The Ultimate Guide to Employer of Record Canada Services

Ever wondered how global companies effortlessly tap into talent living in Canada without getting tangled in legal red tape? Enter the Canada employer of record (EOR). A foreign company will engage a Canadian EOR to legally employ and pay a Canadian citizen or permanent resident who lives in Canada. That employee is then free to work on behalf of the global company while continuing to reside in Canada.

Canada EOR services act as a stealth team of administrative professionals, working quietly behind-the-scenes to take care of all the nitty-gritty, time-consuming payroll and HR tasks like benefits administration, contracting, tax compliance, and ensuring accurate, on-time payment of Canadian employees so organizations can focus on their business.

Let's start by understanding some basic terms and how a Canada employer of record can help any global organization hire Canadians quickly and seamlessly.

What Is a Canada Employer of Record (EOR)?

An employer of record (EOR) is a company that legally employs workers on behalf of another business, taking on all the legal, payroll and HR employer responsibilities for a third party, typically one located in another country.

Say a tech company based in the U.S. who embraces remote work, finds the perfect candidate for a software development role they’ve had trouble filling. That candidate is a great fit experience and skills-wise but they live in Toronto or Vancouver and don’t want to move.

As long as they are a Canadian citizen or permanent resident, a Canada employer of record can quickly (and legally) employ this developer, offering them a full-time permanent role with benefits, paid leave and a salary competitive with the market. It’s a win-win-win!

What are the main benefits of partnering with a Canada EOR?

When partnering with a Canada EOR, organizations can:

  • Avoid the significant costs, time and hassles of setting up a legal entity in Canada.
  • Mitigate legal or financial risks by ensuring compliance with federal and provincial employment laws in Canada.
  • Outsource non-strategic but time-consuming functions like payroll and benefits administration
  • Access a broader pool of skilled and educated candidates who want to work from Canada, or retain employees who want to return to Canada

Long story short, a Canada employer of record gives companies a quick, straightforward path to filling roles with highly skilled, experienced Canadians.

How does a Canadian Employer of Record work with organizations?

Let's breakdown who does what in the tripartite employer of record relationship to fully understand each party’s role and how their responsibilities intertwine:

What does a Canada employer of record Do?

EORs in Canada handle HR admin and payroll for Canadian-based employees. This way, organizations can focus on achieving business goals, not struggling to understand and comply with Canada’s complex web of employment and tax laws.

The Canada employer of record (EOR) Employment Relationship
  • Acts as the Legal Employer

    From the perspective of the Canadian courts, provincial employment legislation and employment-related tribunals, the EOR is the legal employer. It is the EOR’s responsibility to ensure compliance with all employment laws and regulations. The employee signs an employment contract with the EOR and agrees to do work for the client company. The contract clearly states who the client company is, who will supervise the employee’s daily work and what their duties and responsibilities will be.

  • Payroll Processing and Tax Management

    A Canadian employer of record handles all payroll and tax processes for their clients. They should have extensive knowledge of federal and provincial deductions and have secure, simple payroll processes and technology for invoicing and payment of employees. They generate tax documents for employees (T4, T2200) and the government and provide advice to clients on how best to handle taxable benefits, paid leave, and proper handling of expenses to clients.

  • Administers Health Benefits and Life Insurance

    A Canada EOR typically provides extended health benefits to their employees including prescription drug, dental, health, and vision coverage. They may also provide life insurance and long-term and short-term disability (LTD, STD) coverage, as well as accidental death & dismemberment (AD&D) insurance.

  • Ensures Compliance with Provincial and Federal Employment Laws

    Employment law varies province to province in Canada and can overlap with federal regulations. The EOR should have an employment contract for each province, one that is compliant with employment laws and is informed by the latest common law decisions. They should also ensure a client company (foreign company) Canada EOR administrative task. Canada employee / talent basic set of employment policies is in place for every province covering everything from job protected leave and hours of work to health and safety requirements.

    A Canada EOR mitigates the financial and legal risk of hiring Canadians and stays on top of evolving regulations so their clients can rest easy knowing they are compliant with local laws and can avoid surprises if difficult HR issues arise like employee discipline or terminations.

