Expanding into a country or hiring a workforce abroad can lead your business to great profits, but unfamiliar laws and regulations can counteract your company’s goals and plans. Canada is in the world’s leading top 10 economies and highly popular with individuals looking to work abroad. It is among the friendliest and most tolerant countries and even though unemployment is low, the job market is competitive. At Bradford Jacobs, we want to eliminate this complicated part. By using our PEO service we can arrange all needed visas and permits including the entire application process without your physical presence. Few companies have these resources, or the time to ensure that new employees have the right immigration documentation. We are experts in hiring staff, applying for work visas in Canada and ensuring employees meet Canadian work visa requirements with the correct documentation. Our team is trained to research the latest information on Canada visas and work permits and therefore, we created a guide to introduce you to the rules and requirements. By reading this guide, you will get familiar with all the requirements so you or your employees can start working in Canada in no time.
What types of Work Visas and Permits for Canada are there?
The requirements to enter, work or live in Canada depend on where people are from, how long they want to stay and purpose of travel. Most will need to have their fingerprints taken, so this will need to be checked. Those travelling to work, will typically require an offer of employment and the paperwork will need to be completed outside Canada. To find out about your eligibility to apply to work and live in Canada, you can use this tool. There is an extensive list of visa-exempt countries, those needing an Electronic Travel Authorization and those who must apply for an entry visa (Visitor Visa or Temporary Residence Visa).
To be clear:
A Visa gives people the right to enter and to travel around Canada
A Work Permit is permission to work or study in Canada, but it is the visas that allow entry and re-entry
A Residence Visa gives temporary residence to live in Canada but not to work unless they have a work permit
Each has requirements and paperwork to complete.
Some nationalities do not require a work permit. Check here to find out more about the exempt countries.
There are two types of Work Permit in Canada which are issued by the immigration office. Eligibility needs to be checked as this depends on a number of factors. Open Work Permit: These are given under certain circumstances and allows foreigners to work for any eligible employer. There are three distinct types which permit changing employer, location, or type of work. A ‘Labor Market Impact Assessment’ (LMIA) or a job offer are not needed.
Employer-Specific Work Permit: This is for a specific employer, a specified duration and for a particular location. This is the most common permit for potential employees. Most workers initially take the temporary work permit route. After a year or so, employees may be eligible for one of the programs under the Express Entry Scheme which can lead to permanent employment / work permit: these are, Federal Skilled Employees, Federal Skilled Tradesmen, Canadian Experience Class programs.
For those between the ages of 18 to 35, there is the International Experience Canada (IEC) This gives the younger generation the opportunity to work and travel in the country without a job offer. Two main routes through which foreigners can apply for a work permit are: The Temporary Foreign Worker Program (TFWP) gives opportunities for foreign workers over a brief period. Employers need a ‘Labor Market Impact Assessment’ (LMIA) from the Employment and Social Development Canada (ESDC).This allows them to employ foreigners for temporary labor or skill shortages after the position has been advertised to Canadians and permanent residents. TFWP allows employment for six months, which can be extended. There are four categories of TFWP – the main ones for companies are:
The Temporary Foreign Worker Program (TFWP): gives opportunities for foreign workers over a brief period. Employers need a ‘Labor Market Impact Assessment’ (LMIA) from the Employment and Social Development Canada (ESDC).
This allows them to employ foreigners for temporary labor or skill shortages after the position has been advertised to Canadians and permanent residents. TFWP allows employment for six months, which can be extended. There are four categories of TFWP – the main ones for companies are:
Highly skilled or professional employees – Global Talent Stream, which is part of the Global Skills Strategy to enable employers to fast track recruiting top talent from outside Canada.
Low skilled workers.
The International Mobility Program (IMP): This allows companies to employ temporary workers without an LMIA when it is beneficial for Canada and Canadians under a reciprocal agreement.
There are many distinct category of work permits, and exemptions cover workers, highly skilled professionals, intra-company transferees, traders, and investors. A Business Visa (Visitor Visa or Temporary Resident Visa) is also available for business professionals and delegates allowing visits for business purposes.
The ‘Start-up’ Visa Program, for instance, aims to recruit entrepreneurs and link them with Canadian private sector businesses to promote start-ups and grants permanent residence to those who qualify.
How to obtain a Canadian Work Permit / Visa?
First, the applicant must decide which work permit to apply for:
Employer-Specific permit: allows an employee to work in Canada under certain conditions which will be written on the document:
The employer’s name
The duration of the permit
Where the employee will be working (if necessary)
Open Work Permit: has no specific employer named other than the company, which needs to be eligible and follow all requirements. However, these permits are only granted under certain circumstances or situations. There are three diverse types which allow change of employer, location, or type of work. A ‘Labor Market Impact Assessment’ (LMIA) or a job offer are not needed. Typically, most applicants must apply from outside Canada at a local Embassy or Consulate, in their home country and have a job offer. There are particular requirements depending on where and when the application is made – for all applicants. These include:
Documentation proving they will leave the country when the work permit lapses
Have sufficient funds for their stay and return journey
No criminal record, requiring a clearance certificate from police
Medical examination documents
Not plan to work for an “ineligible” employer previously found to be non-compliant
Any other documents requested by the consulate officer on entry to Canada
Many employers also require a Labor Market Impact Assessment (LMIA) previous to hiring foreign nationals or Temporary Foreign Workers (TFW) and once received, a copy should be issued to the employee so they can apply for the work permit.
Some nationalities are visa exempt
Some workers can apply for an Electronic Travel Authorization (ETA)
Others will require a Temporary Residence Visa (TRV)
When applicants, who need an ETA or Temporary Residence Visa, apply for a Work Permit at their local Embassy or Consulate, they will not have to fill out a separate form or pay further costs. This will be issued along with documents e.g., Work Permit, required to enter Canada for employment.
