be provided by law include EI, CPP/QPP contributions, Workers' Compensation (WCB), and paid vacation.

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Workers' Compensation (WCB)

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All provinces and territories require employers to register with their Workers' Compensation Board and pay premiums based on assessable payroll. The maximum assessable earnings — the wage ceiling used to calculate premiums — vary significantly by jurisdiction.

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Supplementary (Voluntary) Benefits

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While not required by law, the following benefits are commonly offered by Canadian employers to remain competitive:

• Extended health and dental insurance

• Group life and disability insurance

• RRSP matching or group savings plans

• Employee Assistance Programs (EAPs)

• Flexible work arrangements and remote work policies

• Tuition reimbursement and professional development funding

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Leaves

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Canada provides a comprehensive set of legislated leave entitlements. Federally regulated workplaces follow the Canada Labor Code; all other employers follow their province or territory's Employment Standards Act. Leave durations and paid/unpaid status vary by jurisdiction.

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Federal Leave Entitlements (Canada Labor Code)

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Provincial Leave Highlights

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The table below summarizes key leave durations for maternity, parental, and compassionate care—the most commonly referenced leaves—across all provinces and territories. Employers should verify the full list of leave types applicable to their province, as each jurisdiction has additional leaves not shown here.

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⚠ Note: Québec has a separate parental insurance plan (QPIP) and does not use federal EI for parental/maternity benefits. Durations shown are for job-protected leave; income replacement is determined separately by EI or QPIP.

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Employee Rights and Protections

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Canada has robust protections for employees at both federal and provincial levels. Understanding these is critical to maintaining compliance and avoiding costly disputes.

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Minimum Wage (2026)

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Minimum wage rates are set provincially and vary significantly. Some provinces have scheduled increases mid-year in 2026. The rates below reflect current 2026 rates with upcoming changes noted.

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Overtime Pay

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All provinces require overtime pay (typically 1.5× the regular rate) once daily or weekly hour thresholds are exceeded. Thresholds vary:

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Human Rights and Anti-Discrimination

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Canadian federal and provincial human rights legislation prohibits discrimination in the workplace on grounds including race, national or ethnic origin, color, religion, age, sex, sexual orientation, gender identity, marital status, family status, genetic characteristics, disability, and conviction for a pardoned offence. Employers must ensure policies, contracts, and hiring practices comply with the applicable Human Rights Code.

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Employment Contracts

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Canada does not have at-will employment. Written employment contracts are required for all employee-employer relationships and must include terms covering salary, benefits, working hours, termination clauses, probationary periods, and confidentiality obligations. Contracts must comply with the minimum standards set by the applicable provincial Employment Standards Act—any clause below the statutory minimum is unenforceable.

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Payments

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Employers must pay employees accurately and on time, accounting for all applicable statutory deductions. Pay frequency requirements and vacation pay obligations vary by province.

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Vacation Pay Rates

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Vacation pay is calculated as a percentage of vacationable earnings. Rates increase with length of service and vary by province.

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Vacation Entitlements (Time Off)

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2026 Statutory Holidays

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Statutory holidays vary by province. All provinces observe New Year's Day, Good Friday, Canada Day, Labour Day, and Christmas Day. Below are selected highlights — employers should verify all applicable holidays for their province.

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Special Payments — CPP / EI / Tax Summary

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Different types of payments are subject to different combinations of CPP, EI, and income tax deductions. The table below covers the most common special payment types.

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⚠ Note: *Income tax on retiring allowances is not deducted on the portion transferred directly to the employee's RRSP (up to the eligible limit).

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End of Employment

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Canada does not have at-will employment. Employers must provide written notice of termination or pay in lieu of notice based on the employee's length of service. Notice requirements differ by province and, for group terminations, by the number of employees affected.

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Individual Notice of Termination

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Group Termination Notice Standards

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Additional group notice requirements apply when multiple employees are terminated at a single location within a specified period. Thresholds and required notice periods vary by province.

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Final Pay

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Terminated employees are generally entitled to receive their final pay—including all owed wages, vacation pay, and any other entitlements—on the next regular payday following termination, or within the specific timeframe set by the applicable provincial employment standards legislation.

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⚠ Note: An ROE (Record of Employment) must be submitted to Service Canada after the final pay is processed, as final earnings must appear on the ROE. An ROE cannot be issued before the final payment.

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Frequently Asked Questions

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Does Canada have at-will employment?

No. Employers must either provide adequate written notice or pay in lieu of notice when terminating an employee, based on length of service and provincial standards. Just cause termination (no notice required) is possible but must meet a high legal threshold.

Do employers have to contribute to pension plans?

Contributions to federal plans such as CPP and QPP are mandatory. Offering a private pension plan is at the employer's discretion, as are the plan's terms, subject to any commitments made in the employment contract.

How does CPP prorating work for employees who turn 18 or 70 during the year?

When an employee turns 18, CPP contributions are prorated based on the number of eligible months, starting the month after their 18th birthday. When an employee turns 70, contributions stop beginning the month after their 70th birthday.

What is CPP2 (the CPP Enhancement)?

CPP2 is a second tier of Canada Pension Plan contributions introduced in 2024. It applies to earnings between the first CPP ceiling ($74,600) and the second ceiling ($85,000), at a rate of 4% for both employer and employee. It is designed to provide higher retirement income for contributing Canadians.

What is the difference between vacationable earnings and vacation each pay?

Vacationable earnings are the types of compensation (e.g., regular salary, overtime, commissions) on which vacation pay is calculated. Vacation each pay means the vacation pay amount is calculated each pay period and paid out at the same time, rather than accrued and paid as a lump sum at the time of vacation. Employers should review their employment contracts and the applicable provincial standards for details.

How are WCB assessable earnings different from pensionable or insurable earnings?

Workers' Compensation assessable earnings are used solely to calculate WCB premium obligations. They differ from pensionable earnings (used for CPP/QPP contributions) and insurable earnings (used for EI contributions). Each set of rules includes and excludes different types of compensation.

Can an employer issue an ROE before the final payment is made?

No. Final earnings must be processed and appear on the Record of Employment before it can be submitted to Service Canada.

Which employment standards apply — federal or provincial?

An employer must follow the standards applicable to their industry, not their preference. Federally regulated workplaces (e.g., banks, airlines, interprovincial transport, telecommunications, federal Crown corporations) follow the Canada Labour Code. Most other businesses fall under provincial or territorial employment standards.

What is the difference between an EOR and a PEO?

An Employer of Record (EOR) becomes the legal employer for your Canadian workers, handling payroll, compliance, and statutory deductions without co-employing the workers with your business.  

A Professional Employer Organization (PEO) enters a co-employment arrangement with the client business, sharing certain employer responsibilities. For international employers without a Canadian entity, an EOR is typically the cleaner and more common solution.

What work permits are available for foreign workers in Canada?

The two primary categories are: (1) Open Work Permit — allows the holder to work for any employer in Canada without being tied to a specific job; and (2) Employer-Specific Work Permit — tied to a specific employer and role, with conditions set by the employer. An EOR can assist in navigating work permit requirements for foreign hires.

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The information in this guide is provided for general reference purposes only and does not constitute legal, tax, or financial advice. Statutory rates and rules are subject to change. Always verify with the relevant regulatory authority or a licensed professional before making employment decisions.

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