  • Onboarding and Offboarding of Talent

    A Canada EOR handles legal and tax documentation including contracts, tax forms and helps talent enroll in health, retirement and other benefit plans. They will also explain the different benefits and options and are the first line of contact for employee questions. They can also help with offboarding tasks and provide record of employment documentation for employees.

  • Administer Retirement Savings Plans

    In Canada, an employer or record typically provides a group retirement savings plan (RRSP) through a trusted investment company to provide savings options for retirement (similar to the 401k program in the US) The EOR can advise client companies on matching contribution percentages, help talent enroll and choose the right plan for them and ensure payroll deductions and tax documentation are accurate and provided to the employee in a timely manner. They can also advise client companies on contribution matching expected by top talent.

  • Paid Leave Tracking

    In Canada, every employee is entitled to paid leave and entitlements vary by province. A Canada Employer of Record helps navigate the complex web of local regulations for vacation, advises on maternity or other job protected leaves, minimum entitlements and carefully tracks paid leave to ensure compliance and avoid large payouts at the end of employment.

What are client companies responsible for?

The client company partners with the Canada EOR to legally employ talent on their behalf. Their responsibilities in the EOR relationship are as follows:

  • Defines job requirements, pay and responsibilities for talent
  • Identifies the ideal candidate
  • Signs client service agreement with a Canada EOR to employ talent
  • Provides day to day direction for the Canadian employee
  • Onboards talent in terms of teaching them about organizational culture and how work gets done in this organization. They are responsible for introducing Canadian employees to their manager, team and making them feel like an integral part of the team, no different than team members who work on site.
  • Provides all the resources required for work – laptop, software, system access
  • Conducts performance reviews and determines if pay raises or promotions are deserved
  • Submits, reviews and approves bi-weekly invoices from the EOR to ensure accurate and on-time payment of Canadian employees

When a client company partners with a Canada EOR to hire a Canadian employee, they:

  • Avoid the significant costs, time and hassles of setting up a legal or tax entity in Canada.
  • Mitigate legal or financial risks by ensuring compliance with federal and provincial employment and tax laws in Canada.
  • Outsource non-strategic but time-consuming functions like payroll and benefits administration.
  • Access a broader pool of skilled and educated candidates.

What happens between the talent and a Canada EOR?

Although they legally work for the Canadian EOR, that relationship is mostly invisible to the employee, limited to payroll, tax forms (T4, T2200) and basic HR paperwork or interactions. The employee’s work life and primary relationship is with the client company from whom they receive day to day work assignments, resources and guidance. Their responsibilities in the EOR relationship are as follows:

  • Fulfill job duties as assigned by the client company
  • Meet performance expectations and deadlines
  • Maintain professional conduct and adhere to EOR company policies

When a Canadian enters into an EOR relationship they:

  • Gain valuable international experience without having to relocate
  • Avoid the uncertainty, paperwork, tax headaches and hustle needed to work as a consultant
  • Get a regular pay cheque, benefits, RSP and paid time off including sick leave and vacation
  • Workplace flexibility: Work in Canada in their home office (or local coffee shop)

How using a Canada employer of record compares to setting up a legal entity

Let’s look at a few key areas and see why using Canada EOR may be the better option for your organization over setting up a legal entity.

Cost & Timeline


EOR

  • Hire in as little as 1 day
  • Pay a % of salary or min. amount per pay period
  • Able to quickly add more employees
  • Can start with 1 employee

Legal entity

  • 6 -12 months to set up
  • Registration Fee
  • Costs for Canadian accountant, payroll provider
  • $7,000 - 10,000+ per province to draw up employment contract and policies
  • Need 10+ employees to be worth the effort

HR compliance


EOR

  • Has policies and contracts compliant with provincial and federal laws
  • Mitigates risks and advises on each employment stage
  • Stays on top of evolving employment regulations and updates contracts and policies regularly

Legal entity

  • Find experts in provincial law, policies and taxes/ payroll
  • 1-2 months to create province specific contracts and policies
  • Assume all legal risks and liabilities for Canadian employees
  • Once per year review and update of all contracts and policies to ensure ongoing compliance

Taxes


EOR

  • Ensures accurate deductions and prepares tax documentation T4,T2200  for employee and government

Legal entity

  • File taxes in each province where employee resides
  • Stay up to date on evolving tax landscape and ensure deductions are correct.
  • Prepare tax documentation and ensure records are correct

Payroll & benefits


EOR

  • Have a Payroll Compliance Professional (PCP) with in-depth knowledge, ensuring accurate and compliant payroll processing.
  • Streamline payroll tasks, saving time and effort for client companies.
  • Navigate complex employment laws, reducing the risk of legal issues related to payroll and benefits.
  • Avoid the expenses and complexities associated with managing payroll and benefits in-house.