How to apply for Visa / Work Permit for Canada
To find out about your eligibility to apply to work and live in Canada, you can use this tool which will also show suitable programs to apply for. Applications must meet different criteria depending on the respective immigration program. Questions focus on work experience, income, details of job offer, education, languages, age, nationality, and family members. This will take about 10 minutes. Since COVID, most applicants should apply online. Employer-specific work permit: The employer must have applied for a Labor Market Impact Assessment (LMIA) to prove that the company is allowed to hire foreign nationals on a temporary basis.
A completed IMM 1295 application form for applying outside of Canada
All fees applicable e.g., applying and processing the application form, for biometrics, etc.
Passport copy showing all details, validity, and photo
Two photographs with name and DOB on reverse OR fingerprints plus photo if requested
Proof of legal status of residency
Proof qualified for the job offered
Copy of the LMIA from employer with the LMIA number
Letter offering the job and a copy of employment contract
Any documentation that is required for the entry visa – electronic travel authorization (ETA) or the Temporary Residence Visa (TRV) also known as Visitor Visa
There may be other documents required depending on which Province the employee is to be found, whether with spouse, requiring a post-graduate work permit and if LMIA-exempt. This link also supplies more detailed information about these documents.
How much is a Canadian Work Visa?
Electronic Travel Authorization – 7 CAD, US$5.5
Visitor Visa (per person) – 100 CAD, US$80
Employer-specific Work Permit – 155 CAD, US$123
Open Work Permit – 155 CAD, US$123
Open Permit Holder Fee – 100 CAD, US$80
Start-Up Visa (with permanent residency): 2075 CAD, US$1575
International Experience Canada (participation fee): 156 CAD, US$124
Biometrics: 85 CAD, US$68
Labor Market Impact Assessment (LMIA): 1000 CAD, US$795 for employers per worker
Working Visa / Permit for Canada
Most foreigners wanting to live and work in Canada will require some documentation. Some countries have agreements which allow their citizens to travel and enter Canada for limit periods. Some occupations do not require a work permit, but the majority of those looking for employment will. Typically, most of those applying will have been offered a job which will require a work permit. They should apply for this from their country of residence at a local Embassy or Consulate at the same time as an entry visa (if needed). The permits are:
Employer-Specific permit: allows an employee to work in Canada under certain conditions which will be written on the document as well as the employer’s details, how long the permit will last and where the employee will be found. This permit will require a job offer and a ‘Labor Market Impact Assessment’ (LMIA) from the Employment and Social Development Canada (ESDC) applied for by the employer. This is the more usual permit applied for when hired by a company/employer.
Open Work Permit: has no specific employer named, but the company needs to be eligible and follow all requirements of the Open Work Permit. It will only be granted in certain situations. There are three distinct types which allow you to change employer, location, or type of work. A ‘Labor Market Impact Assessment’ (LMIA) or a job offer are not needed.
Two main routes through which foreigners can apply for a work permit are:
The International Mobility Program (IMP): allows companies to employ temporary workers without an LMIA when it is beneficial for Canada and Canadians under a reciprocal agreement.
The Temporary Foreign Worker Program (TFWP): supplies opportunities for foreign workers over a brief period. For this, employers will need a LMIA from the ESDC. This allows them to recruit foreigners to fill temporary labor or skill shortages after the position has been advertised to Canadians and permanent residents. TFWP allows employment for six months, which can be extended. There are four categories of TFWP – but the main ones for companies are:
Highly Skilled or professional employees – Global Talent Stream which is part of the Global Skills Strategy to enable employers to fast track when they recruit top talent from outside Canada
Low skilled workers
Alongside a Work Permit, most employees also need an entry visa – either an Electronic Travel Authorization (ETA) or Temporary Residence Visa (Visitor Visa). When applicants, who need one of the above, apply for a Work Permit at their local Embassy or Consulate, they will not have to fill out a separate form or pay further costs. The ETA or TRV will be issued along with the work permit to enter Canada for employment. Employers also have obligations and must meet specific requirements. Employers of temporary foreign workers should follow conditions under the Immigration and Refugee Protection Act (IRPA). Employers hiring through Temporary Foreign Worker Program (TFWP) must regularly review the situation and foreign employees’ working conditions, informing the Employment and Social Development of Canada (ESDC) of any changes. ESDC can inspect the employees’ circumstances at any time. Documents relevant to the LMIA and work-permits issued need to be kept for six years.
Global expansion is a great way to grow your business and Canada offers many appealing opportunities. However, the tax laws can be complex and require time-consuming research. By using our PEO service, we will take care of the complicated legwork so that you can focus on your business goals in Canada. Dealing with employment, tax, and payroll from overseas is always a tricky process and poses complications that demand expert guidance. This is especially so when setting up an international presence in Canada. Individual and corporate taxes apply at the federal level as well as being imposed by the 10 provinces and three territories, with the province of Québec usually operating independently.
We have made it our goal to keep track of the latest changes in the tax policies to always ensure complete compliance. To keep you informed and updated too, we created this guide which includes the basic facts regarding tax regulations in Canada.
Overview of Taxes in Canada
Individual Income Tax: 15% – 33%, applies to residents and non-residents.
Social Insurance Taxes: Employment Insurance (EI) – Employee contribution 1.58%, Employer contribution 2.212%; Canada Pension Plan (CPP) – Employee and Employer each contribute 5.25%
Corporate Income Tax (CIT): Federal rate – 15.0%, Provinces and Territories apply varying rates – 8.0% – 16%
Capital Gains Tax: Rate applied to capital gain – 50.0%
Indirect Taxes: Federal Goods and Services Tax (GST) and 5% Harmonized Sales Tax (HST).
