Employment Law in Canada

Canada’s labor laws are designed to protect its workforce, and organizations that seek to hire talent in Canada must be aware of them.  

The Canada Labour Code (“the Code”) lays out Canada’s federal labor laws and outlines the rights and responsibilities that apply to employers and workers in federally regulated workplaces. The Code has four parts.  

• Part I on Industrial Relations applies to workplace relations and collective bargaining between unions and employers, with provisions for dispute resolution, strikes, and lockouts.  
• Part II on Occupational Health and Safety provides measures that are designed to prevent accidents, injuries, and occupational diseases in the workplace.  
• Part III on Standard Hours, Wages, Vacations, and Holidays establishes workers’ rights to fair and equitable employment conditions and protects those rights.  
• Part IV: Administrative Monetary Policies lays out a system for administrative monetary penalties and allows for the public naming of employers that have violated Parts II or III of the Code or related regulations.  

The Code applies to industries such as telecommunications, transportation, and banking. Employers in federally regulated industries must also comply with the provincial and territorial laws that apply to them, as do the employers that are not in federally regulated industries.   

With HR and legal experts based in Canada, Safeguard Global manages compliance with all relevant labor laws so you don’t have to. Contact us to learn more about how our EOR handles compliance in Canada.  

Contracts

In Canada, the primary types of employment contracts are indefinite-term or permanent contracts, fixed-term contracts, and independent contractor agreements. An employment contract can also be characterized as full-time, part-time, casual, or seasonal. Permanent or indefinite-term contracts are the most common in Canada. And while independent contractor agreements are technically not employment contracts, they lay out terms for the relationship between a service provider and client.    

Permanent contracts must include benefits such as pension contributions, health insurance, paid leave, and access to employment insurance. Fixed-term employees are likewise entitled to statutory benefits and protections as dictated by provincial or federal law.  

Canada also supports apprenticeship contracts governed by relevant provincial or federal legislation. Employers must provide structured training in line with approved curricula, pay apprentices a regulated stipend, ensure a safe working environment, and maintain regular working hours.

Termination and notice periods

Canadian labor law outlines clear rules regarding termination, notice periods, and severance rights. Employers must give written notice before terminating an employee or provide pay in lieu of notice.  

The statutory minimum notice period is based on length of service. No notice is required for employees who have worked less than three months; however, a period of notice is needed for employees who have worked at least three months, with the required notice periods determined by the length of service.   

• Less than three months: No notice required 
• Three months up to three years: Two week’s written notice 
• More than three years: One week per completed year of service, up to eight weeks 

Employees may also be entitled to severance pay depending on tenure and provincial regulations. Federally regulated employers must follow Canada Labour Code requirements.  

Valid reasons for dismissal include: 

• Misconduct or violation of workplace policy 
• Redundancy or business closure 
• Ongoing performance issues 
• Frustration of contract due to long-term illness 

As your EOR in Canada, we help manage termination processes and ensure compliance with Canadian employment law.

Probation periods

In Canada, probationary periods are not automatic for new employees. Employers that wish to use probation periods with new employees can only do so if the employees agree to it. Probation periods typically last three months but can last longer in some regions.   

Probation terms must be clearly stated in employment contracts. During the probation period, either party may end the employment with minimal notice, and employees are entitled to statutory protections such as workplace safety and nondiscrimination.

Working hours and overtime

Part III of the Canada Labour Code sets standards for employment conditions that include hours of work, minimum wages, statutory holidays, annual vacations, and types of leave. The federally regulated industries that must uphold these standards are identified in the Code, and they include, among others, the banking, transportation, and telecommunications sectors.  

Employers must also comply with provincial and territorial laws that apply to working hours and overtime. 

As your EOR in Canada, Safeguard Global ensures compliance with all national, provincial, and territorial labor laws that address these matters.

Taxes

Federal income tax is also withheld from employee salaries, with the Canada Revenue Agency’s tax tables and TD1 forms determining how much is withheld. 

Employees are also subject to provincial and territorial income tax.

Employer payroll contributions

Canada's social security system requires employer contributions that are dependent on the total number of employees, and these contributions cover pensions, medical care, disability insurance, and gratuity payments. In addition, workers' compensation is financed by contributions from state governments, employers, and employees.  

In Canada, employers are responsible for contributions to the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) and the Employment Insurance (EI) or Quebec Parental Insurance Plan (QPIP) on behalf of their employees. Employees also contribute to their pension plans and insurance plans.  

Employees may also choose to have contributions deducted from their pay for items such as retirement savings, health and dental benefits, and life and disability insurance. These extra deductions are voluntary.