Legal entity

  • Most time consuming part of bookkeeping
  • Complexity – irregular employment laws and regulations require local legal expertise
  • High risk and inaccuracies due to complex local regulations

NOTE: If no revenue is generated in Canada, companies may not be able to set up a legal entity

Your primer to navigating Canadian employment law


Federal and provincial Laws

Canada's employment laws are governed by a complex and overlapping framework of federal and provincial legislation. Some employees are regulated by federal laws (The Canada Labour Code) such as railways, airlines, banks, pipelines and mining. Most other employees are regulated by the labour and employment standards as set out by the province in which they work. Although there are many similarities in standards between the provinces, there are also many technical differences that an employer must be aware of. This can create a compliance nightmare that can be difficult for a foreign employer to navigate and contracts must be regularly reviewed and updated to ensure ongoing compliance. Areas of complexity include:

  • Wages and hours

    • Minimum wage, overtime pay, and other wage-related entitlements vary by province and industry.
    • Compliance with provincial rules regarding scheduling, breaks, and leaves of absence.

  • Employment standards

    Employment Standards are the legislative acts that govern the employer – employee relationship and ensure employees are treated fairly and equitably. Employment standards also set out specific requirements for employers, for example the requirement to have certain policies or workplace programs in place.

    • Policies to ensure employees are treated fairly and equitably and that the EOR employment contract meets or exceeds legislative requirements in all jurisdictions where they have employees. These policies also set a minimum standard for employee conduct.
    • An EOR can advise client companies on termination of employment, severance pay, workplace safety and many other legal questions

  • Paid and protected leaves

    Every province in Canada requires a minimum amount of vacation time or pay, as well as paid time off on statutory holidays and job protected leave. Each province also has its own rules governing eligibility for overtime and rates of overtime pay.

    • Statutory holiday: Each province has their own. For instance, in Ontario, there are nine mandatory paid holidays in 2024 plus four optional ones.
    • If employees do not use their paid time off as it is accrued, significant financial liabilities for the client company can result as paid leave must be paid out when employment ends.
    • An EOR should ensure provincial laws are being followed and track and correctly accrue paid leave to avoid unexpected payouts.
    • Canada also has a number of job-protected leaves (eg. maternity, critical illness, family care) and each province has different requirements or entitlements for each. A Canada EOR should have clear policies on these leaves and provide the employees and client companies information about these protected leaves.

  • Ending of employment – terminations, layoffs and offboarding

    Given the contrast between the 'at-will' employment structure in the United States and other countries and Canada's complex web of employment regulations, a Canada EOR plays a vital role in advising on severance packages and notice periods.

    The right Canadian EOR can ensure a smooth and legally compliant transition for employees and limits financial exposure for the client company with a sound and legally enforceable employment contract. The EOR's expertise in navigating the nuanced employment laws of each country enables a seamless offboarding process, minimizes potential challenges and promotes a respectful and compliant conclusion to the employment relationship.

How a Canada Employer of Record provides worry-free employment - and legal compliance

Navigating the complex and evolving landscape of Canadian employment laws and regulations can be a daunting task. A Canadian Employer of Record alleviates this burden, providing worry-free employment of Canadian talent. An EOR in Canada must understand both federal and provincial employment laws and should have contracts and policies specifically tailored to each province.

For companies who hire an Employer of Record in Canada, this provides a worry-free way to employ Canadians:

  • Freedom to hire anyone, anywhere in Canada.
  • A single point of contact for all Canadian HR and payroll services.
  • Advice to ensure compliance and mitigate risks throughout the employment life cycle.
  • Outsource of administrative functions so they can focus on business objectives and growth without worrying about compliance, costs and risks associated with Canadian employees.