Canada Individual Tax – Single, Married
Canadian residents are taxed on their worldwide income. Taxpayers pay income tax to the federal government and to the government of the province/territory where they live. In all provinces/territories, except Québec, the federal government collects the provincial/territorial tax and passes it to those authorities to fund various programs. The provinces and territories apply their own tax rates and bands. Canada’s income tax system is progressive, meaning low-income earners are taxed at a lower percentage than high earners. Income tax rates for 2021 were set at:
CAD 0 – CAD 49,020 (US$38,940): 15%
CAD 49,020 – CAD 98,040 (US$77,880): 20.5%
CAD 98,040 – CAD 151,978 (US$120,730): 26.5%
CAD 151,978 – CAD 216,511 (US$171,995): 29.0%
CAD 216,511 and above: 33.0%
Married couples file separate tax returns.
The above rates also apply to non-residents’ Canadian-sourced income, except where profits arise from dividends, royalties and rents which are taxed at a flat rate of 25%.
Canada Individual Tax Rules
Canadian citizens are taxed on their worldwide income wherever earned or paid
Non-residents are liable for taxes on their Canadian-earned employment income, business income in addition to gains from selling Canadian property. Non-residents are taxed at 25% on income from royalties, rents, or dividends
The tax year runs from January 1 until December 31
Self-assessment tax returns are due by April 30 of the following year, or by June 15 for filing self-employed income, by both residents and non-residents, but any due taxes must be paid by April 30 of the following year
Married couples file independent returns
Individuals living in Canada for 183 days or more are considered as tax residents. They may be liable for taxes for the entire year that includes the 183-day qualifying period
Liability for taxes as a resident is decided on an individual basis on criteria applied by the Canada Revenue Agency
Taxable payment includes salaries, wages, tips, bonuses, fees, profit sharing
The federal Goods and Services Tax (GST) and Harmonized Sales Tax (HST) apply to most goods and services at 5%. Rates vary between provinces, for example HST is 13% in Ontario and 15% in four others. Some provinces also apply a Provincial Sales Tax (PST). Exemptions include groceries and health services, among others.
Canada Employers’ Social Security and Statutory Costs
All Canadian employers must pay into the Employment Insurance (EI) fund, which supplies income for workers who lose their jobs, and into the Canada Pension Plan (CPP). Québec has its own pension plan, the QPP. Employer percentage EI contributions of the employees’ salaries are 2.212% to a maximum of CAD 1,245.36 (US$989) in 2021 and CAD 1,333.84 (US$1,058) in 2022. Employers also pay 5.25% into the CPP fund with the maximum pension contributions capped at CAD 55,900 (US$44,406).
Employee Social Insurance Taxes:
All Canadian employees pay into the Employment Insurance (EI) fund and the Canada Pension Plan (CPP). Employees contribute percentages of their salary into both funds – 1.58% into the EI and 5.25% into the CPP. EI contributions are to a maximum of CAD 889.54 (US$706) and to a maximum of CAD 55,900 (US$44,406) in the CPP. Québec runs its own pension plan. Other statutory employer costs include the National Minimum Wage. On December 29, 2021, Canada introduced a new Federal Minimum Wage affecting all private sector federally regulated employees of CAD 15 (US$11.92), regardless which province or territory they work in. This is the lowest hourly rate which can be paid, although if the province mandates for more than CAD 15, the higher rate applies. For those workers not covered as federally regulated private sector employees, the minimum wage will still be set according to which of the 10 provinces or three territories they work. For example, as of October 2021, rates included Alberta CAD 15 (US$11.92), Newfoundland and Labrador CAD 12.50 (US$9.93), Northwest Territories CAD 13.46 (US$10.69) and Nunavut CAD 16.00 (US$12.71).
Global expansion into Canada usually means that you need to set up an in-country entity. However, by partnering with us you create the possibility to bypass this process and utilize our Canadian entity. By using our PEO service, we take care of the complicated paperwork. Expanding into a new country is always an adventure, but we believe this adventure should be exciting instead of just frustrating and time-consuming. Therefore, we have been supporting companies in over a hundred countries with their expansion plans.
In this guide, we will share which documents you need to establish an entity in Canada, but also where you will need to register your business address and company’s name. We will also break down the advantages and disadvantages of setting up an entity in Canada.
How to set up a Canada Subsidiary
First, choose the company type, which most typically will be a limited liability corporation, although a branch office is another (and less popular) option. Careful consideration must go into the choice of subsidiary vehicle, as each attracts different registration procedures and taxation regulations. These are some of the issues that need considered:
Corporations formed under federal law must have 25% of their directors as Canadian residents. This also applies to corporations formed only at the provincial level in Ontario, Alberta, Manitoba, Saskatchewan, Newfoundland, and Labrador
In addition to being formed under federal laws of Canada, the subsidiary must be registered in each jurisdiction where it provides goods or services
If a company is registered only in a particular province or territory it is restricted to conducting business only in that jurisdiction
The company must file articles of association / incorporation as well as its corporate by-laws
Steps to set up a subsidiary include:
Decide on the type of subsidiary and register relevant documents with the Canadian Trade Register
Prepare incorporation documents, provide the Articles of Association, supply information on the parent company from the home country’s trade register
Once registered, the company must obtain a tax identification number and a Goods and Services Tax (GST) number, issued by the local offices of the Canada Revenue Agency (CRA)
Register for payroll with the CRA
Complete Form RC1 to obtain a Business Number (BN) and forward it to the relevant Tax Service Office or Tax Centre
What you need to set up a Canada Subsidiary
To set up a subsidiary corporation in Canada, federally or provincially, the company must have a unique company name and submit Articles of Incorporation or Association, which comprises of:
Registered office address (this cannot be a Post Office box)
Directors and/or incorporators
Share capital and any provisions regarding shares
The new subsidiary will then need to comply with various registration procedures via the Canada Revenue Agency (CRA), such as:
Obtaining a tax identification number and a Goods and Services Tax (GST) number, issued by the local offices of the CRA
Register for payroll with the CRA
Complete Form RC1 to obtain a Business Number (BN) and forward it to the relevant Tax Service Office (TSO) or Tax Centre (TC)
Benefits of setting up a Canada Subsidiary
Most non-resident investors prefer a subsidiary as it separates liability between the Canadian business and the parent company, generally freeing the parent company from responsibility for debts, losses, or legal liabilities. A subsidiary is simply a Canadian corporation whose controlling or sole shareholder is another corporation. The subsidiary can apply for extra-provincial registrations to operate in other provinces from where they are incorporated. Additionally, the subsidiary can follow separate business opportunities and initiate its own contractual arrangements.
