🇨🇦 Hiring in Canada

💡 Everything you need to know to hire and manage employees in Canada through Toku. Toku handles payroll processing, tax withholding, social contributions, and statutory compliance. This guide covers what you need to plan costs and manage your team.

A quick note on Canada: employment rules are set federally and by each province, and entitlements such as minimum wage, leave, and notice vary by where your employee works. The figures below reflect federal standards; Toku applies the correct provincial rules for each hire.

At a Glance

Onboarding a New Hire

Plan for 5-7 business days between submitting a new hire and their start date. Toku completes payroll registration before the start date and, depending on the province, may also need to register for workers' compensation. Your new hire provides proof of their right to work in Canada, and salaries are set and paid in CAD (Toku converts if you budget in another currency).

Submit the new hire through the Toku platform for the employment agreement, statutory registrations and payroll setup. See Onboard Contributors as a Client Admin in Toku for the steps. Toku will confirm the expected onboarding timing for your hire.

Employer Costs

Canada is one of the lower-cost countries to employ in. On top of gross salary, employers pay:

As a rule of thumb, total cost of employment is roughly 108-110% of gross salary, and because contributions are capped, the effective percentage drops for higher earners. There is no 13th month salary in Canada.

Employees pay their own CPP and EI contributions plus federal income tax (14-33%) and provincial income tax, all withheld from gross salary, not paid on top. Toku calculates and remits all of the above.

Compensation & Payroll

Toku runs two payrolls per month in Canada, and employees receive a pay stub each cycle showing gross pay, deductions, and net pay. All wages are paid in CAD by direct deposit.

For federally regulated employees, the federal minimum wage is CAD 18.15 per hour from April 1, 2026, or the applicable provincial or territorial rate if higher. Other employees are generally subject to the relevant provincial or territorial wage rules. Toku will confirm the current rate for the hire. There is no general statutory 13th month salary or mandatory bonus, though agreements may provide one.

Employment Contracts & Probation

• Toku issues a compliant local employment agreement for every hire, in English or French (employees in Quebec have the right to a French-language contract).
• Indefinite-term, fixed-term, and part-time arrangements are all recognized; indefinite-term is the standard.
• Probation is 3 months under Toku's employment agreement. Statutory protections depend on whether the employment is federally or provincially regulated, the work location and individual circumstances. Toku will confirm the applicable rules.

Working Hours

The standard is 8 hours per day and 40 hours per week. Overtime is paid at 150% of the regular wage for hours beyond 8 in a day or 40 in a week, with a general cap of 48 hours per week. Employees are entitled to at least 8 consecutive hours of rest between shifts and 24 consecutive hours off per week. Managers and certain professionals may be exempt from overtime, and provincial thresholds can differ.

Leave Entitlements

Federal entitlements are below; provincial rules vary, and Toku applies the correct ones for each employee's location.

Maternity and parental leave pay comes from Employment Insurance, not from you, and returning employees must be reinstated to the same or a comparable position.

Public Holidays (2026)

There are 10 federal statutory holidays in 2026. Provincial lists differ: some provinces add holidays such as Family Day or Civic Holiday while not observing all federal ones, so your employee's entitlement depends on their province.

Benefits

CPP pension coverage, Employment Insurance, and provincial workers' compensation are statutory and included in Employer Costs above. All employees also have access to publicly funded universal healthcare through their provincial health insurance plan, covering hospital and physician services. On top of this, every Canadian hire receives a fully employer-paid group benefits package with Sun Life, plus an optional Group RRSP/DPSP retirement plan with Canada Life that includes an employer match. Toku administers both.

Benefits at a Glance

Provincial Health Coverage

The Sun Life package supplements provincial health plans by covering eligible expenses they don't fully cover. For Québec residents, drug coverage automatically adjusts to meet RAMQ requirements.

Group Benefits (Sun Life)

The package is mandatory and fully employer-paid, with no deductible and a drug card included:

Retirement: Group RRSP + DPSP (Canada Life)

Participation is voluntary and open to all full-time employees at any time:

• Employee contributes 1% - 4% of earnings by payroll deduction; Toku matches up to 4% into the DPSP (billed to you). Additional unmatched voluntary contributions are allowed within CRA limits.
• Both employee and employer contributions vest immediately.
• Contributions can be changed or paused at any time; annual RRSP tax receipts are issued via the Canada Life portal.

Costs & Who Pays

The benefits plan is 100% employer-paid and is a cost you should expect on every Canadian hire. Employer-paid premiums may be taxable income to the employee; the amounts flow through payroll automatically. If the employee joins the retirement plan, the employer match (up to 4% of earnings) is an additional cost.

Enrollment

Enrollment is mandatory for all eligible (full-time regular) employees and their dependents, with no waiting period: coverage is retroactive to the start date. Toku's local broker contacts each new employee within the first month, and enrollment must be completed within 31 days of eligibility (late applications may face restrictions). Life events (marriage, birth, dependent changes) must be reported within the same 31-day window.

What You Need to Know About Benefits

• The Sun Life package is mandatory for full-time regular employees, so budget for it on every Canadian hire.
• The retirement plan is voluntary, but budget for the employer match of up to 4% of earnings if your employee joins.
• On involuntary terminations, benefits must be extended for the length of the statutory (ESA) notice period when termination pay is issued as a lump sum. Toku manages this. For the full employee-facing detail, see the Canada Employee Benefits Overview for details.

Common Extras

Other common extras in Canada include employee assistance programs, wellness spending accounts, and enhanced retirement matching. Toku can advise on the cost impact of any of these.

Ending Employment

Federally regulated employees may have unjust dismissal protections after 12 months of continuous service when they are not covered by a collective agreement. Provincial and territorial rules differ. Notice, severance and other compensation depend on the case, so involve Toku before making a termination decision. For the process, see How to Terminate an Employee or Contractor.

Federal minimum notice for termination without cause:

For federally regulated employees with at least 12 months of continuous service, statutory severance is generally the greater of two days’ wages per completed year or five days’ wages. Provincial or territorial rules and individual agreements can differ; additional notice or compensation may apply. Toku will confirm the full exit cost for the case.

Annual Leave at Termination

This section describes statutory annual leave. Any additional contractual or company-provided leave above the statutory minimum may follow different carryover, expiry, or payout rules under the employee's agreement or applicable policy, subject to local law.

Statutory leave termination payout: Generally required for statutory vacation pay owing, but the rule depends on the employee's province or territory.

Statutory carryover / look-back: Vacation scheduling, carryover, forfeiture and payout rules vary across provinces and territories. There is no safe Canada-wide expiry rule.

Admin responsibility: Always give Toku the employee's work province or territory and keep vacation balances by entitlement year. Do not apply a single national “use it or lose it” policy.

Important exceptions: Federally regulated employees and provincially regulated employees can have different statutory rules. Enhanced vacation above the statutory minimum may also be treated differently from statutory vacation pay.

See the Annual Leave / PTO Carryover & Termination Payout Guide for the cross-country framework.

Hiring Someone from Overseas?

Foreign nationals generally need a work permit: either an employer-specific permit (usually requiring a Labour Market Impact Assessment showing no Canadian worker is available) or an LMIA-exempt permit under the International Mobility Program, such as intra-company transfers or CUSMA professionals. Processing takes anywhere from several weeks to several months. Canadian citizens and permanent residents need no permit. Talk to Toku before extending an offer to a candidate who needs sponsorship.

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Last updated November 5, 2026 (onboarding link, wage and termination guidance only). Last verified October 2026. This guide is for general information and doesn't constitute legal or tax advice. Your Toku account manager can confirm specifics for your situation.