If your global expansion plans include the Canadian market—with good reason, as there are many advantages to doing business in Canada—there also are a host of factors to consider before establishing a presence in the country, from cultural to legal.
Where do you start? We’ll take a look at three of the most important considerations for a foreign company doing business in Canada. Here’s what you should know.
1. Canada’s official languages
Although Canada’s Official Languages Act stipulates that English and French are the legal workplace languages in the country’s federal institutions, it’s a good model for companies to follow when doing business as well.
Canada’s language act includes the following:
Respect employees’ language-of-work rights. If an employee only speaks French or English—but not both—an employer must respect the employee’s primary language.
Foster a truly bilingual workplace in bilingual regions. Some regions in Canada are more bilingual than others. In 1969, Canada established official bilingualism, providing legal protections for French and English speakers. If you focus on hiring in Quebec, for instance, hiring employees fluent in both languages can help you provide adequate support to any Canadian resident.
A company operating in Canada should also consider offering language learning opportunities for employees who wish to learn French or English. While companies can’t require employees to learn another language, offering language learning resources can significantly support Canadian professional development.
2. Entity establishment
Part of the evaluation on entering the Canadian market should include weighing whether you’ll establish an entity—which can be a lengthy and costly process. If the Canadian market is critical to your growth plan and you’d like to begin hiring workers sooner than an entity can be registered, an employer of record (EOR) is a good option for getting started in the country.
An employer of record already has an in-country entity and the infrastructure in place to hire local workers—and it can usually do so quickly. You can partner with an EOR to hire the workers you need to begin operations in Canada while you work to set up your entity in parallel. Or you can employ them directly through the EOR if you decide entity setup isn’t the right path for your organization.
3. Human resources requirements
If you plan to hire in Canada, it’s important to understand the country’s employment laws and benefits requirements to ensure compliance and fair treatment of workers.
Some of the Canadian labor laws to keep in mind include:
Working hours. Employees are entitled to eight-hour days, 40-hour weeks, and at least one full day of rest per week.
Overtime. Employees who work more than 40 hours per week are entitled to either time-and-a-half pay per hour of overtime or time-and-a-half paid leave per hour worked. Employees also have the right to refuse overtime requests to attend to family matters or to ensure the education of family members under 18 years of age.
Wages. Canada’s nationwide minimum wage is $15.55 per hour. But if a province stipulates a higher province-wide minimum wage, the higher of the two minimum wages will apply. Each year, the federal minimum wage may increase to account for inflation.
Workers’ compensation. Canadian businesses and foreign companies working in Canada must provide workers' compensation insurance to employees. You can streamline your workers’ compensation process by using an employer of record.
As you hire new employees in Canada, you’ll also need to ensure that your employee onboarding and training standards are in line with Canadian laws. Regulations to note include:
Collecting and securing employee data. Before collecting any personal information from employees, Canadian employers must disclose which data they will collect, the data’s intended purpose, and what efforts they will make to protect that data.
Reporting. Canadian businesses must file annual reports to the Labour Program that detail their industry, the number of employees on staff, and the number of employees hired per province.
Payroll tax payments and reporting
Canadian employers must remit payroll taxes to the Canadian government. Some provinces require additional payroll taxes to fund local healthcare infrastructure and other provincial government initiatives.
Your tax withholding, payment and reporting requirements will depend on the following characteristics of your business:
- Company size
- Legal status or business structure (e.g., whether the business is a sole proprietorship or incorporation)
- The types of employees you hire
Businesses hiring Canadians must also account for the Canadian Pension Plan (CPP), a government-operated, employee-paid retirement fund for employees in most industries. While not all employers must provide the infrastructure for employees to pay into the CPP, you should create a compliance plan and standard operating procedure (SOP) to accommodate the program and provide resources to employees who wish to pay in.
The Canada Labour Code entitles Canadians to a variety of benefits that their employers are legally obligated to provide. Some of these benefits include:
Employment insurance (EI). Employees fund their EI benefits, which Canadians may receive when they resign, are fired from a job, or take leave for medical issues.
Paid and unpaid leave. Employees may be entitled to leave benefits for maternity, illness, bereavement or personal leave.
Vacation time. After 12 months of consecutive employment, Canadian employees receive two weeks of vacation time.
Paid federal holidays. Paid federal holidays in Canada include:
- New Year’s Day
- Good Friday
- Victoria Day
- Canada Day
- Labour Day
- National Day for Truth and Reconciliation
- Thanksgiving Day
- Remembrance Day
- Christmas Day
- Boxing Day
Your company’s termination policy should comply with Canadian termination regulations stipulating:
Documentation. Canadian employers must document incidents and official warnings leading up to employee termination. The documentation process protects both employers and employees from legal action.
Notice. Employers must provide Canadians with at least two weeks’ notice of their termination before dismissing them.
Severance pay. Canadians who have worked for at least 12 consecutive months are eligible for mandatory severance pay.
Layoff policies. In Canada, a layoff does not constitute termination. Specific laws stipulate how employers should handle a layoff, and businesses should ensure compliance with national laws before instituting a layoff.
Group terminations. Canadian businesses planning to terminate more than 50 employees at once must provide notice 16 weeks in advance to Canada’s Head of Compliance and Enforcement.
Unjust dismissal protections. Like many other nations, Canada offers unjust dismissal protection to employees to prevent illegal termination.
In-country HR expertise for foreign companies doing business in Canada
Remaining compliant with Canada’s employment laws is a critical component of doing business in the country. A Canada employer of record not only can help you get to market faster by eliminating the need for an entity, but it can also help with the all-important HR component, providing local HR support to ensure compliant contracts and onboarding, benefits administration and payroll.
Learn more about how an employer of record can help your company do business in Canada by speaking with a global solutions advisor today.