Other benefits for a subsidiary:
Easier to obtain regulatory approvals, loans and finance and enter into contracts with other Canadian companies
More impact with clients and suppliers as subsidiaries imply more permanency than branches
Employees feel there is more stability and job security than from being with a branch
Among the legal advantages of setting up a Canada subsidiary is that the shareholders and directors of the parent company have limited liability and the parent company itself is generally not liable for the activities, responsibilities, or debts of the subsidiary.
In the wider commercial sense opening a subsidiary makes a statement of a company’s commitment to expanding into foreign markets. Canada is a popular target for expansion with its vibrant business culture. Geographically, Canada’s location is another plus for further expansion with Pacific and Atlantic coastlines, plus land access to the US and Central and South America. There is a more straightforward option to the risks and costs of setting up a subsidiary corporation in Canada.
Using a global Professional Employer Organization (PEO) such as Bradford Jacobs means staff can be sourced, placed in their roles, and be up-and-running within days, rather than months, and with all the difficulties of payroll, taxation, and compliance under control thanks to our Employer of Record (EOR) services.
Canada occupies the second-largest landmass in the world and is one of the leading trading nations globally, priding itself on being a ‘foreign trade zone’ from the Pacific coast on the west, the Atlantic in the east, as far north as the Arctic and to the US border in the south. Canada is in the world’s top 10 economies and a natural resources ‘superpower’ with the world’s third largest oil reserves, plus massive quantities of timber, iron ore, coal, and precious metals. This is backed by a well-educated, highly skilled workforce operating across all sectors of the economy. The nation ranks 10th in the world for attracting foreign direct investment, according to the Organization for Economic Cooperation and Development, and sixth in the world on Forbes’ Best Countries for Business table. Foreign companies expanding into Canada’s massive potential nevertheless face a complex web of employment laws. Canada has 10 provinces and three territories. These are largely autonomous in terms of employment laws, which means regulations vary between federal, provincial, and territorial authorities. There are speedier and more cost-effective alternatives to launching a subsidiary, with Bradford Jacobs opening the door to a hassle-free route into Canada.
Work alongside our Professional Employer Organisation (PEO) recruitment specialists, then utilise our Employer of Record (EOR) in-country experts to handle every aspect of compliance. Employers can depend on our in-depth knowledge of Canada and how to navigate its challenging legislative issues at federal, provincial, and territorial levels. Here we have set out some basic summaries of what you need to make the transition into the Canadian market, whichever sector you operate in.
Starting a Business in Canada
Canada ranks 23rd out of 190 countries for ease of doing business, according to the World Bank’s 2020 Index comparing global business regulations. It is second (after New Zealand) for the ease with which a business can be started, taking a mere one-and-a-half days to set up a business compared with five-and-a-half in the US. However, companies planning a global expansion must beware differences in federal, provincial, and territorial regulations affecting employment, payroll, and tax filing. For example:
Under federal laws, companies formed in Ontario, Alberta, Manitoba, Saskatchewan, Newfoundland, and Labrador must have at least 25% Canadian directors
In addition to being formed under federal laws or the specific laws of a province, companies must be registered in each jurisdiction where it provides goods or services
The company must file articles of association/incorporation as well as their corporate by-laws
The procedure for setting up a company includes:
Deciding on the type of subsidiary, typically a limited liability company, and registering relevant documents with the Canadian Trade Register, with information from the home country’s trade register
Once registered, the company must obtain a tax identification number and a Goods and Services Tax (GST) number, issued by the local offices of the Canada Revenue Agency (CRA)
Register for payroll with the CRA
Complete Form RC1 to obtain a Business Number (BN) and forward it to the relevant Tax Service Office (TSO) or Tax Centre (TC)
Expanding Business into Canada
The strength of Canada’s internationally focused economy makes it a prime target for foreign expansion. Incoming businesses can draw on a well-educated, highly qualified workforce operating in manufacturing, industrial, natural resources, hi-tech and service sectors. Main industries feature transportation equipment, chemicals, minerals, food products, timber, petroleum, and natural gas. Canada is also in the world’s top 10 fishing and seafood industries. Companies planning Canadian expansion via a subsidiary typically opt for a limited liability company, but this route brings compliance issues surrounding federal, provincial, and territorial laws on hiring and recruiting, payroll, taxation, compensation, and benefits plus every other layer of employment regulation. There is a simple alternative. By partnering a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in Canada.