Questions to ask a Canadian Employer of Record about legal compliance

  • Does your organization have internal expertise or have a network of external HR and employment law experts to handle difficult and potentially expensive HR issues like workplace investigations, employee discipline or terminations?
  • Do you have employment contracts and policies specific to the province the potential employee lives in?

Streamlining payroll and tackling the Canadian tax system


Payroll processing in Canada

Payroll processing, known for its complexity and time-consuming nature, plays a crucial role in an organization's financial management. The intricacies involved in managing employee compensation, tax deductions, benefits, and compliance with ever-changing regulations make payroll a challenging yet essential function.

Some hard-hitting payroll stats and facts:

  1. 40% of small business owners say taxes and bookkeeping are the worst and most time- consuming part of owning a business (SCORE).
  2. Payroll typically takes up 5 hours each pay period or 21 days each year.
  3. There are twice as many mistakes when using homegrown payroll solutions versus third-party payroll solutions (Aptitude’s Payroll Index Report).
  4. 25% of small businesses use pen and paper for tracking finances. 45% don’t have an in-house accountant or bookkeeper (Clutch).

When managing payroll in Canada, employers must have extensive knowledge of federal and provincial deductions encompassing Canada Pension Plan (CPP), Employment Insurance (EI), as well income tax or benefit deductions. They should also understand taxable benefits, paid leave accrual, and how to properly handle expenses.

A Canada employer of record handles all payroll processes and functions on behalf of their clients including:


  • Handling time-consuming calculations:

    An EOR handles intricate calculations, including regular wages, overtime pay, bonuses, tax deductions, and other entitlements.

  • Ensuring compliance with payroll laws:

    Employers in Canada must comply with various payroll laws at the federal and provincial levels as well as Canada Revenue Agency (CRA), Employment and Social Development Canada (ESDC) and the Provincial Ministry of Labour and ensure accurate employee payments to timely tax deductions and submissions.

  • Filing and reporting requirements:

    An Employer of Record manages the filing of payroll reports with government agencies, such as tax authorities and employment insurance offices.

Pro Tip! Seek an employer of record equipped with certified payroll compliance professionals (PCP) for an assurance of expert handling in payroll processes. Elevate your business with a partner committed to precision and compliance.

Navigating the complex Canadian tax landscape

Canada's tax system is a multi-jurisdictional one, with federal and provincial levels of government imposing taxes. As a result, tax compliance is a significant administrative burden for businesses. A Canada Employer of Record (EOR) must possess in-depth knowledge of this complex tax structure, ensure meticulous paperwork and reporting.

Hard-hitting tax fact: Tax compliance consumes, on average, 54 percent of a tax department’s time


Questions to ask a Canadian Employer of Record about payroll

  • Do you have certified payroll practitioners in house?
  • Do you have experts in payroll practices in each province or at least in the provinces your candidate lives in (eg. Ontario, British Columbia, Quebec)

Outsourcing HR administration

Talent management professionals spend more than 50% of their time on administrative tasks. This leaves little time for strategic HR planning, employee relations, and talent development. For instance, small businesses report the following:

HR Admin: 5 hours per week


Benefits Admin: 1.6 hours per week



Payroll: 5 hours per day


Labor Law Review: 1-3 hours per week


How can a Canadian employer of record help with HR administration?

When engaging a Canada Employer of Record, they will handle all the nitty-gritty boring but critical HR administration and compliance tasks for Canadians, so client companies can focus on more strategic initiatives like talent motivation and development.

  • HR compliance:

    Review and update policies (eg. harassment, substance use, protected leaves, health and safety) on an annual basis, review employment contracts annually, provide Canada specific training or assessments (eg. health and safety, ergonomic) and ensure compliance with employment standards, maintain meticulous employment records and paperwork.

  • Benefits administration:

    Negotiate contracts with benefit providers, answer employee inquiries about plans and guide them through the enrollment or claims submission processes.

  • Onboarding employees:

    Ensure all paperwork is completed and signed including employment contracts, tax forms, direct deposit, benefits and other relevant forms. Review company policies, paid leave and benefits packages with employees, help them enroll in benefits and RRSPs to set the stage for a successful and smooth employment lifecycle.


Questions to ask a Canadian employer of record about HR administration

  • Do you provide STD or LTD coverage?
  • Do you have province specific policies? How often do you review and update these policies?
  • What is included in your onboarding processes?

