A successful business largely depends on its employees. By creating working contracts that include the right terms and benefits there will be no misconception and the perfect work-life balance can be created. At Bradford Jacobs, this is our aim, and we support companies in over a hundred countries with creating compliant and balanced labor contracts. Our team in Canada keeps track of the Canadian laws and regulations daily to be duly aware of updates that can be implemented in working contracts. By using our PEO and EOR service we can provide compliant labor contracts for employees in Canada including local benefits. To support your plans, we made this guide including the basics of employment contracts in Canada. After reading this guide you will know everything about social security, notice periods, and the average working hours.
How do you hire Canada Employees?
International companies hiring employees as part of their expansion into Canada must comply with federal regulations, as well as those applying in Canada’s 10 provinces and three territories. Legally, employment contracts can be verbal or in writing, but written versions are advisable in dealing with complex terms covering such as pensions, compensation and benefits, or any confidentiality or intellectual property issues.
Contracts are generally full-time /open-ended, although fixed-term agreements are allowed, but can come with fewer guarantees such as terms of notice. Canadian employment laws protect all workers, including foreign employees whose terms of employment must comply with what is permitted in their visa or work permit. Federal, provincial, and territorial rules cover payroll, tax, social insurance, and benefits including minimum wages, working hours, overtime, and parental leave. Statutory minimums apply in most case, at federal and regional levels.
Other issues must be dealt with before companies move into the ‘contract phase.’ These involve:
- Confirming the requirement to make payroll deductions. Any remuneration relating to employment requires registering for payroll
- Obtaining a Business Number (BN) from the federal government or a Québec Enterprise Number for those incorporating in that province
- Opening a payroll program account to obtain the payroll number needed to remit deductions and file returns. Register for the program account as soon as hiring begins
Once ready to recruit, employers must be prepared for more procedures regarding their contracted employees, including the following:
- Obtaining the employee’s Social Insurance Number (SIN) within three days of their starting work, and completing Form TD1 (Personal Tax Credits Return) within seven days of starting and before paying the employee
- Calculating deductions and contributions for the Canadian Pension Plan (CPP) or Québec (QPP) equivalent, Employment Insurance (EI) and income tax
- Submitting payroll information returns, completing, and filing year-end summary of all employees’ pay and deductions and remitting deductions for CPP, QPP if applicable, EI and income tax. In most cases deductions are filed by the 15th of the month after employees are paid. Remuneration includes taxable benefits and allowances. Different rules may apply to Small and Medium Enterprises (SMEs).
Outsourcing the recruitment and hiring process through Bradford Jacobs’ Professional Employer Organization (PEO) network will give you the security that our in-depth knowledge can deal with all these potential problems. Trusting our Employer of Record (EOR) services to oversee every aspect of payroll compliance will guarantee a trouble-free move into your unfamiliar territory.
Employment Contracts in Canada
Formal, written contracts are not required under Canadian law but are recommended when the employer/employee relationship involves such as compensation, termination provisions and personal benefits. Different interpretations can apply between the provinces and territories. In Ontario, for example, the Employment Standards Act sets the minimum regulations in employer/employee relationships. Common law and case history also play a role in the interpretation of employment contracts. However, ‘employment policies’ play a key role and cover employees in some general areas. Employers are expected to provide their health and safety policy in a written form for their workforce. Some provinces and territories require similar policy documents to be posted in the workplace covering harassment, anti-discrimination, and bullying.
Specific contract types include:
Indefinite / Open-ended Employment Contracts: The typical type of contract for long-term stable employment, without an end date. Can be terminated without cause if the employee is given notice or severance pay in lieu. Termination with just cause does not require notice or termination pay.
Fixed-term Employment Contracts: These specify an end date to the contract. If the contract is terminated without cause before the end of the agreed term the employee is entitled to the balance of the outstanding agreed salary as severance. Where an employee fulfils a series of fixed-term contracts this may count as accruing ‘seniority’ with entitlement to higher severance payments.
Probation Period Employment: Any trial periods must be specified in a contract. Most jurisdictions permit a three-month trial period, during which employers may terminate without notice or pay in lieu as long as their reasons do not contravene laws on discrimination.
Freelance, Temporary and Part-time Employment: These may be covered by contracts but can be a problem area in relation to the ‘classification of workers’ from a tax perspective with the Canada Revenue Agency.
In drawing up employment contracts or agreements for employees in Canada, general points include:
- Legally, employment contracts can be verbal or in writing. Written contracts are advisable where complex terms apply to such as compensation, benefits and pensions and must comply with provincial and territorial laws
- Employees cannot contract out of their minimum entitlements under federal, provincial or territory laws, or under basic requirements of employment regulations
- Contracts can be fixed term or indefinite
- Any restrictions on confidentiality or intellectual property rights must be covered in the contract
- Foreign workers’ contracts must comply with representations made in the work permit application
What Employment Laws exist in Canada?
Canada’s Constitution Act allows for employment regulations to be largely covered by contracts and common law in nine of the 10 provinces, except for Québec where employment law is dictated by their Civil Code. Federal laws can override common law in specific sectors such as banking, air transport, railways, ports, and telecommunications. Regulations cover foreign workers as well as Canadian citizens.
Collective agreements in the private sector mostly occur at the company level or individual workplace level, covering more than three quarters of employees in the sector. However, there are still some industry-level bargaining that occurs in some private industries, particularly in construction or some parts of the arts and entertainment industries. Collective agreements are not valid for a specific period, but they most commonly are valid for a year. Industries where most employees are covered by company-level and workplace-level agreements include utilities, gas, electricity, water, telecommunications, finance, and manufacturing.
Laws and statutes that affect employment in the federal sectors include:
- The Canada Labor Code defines the rights and responsibilities of over 12,000 companies and close to one million employees in federally regulated sectors. The Code covers industrial relations, workplace health and safety, holidays, working hours, unjust dismissals, minimum wage, and severance payments
- The Canadian Human Rights Act prohibits discrimination in employment and services within federal jurisdiction
- The Employment Equity Act requires federally regulated organizations to provide equal opportunities to women, Aboriginal groups (Indian, Inuit or Métis), people with disabilities and members of minorities. These provisions also come under The Federal Contractors Program, which applies to employers incorporated in a particular province who have federal contracts in excess of CAD 1,000,000 (US$802,000).
The Legislated Equity Employment Program requires employers to report annually how many individuals from the four groups have been integrated into their workforce.