Canadian Business Facts
Capital city – Ottawa, Canada’s fourth largest metropolitan area
Population – 38 million people
Regions – the Atlantic Provinces, Central Canada, the Prairie Provinces, the West Coast, the Northern Territories. Canada has 10 Provinces and three Territories
Official Language – English and French
Economy and world ranking – tenth largest economy in the world with a GDP of CAD1.73 trillion
Leading sectors by GDP – real estate and rental and leasing, manufacturing, mining, energy, finance and insurance, construction, health care
Main exports – crude petroleum and gas, forestry products, cars, gold, automotive parts and trucks, planes plus engines and parts
Main imports – cars, vehicle parts, delivery trucks, petroleum and oil, computers, gold, telephones
Main trading partners – US, China, UK, Japan, and Mexico
Government – a federal state, a parliamentary democracy, and a constitutional monarchy
Currency – Canadian dollar (CAD)
Advantages and Challenges of the Canadian Market
Advantages of expanding into the Canadian market include:
Location: Geographic position gives easier access to the US market, while Atlantic and Pacific coastlines access global markets
Trade: Member of the US-Mexico-Canada Agreement (USMCA, formerly NAFTA), with favorable trade treaties with other countries
Workforce: Highly skilled and well-educated. Ranked best educated among members of the Organization for Economic Cooperation and Development
Taxes: Beneficial treaties with other nations and comparatively low corporate tax rates with available incentives and benefits
Economy: Government encourages business expansion and entrepreneurship
Challenges of expanding into the Canadian market include:
Compliance: Navigating federal, provincial, and territorial rules governing employment, taxation, and payroll, particularly as this applies to Québec, where all forms, filing and contracts must be completed in French and all local workers must be able to speak and write French
Bureaucracy: Ensuring business operation complies with federal, provincial, and territorial incorporation regulations. In addition to being incorporated under federal laws of Canada or the specific laws of a province, companies must be registered in each jurisdiction where it provides goods or services
Contracts: The World Bank assess it can take around 900 days to enforce contracts in their ‘ease of doing business’ rankings for Canada
Scrutiny: Canadian regulators review foreign companies looking to expand into certain sectors, including financial services, transportation, telecommunications, cultural industries, and broadcasting
Operations: Incoming companies must comply with customs laws and bilingual packaging and labeling requirements to meet the Canadian Consumer Packaging and Labeling Act, which requires both English and French product labels
Limited Corporation / Subsidiary or Branch in Canada?
International companies targeting Canada for expansion will generally choose a limited liability corporation subsidiary. They have independent legal status from the parent company, which is generally free from responsibility for any debts or liabilities of the subsidiary. Subsidiaries can have a totally different name from the parent company, pursue different business activities and form their own contracts. Branches, in comparison, are an extension of the parent company and are not generally a popular choice for expanding into Canada.
Main characteristics of a subsidiary:
Independent legal entity from the foreign parent company
Only the directors of the subsidiary may be subject to liability
Any liabilities of the subsidiary are not the responsibility of the owning parent company
The subsidiary is managed by a board of directors, elected by the shareholders
Subsidiaries can manage their own tax affairs and take advantage of any incentives in the jurisdiction it operates
Subsidiary corporations are taxed on their Canadian-sourced and worldwide income
Under the Canada Business Corporations Act subsidiaries can be incorporated either with federal or provincial jurisdictions
Federal incorporation requires Canadian residents must make up at least 25% of the subsidiaries directors. Some provinces apply the same regulation
Main characteristics of a branch:
A branch is an extension of the parent company, has the same name and must follow identical business activities
The parent company is responsible for any debts or liabilities of the branch
A branch operates on extra-provincial licenses in the jurisdictions where it operates or can be registered with the Companies Registrar both federally and at provincial level
Expert guidance is vital when weighing the options between a subsidiary and branch in Canada. There is an alternative route – one that is quicker, stress free, cost effective and will have you up-and-running in days rather than weeks or even months. Bradford Jacobs will locate top talent for your company. Once you select your new employee our Employer of Record (EOR) specialists will handle every aspect of employment law, including payroll and tax.
Legal Structure for Canadian Market Entry
Canada’s Business Corporations Act governs the activities of foreign businesses setting up subsidiaries or branch offices in the country. There are also provincial and territorial regulations regarding expansion; for example, some provinces stipulate that 25% of directors must be Canadian, a regulation that also applies to subsidiaries registered with the federal authorities.
The legal structure for a limited liability corporation:
The legal structure for a subsidiary allows it to operate independently from the parent company, under its own name and able to follow its own commercial and business activities.
The subsidiary can have an unlimited number of shareholders who have no liability beyond their share contributions.
The shareholders elect directors, who can then appoint managers to manage day-to-day operations.
Corporations formed under federal law must have 25% of their directors as Canadian residents. This also applies to corporations formed only at the provincial level in Ontario, Alberta, Manitoba, Saskatchewan, Newfoundland, and Labrador.
In addition to being formed under federal laws of Canada, the subsidiary must be registered in each jurisdiction where it provides goods or services.
The legal structure for a branch:
A branch is not a separate legal entity from the owning foreign parent company and carries on the same business under the same name as the parent company as its permanent representative in Canada.
The branch must provide Articles of Association of the parent company, which may be required to make its financial records available to the Canadian Companies Register.
The branch must appoint an individual to represent it in dealing with the tax authorities.
Opening a Business Bank Account in Canada
All companies need a business/corporate bank account when working in Canada. Here you will find some of the most consistent banks which rank among the most secure in the world. It is vital to keep your personal finances separate from your company transactions. It is not mandatory for those with Canadian residency to open a corporate account, but some banks do require you to do so in person; those who do not, usually require more documentation and have greater account restrictions.
There are a variety of international banks in Canada, and you may be able to open an account with them in your home country and then transfer this to Canada. However, the fees may be higher, and you may need a higher minimum balance. An account can usually be finalized on the same day with the right documents. A corporation or subsidiary requires the following documents and others which will depend on the type of bank you choose:
Two items of ID from corporation’s signatories
Articles of Association or Incorporation
Certificate of Status
Corporate profile report
Certificate of Existence
Certificate of Compliance
Corporate annual government filing details
Notice of Assessment for income tax
Business Number (BN)
Research is needed to choose the right bank offering the right services for your business. The Canadian banking system is quite centralized; five banks control 90% of Canada’s domestic banking each with its own features and benefits to complement your company. However, some banks charge higher rates especially for sending money overseas and international payments, so choose wisely.
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 labour contracts. Our team in Canada keeps track of Canadian laws and regulations daily to be duly aware of updates that can be implemented in working contracts. By using our PEO and Employer of Record (EOR) service we can provide compliant labour 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 international 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.
Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in Canada might not all be familiar to you yet. By using our PEO and Employer of Record (EOR)service we can provide compliant labour contracts for employees in Canada including local benefits. When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few. In Canada, benefits are guaranteed by national legislation as well as collective agreements with trade unions or workers’ councils. Our guide will explain what benefits and employee compensation are guaranteed and what can be modified, for any employer who wishes to expand their business into Canada.
What Employee Benefits are there in Canada?
A wide-ranging framework of federal laws, plus those set by provinces and territories, cover employee entitlements and benefits in Canada. Minimum requirements of government – mandated employee benefits include participation in Employment Insurance (EI), the Canada Pension Plan (CPP) or the Québec Pension Plan (QPP), Worker’s Compensation Act (WC) and the Workplace Safety and Insurance Board (WSIB).
Basic guaranteed benefits include:
National minimum wage – although actual minimums vary with the 10 provinces and three territories setting their own minimum rates of pay
Termination, dismissal, notice periods and severance regulations
Maternity and parental allowances
Again, many jurisdictions have their own versions of laws, while case and common law can also apply where issues are not covered by mandatory regulations.
The responsibilities of foreign companies reach further than simply complying with tax, social security, and payroll regulations, however. Specific regulations apply to benefits and entitlements with the risk of fines and sanctions for non-compliance. It is vital that employers have a firm grasp of what is guaranteed for their employees, as this will affect the employer-employee relationship. This is where Bradford Jacobs steps in to point you in the right direction, drawing on over 20 years’ experience as a Professional Employer Organization (PEO) and Employer of Record (EOR).
What Compensation Laws exist in Canada?
A variety of workers’ compensation programs in Canada safeguard employees from the financial implications of injuries or occupational illnesses suffered at work. Support programs are generally administered by provincial and territorial authorities. The Labor Program covers claims for federal employees working in Canada or abroad. Companies that are incorporated or have employees must register with their province or territory Workers’ Compensation Board. Mandatory registration may also depend on the number of employees.
Both the labor rights of employees and the responsibilities of employers fall under the Canada Labor Code. The rights of foreign workers are also protected. It is still vital for employers to fulfil responsibilities to employees over benefits, compensation and minimum requirements that are governed by law, either federally or at the provincial and territorial level and in whichever sector, public or private. Do not take the risk of ignoring them. Compensation, entitlements, and benefits include:
National Minimum Wage: On December 29, 2021, Canada introduced a new Federal Minimum Wage affecting all private sector federally-regulated employees of CAD 15 (US$11.92), regardless which province or territory they work in. This is the lowest hourly rate which can be paid, although if the province mandates for more than CAD 15, the higher rate applies. For those workers not covered as federally-regulated private sector employees, the minimum wage will still be set according to which of the 10 provinces or three territories they work. For example, as of October 2021, rates included Alberta CAD 15 (US$11.92), Newfoundland and Labrador CAD 12.50 (US$9.93), Northwest Territories CAD 13.46 (US$10.69) and Nunavut CAD 16.00 (US$12.71).
Sick Leave: Federal Employment Insurance (EI) sickness benefits provide up to 15 weeks’ benefit at 55% of salary to a maximum of CAD 595 (US$472). A medical certificate is required to prove inability to work due illness, injury or any other designated condition. Arrangements can differ between Canada’s different jurisdictions.
Working Hours and Breaks: Standard hours in a federally-regulated industry are eight per day in 24 consecutive hours, totaling 40 a week, stretching from midnight Saturday till midnight the following Saturday. Employees are entitled to one full day of rest, usually Sunday. Except in certain circumstances, the maximum working hours should not exceed 48 in a week. Employees are entitled to one 30-minute break every five working hours.
Overtime: Hours worked over the standard week are considered overtime and reimbursed at 1.5 times the normal hourly rate. Managers, executives and professions such as doctors, lawyers, dentists, architects and engineers are precluded from overtime.
Paid Vacations: Federally-regulated employees receive two weeks’ paid vacation for each completed ‘year of employment’ up to four years, increasing to three weeks after five years with the same employer and four weeks after 10 years. The qualifying ‘year of employment’ begins on the date employees begin work or a 12-month period decided by the employer within parameters of the Canada Labor Standards Regulations. Arrangements can differ between Canada’s 10 provinces and three territories.
Maternity Benefits: These are federally-administered for all jurisdictions from Employment Insurance (EI) except for Québec. Benefits depend on the type of benefit chosen and the pre-tax earnings in the previous 52 weeks or since the last claim, whichever is shorter. The benefit is 55% of average insurable weekly pay up to a maximum of CAD 595 (US$478) in 2021. Québec employs an independent Parental Insurance Plan (QPIP), with rates assessed according to which plan is chosen. Québec is the only province that identifies paternity leave as a separate benefit.
Parental Leave: Job-protected entitlements vary between regulations for federally-regulated private sectors and those of the 10 provinces and three territories. Typically, parental leave is for 35 weeks from when the baby is born until the baby is one year old. Parents can choose between standard benefits at 55% of average weekly insurable earnings to a maximum of CAD 595 (US$480), or extended benefits up to a maximum of 61 weeks, at 33% of average insurable weekly earnings capped at CAD 357 (US$286), plus family supplement if the parents are entitled.
Notice Periods, Termination and Severance: An employer must provide at least two weeks’ written notice of their intention to terminate employment. In lieu of written notice, the employer must pay two weeks’ wages and give severance pay regardless of the length of service or the company’s size. Written notice or pay in lieu does not apply in certain circumstances – if the employee has not completed three months’ continuous service, is being dismissed for just cause or the contract specifies an end date for employment.
An employee is not legally required to give notice, but contracts usually include a notice period clause for both employer and employee. Also each province/territory has its own rules and regulations.
Canada is in the world’s top 10 economies, forms the second largest land mass in the world and is rich in natural resources. There are thriving ports on both the Atlantic and Pacific coasts with global connections to key international markets for exports and imports. These benefits are backed by a highly-skilled, well-educated, and motivated workforce. Hiring the right talent in Canada to expand your company can result in a thriving business with numerous opportunities. However, the recruitment process can be complicated when you have no physical presence in Canada yet. Our PEO and Employer of Record (EOR) service can be the solution for your company. Recruitment can be a tricky business, especially when a company is venturing into unfamiliar countries and exploring new markets. This is the perfect occasion to bring in a specialist to oversee the process for you. Our comprehensive knowledge of all Canadian employment sectors and understanding of the culture and customs guarantee an untroubled transition. Look through our guide to familiarize yourself with everything an employer needs to know about the recruitment process in Canada.
The Recruitment Process in Canada
Recruitment is the first stage of making your company operational and competitive in Canada. It is vital to know where to locate the finest talent to be a perfect fit for your company’s global expansion plans. Foreign companies opening a legal entity subsidiary must follow strict procedures to register and onboard employees, complying with federal laws and those applied by the 10 provinces and three territories. These include:
Registering for payroll with the Canada Revenue Agency (CRA)
Completing Form RC1 for a Business Number (BN) and forwarding it to the relevant Tax Service Office (TSO) or Tax Centre (TC)
Ensuring employment contracts comply with Labor Standards laws for the relevant province and the employee has a Social Insurance Number (SIN)
Completing employee’s Form TD1 (Personal Tax Credits Return) to calculate how much tax is deducted from earnings
Registering a payroll program account and obtaining the payroll number for making and remitting deductions and filing returns as soon as you start hiring employees
Calculating deductions and contributions for the Canadian Pension Plan (CPP), Employment Insurance (EI) and income tax
Sending payroll information returns and completing year-end summaries for all employees’ pay and deductions. Remitting deductions for CPP, EI and income tax
The recruitment process is time-consuming and requires dedication – a challenging task when facing a host of other complicated issues involved in international expansion. Partner with Bradford Jacobs as your Employer of Record (EOR). We will provide all the answers. We will convert your expansion blueprint for Canada into an action plan, with additional support including:
Advising on payroll method – This involves paying employees and payroll tax to the Canada Revenue Agency (CRA) and the tax agency of the relevant province or territory, if applicable, and filing tax returns
Bradford Jacobs locates the ideal employees for your company, then steps in as EOR to ensure they comply with Canadian employment contracts law, payroll, HR and, if required, visa requirements and permits
We manage all work-related registration formalities and on-going employment issues while you have daily control of your employees
The employees complete their time sheets and any expenses claims and we invoice you, the client. Once paid, we deduct all contributions to the relevant Canadian authorities and transfer the balance into the employees’ accounts
Within a few days your company has an international presence in Canada, in prime position to explore expansion throughout North, Central and South America without risking the initial expense, commitment or hassle of setting up your own subsidiary or branch office. Make contact today.
Legal Checks You Can Make on Employees
Background checks, or pre-employment screening, in Canada are governed by privacy law relating to the public sector. In the private sector, checks are not always governed by privacy law. General guidance for employers covers:
Do not collect more information than necessary or relevant
Use information only for the stated purpose
Restrict information to those for whom it is relevant
Make collected personal information available for the potential employee to verify
Delete or destroy information once it is no longer needed
Other checks include:
Criminal Record Checks: Can be made through Canadian Police Information Check (CPIC), Criminal Record Checks (CRCs) and Vulnerable Sector Checks (VSCs). In some sectors, such as working with children, the law may require more detailed checks. Any checks should have the prospective employee’s permission and be made after a conditional job offer.
Discrimination: Asking questions that compromise human rights are prohibited, making it illegal to ask a candidate’s age, sexual orientation, place of origin, matrimonial or social status, political or religious belief among other restrictions.
Educational and Reference Checks: Are regularly conducted but must be with candidate’s permission and should not be excessive. Professional experience checks are allowed to verify previous position and length of employment.
Credit Checks: Permitted where candidate’s credit history is relevant to the position but must not contravene consumer-protection legislation.
What is also required for employment checks is to verify that candidates are legally allowed to work in Canada by obtaining their Social Insurance Number (SIN) after making a conditional job offer.
Basic Facts on Hiring in Canada
Companies hiring fresh staff for their expansion into Canada face a framework of rules and regulations at both federal and provincial level. Generally, provinces have jurisdiction over employment, while federal laws govern such sectors as aeronautics, banking, and inter-province transport logistics. The federal government and provinces apply legislation setting minimum standards for sick leave, minimum wages, work hours, maternity allowances, and holidays for example. Other rules regulate workplace discrimination and employee privacy.
To hire employees, companies must follow procedures set by the Canada Revenue Agency (CRA). These include:
Registering for payroll if they reimburse employees for salaries, bonuses, or other benefits
Obtaining the employee’s Social Insurance Number (SIN) within three days of their starting work and completing Form TD1 for Personal Tax Credits Return within seven days
Obtaining a payroll number and open payroll program for making and remitting deductions, providing date employees receive first payment, the number of employees, frequency of payments and parent company’s country if a foreign-owned entity
Calculating deductions for Canadian Pension Plan (CPP) and Employment Insurance (EI)
Submitting payroll information returns, completing, and filing year-end summary of pay and deductions for all employees
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 contracts must comply with any provincial and territorial laws. Your company will operate effectively in the shortest time by outsourcing payroll to an Employer of Record (EOR) such as Bradford Jacobs. We have the experience and expertise to oversee all levels of the process, relieving employers like you of the headaches associated with complying with federal and provincial employment and tax regulations.
To succeed in business in Canada, it is vital for both employers and employees to have a strong understanding of the business culture. Canada offers among the highest qualities of life. It is culturally diverse with cities showing North American, French, and British influences, while the Organization for Economic and Cultural Development ranks the highly skilled workforce as the ‘best educated’ among member nations. As a global PEO (Professional Employment Organisation), it is our goal to be familiar and updated with the business culture in the country we work with and in. By sharing our knowledge about the Canadian work culture, we want to support your global expansion plans. Therefore, we will address all the aspects of the work culture in Canada to start your expansion well-informed.
Work Culture in Canada
Comprising the second largest land mass on the globe, Canada is a natural resources ‘superpower’ with the world’s third largest oil reserves. Its leading role as exporter of timber, iron ore, coal and precious metals is supported by booming ports on the Pacific and Atlantic coasts, while the Great Lakes/St Lawrence Seaway links Canada with the US heartland. These global connections provide smooth access to key international markets. But other considerations come into play – understanding workplace culture and the business environment are equally vital in making a successful move. Teamwork is highly valued in the Canadian business environment. Working well with others, listening to their ideas, and sharing responsibility are important skills. Co-workers are treated with respect, from those working in entry-level positions to supervisors and managers.
It is time to ‘get down to business’ so here are a few tips on taking the right steps, and avoiding the pitfalls:
Language: Knowledge of the French language is important throughout Canada as English and French have equal standing. But fluency in written and spoken French is vital if the business is based in or serving Québec
Punctuality: Being on time is appreciated as a sign of respect, professionalism and being ready for business
Business Meetings: Canadians value everybody’s opinions being heard. Business communication is direct and courteous. Avoid aggressive sales pitches. Decisions tend to be based on verifiable facts. French culture in Québec may see more deference for senior figures
Beware Comparisons: Avoid references to business in the US; culture and practices are quite different and Canadians do not appreciate comparisons
Greetings: Initially be fairly formal, using titles and surnames but expect hosts to quickly move to first-name terms. Shake hands firmly and maintain eye contact
Business Cards: Swapping business cards at either end of the meeting is usual – it is a good idea to print English on one side and French on the reverse
Dress Code: Safe to dress formally for men and women, though start-ups and tech companies are often more relaxed
Gift-giving: Be wary of offering a gift before the deal is sealed, in case it is seen as an attempt to curry favor. The public sector has a code of practice prohibiting this
Sealing the Deal: Agreements are often sealed by a handshake and written order, later confirmed in documentation. That might be the time to offer a small gift, or suggest lunch or dinner
Business Meals: An ideal way to relax after a successful conclusion to negotiations
Canada Minimum Wage
On December 29, 2021, Canada introduced a new Federal Minimum Wage affecting all federally regulated employees of CAD 15 (US$11.92), regardless which province or territory they work in. This is the lowest hourly rate which workers can be paid, although if the province mandates for more than CAD 15, the higher rate applies. For those workers not covered as federally regulated sector employees, the minimum wage will still be set according to which of the 10 provinces or three territories where they work. For example, as of October 2021, rates included Alberta CAD 15 (US$11.92), Newfoundland and Labrador CAD 12.50 (US$9.93), Northwest Territories CAD 13.46 (US$10.69) and Nunavut CAD 16.00 (US$12.71).
Canada Probation Periods
Canada’s 10 provinces and three territories have different statutory administrations and probation periods may vary. However, depending on the nature of the business, federal law may override provincial law. A probationary period consists of the first three months (although it can be six months in Prince Edward Island, New Brunswick, and Yukon) and when written into the contract can stipulate without notice, pay or severance. However, if a contract does not detail the probation period and termination entitlements, employees may be entitled to a severance package even if termination occurs during the statutory probation period.
Working Hours in Canada
Standard working hours are eight per day in a period of 24 consecutive hours, for a total of 40 in a week, stretching from midnight Saturday till midnight the following Saturday. Employees are entitled to one full day of rest, usually the Sunday. Except in certain circumstances the maximum working hours should not exceed 48 in a week. Also, during the working day, employees are entitled to one break period for each five-hour period worked, no less than half an hour.
Overtime in Canada
Although labor laws may differ depending on the province, any hours worked over the standard week (40-44 hours) are considered overtime and reimbursed at 1.5 times the normal hourly rate. Managers and executives and professions such as doctors, lawyers, dentists, architects, and engineers are precluded from overtime.
Notice Periods in Canada
An employer must provide an employee with ‘reasonable notice’ of intention to terminate employment in order for the employee to find another job (unless on a fixed contract) and this can differ between provinces. Typically, notice periods range up to eight weeks maximum. Employers must give ‘termination pay in lieu of notice’ regardless of the length of service or the company’s size. Written notice or pay in lieu does not apply in certain circumstances – if the employee has not completed three months’ continuous service, is being dismissed for just cause or the contract specifies an end date for employment. An employee is not legally required to give notice, but contracts usually include a notice period clause for both employer and employee. Again, each province/territory has its own rules and regulations.
Redundancy, Termination, Severance in Canada
If an employee has been continually working for a company for a minimum of 12 consecutive months before the employment was terminated, they have the right to termination pay in lieu of notice. Entitlement is two days of regular/average pay for each completed year they have been employed by their company before termination with the minimum payment being five days’ pay. All employees are entitled to this benefit pay unless they have been dismissed for ‘just cause’ or ‘willful misconduct.’ The only province to pay ‘severance,’ which is not the same as ‘statutory termination pay in lieu of notice,’ is Ontario – as long as the worker has been employed for five years. A one-time payment is made at the rate of one week’s salary for every year worked, capped at six months.
Pension Plans in Canada
To qualify for a Canada Pension Plan (CPP) – Old Age Security (OAS) payment, individuals need to be at least 60 years of age, but are not eligible for a full pension until the retirement age of 65. The benefits are reduced by 0.6% for each month that the employee takes his pension before retirement age. If delaying payment until 70, then the monthly payment will be increased by 0.7%. Anyone who is over the age of 65 and has lived in Canada for 10 years or more, can receive an OAS.
This taxable benefit replaces part of the former employee’s salary and is paid for the rest of their life.
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