Benefits and retirement savings (RRSP) administration

Although Canada has a publicly funded, universal system for medically necessary health care services, some services like prescription drugs, dental and vision care are not covered.

Employees in Canada expect employers to provide health benefits that cover these gaps for themselves and their families and also extend health coverage to include services like physiotherapy, psychiatry, naturopathic or massage.

How can a Canadian employer of record help you with benefits and retirement savings administration?

A Canadian employer of record (Canada EOR) will engage with a Canadian benefits provider to provide a comprehensive health benefit package to cover the majority of health-related expenses not covered by the public system.

1. Supplemental health benefits management


  • Negotiate contracts with benefits providers:

    Contract with Canadian health benefit providers to secure optimal but cost-effective supplemental health benefits.

  • Employee enrollment:

    Assist employees in enrolling and selecting supplemental benefits to best meet their needs.

  • Explain coverage and claims process:

    Most benefit providers have online portals that make it easy to file claims, check on the status of a claim or find out about what is included in coverage.

  • Contribution management:

    For tax efficiency, some benefits (like short-term disability) may be paid by the employee or benefit cost may be shared by the client company and employee. A Canadian EOR will ensure all invoices or payroll deductions are accurate, provide documentation and answer any questions from clients or employees.

2. Life insurance, short-term disability (STD), and long-term disability (LTD)

To lessen the financial impact of major illness, injury or death of the employee, most EORs will offer life and disability insurance for employees as a part of their benefits plan.

Short and long-term disability (STD, LTD) plans in Canada provide income replacement to employees in the event of a serious illness or injury that prevents them from working for an extended period.

A Canada EOR will set up and administer these programs and advise employees (and employers) on how to navigate the complicated administrative process of submitting applications and supporting documentation to access these benefits.

  • Life insurance:

    Provides financial protection to employees' beneficiaries in the event of the employee's death. This offers peace of mind to employees, knowing their loved ones are financially secure.

  • Short-term disability (STD):

    Offers financial support to employees who are temporarily unable to work due to illness or injury. Typically covers a portion of the employee's salary for a specified period, often the initial weeks of disability. Short-term disability plan aims to provide a financial safety net during short-term health challenges.


  • Long-term disability (LTD):

    Extends coverage beyond the short-term, providing financial assistance for an extended period, sometimes until retirement age. Long-term disability plan covers a percentage of the employee's salary, ensuring continued financial support during prolonged illnesses or injuries. This plan is essential for employees facing extended periods of disability, offering sustained income protection.

3. Retirement savings plan (RRSP) management

A Canadian EOR will typically offer a registered retirement savings plan (RRSP) for employees. They will negotiate contracts with a Financial Provider for the Group RRSP that will provide a number of different investment options to choose from without subjecting employees to undue market risks. They will deduct any contributions an employee chooses to make from their before-tax pay and provide T4 and RRSP contribution documentation needed by the CRA for tax season.

An EOR can also advise on the amount or type of employer matching contributions expected to attract and retain top talent.

Questions to ask a Canadian Employer of Record about health benefits and RRSPs

  • What types of extended health benefits do you offer? Are there set packages or can they be customized?
  • Do you offer RRSPs? What percentage matching contributions do you recommend?

How Canadian EORs help your organization embrace the remote work future

The rise of remote work is rapidly transforming the workplace landscape and reshaping expectations about where work is done. Employees want increased workplace flexibility, and organizations that embrace remote work can expand their talent search to a much wider audience.

Did You Know? 98% of workers express the desire to work remotely at least some of the time, reflecting the growing trend towards flexible work arrangements.

Embrace the shift towards a remote-friendly workplace with a Canada EOR!

Technology and communications options have made physical proximity to an office less critical. This change is particularly evident in Canada, where professionals are now seeking remote employment opportunities without the need to uproot themselves or face the challenges associated with long commutes.

Forbes Magazine has researched remote work in the US and the statistics below reflect trends shaping the workplace landscape globally, including in Canada.

According to Forbes Insights: A Glimpse into The Remote Work Landscape (2024):

  • 12.7% of full-time employees work from home
  • 28.2% work a hybrid model
  • 32.6 million Americans will work remote by 2025
  • 16% of companies operate fully remote

Workplace flexibility has become a key factor in employee satisfaction and retention. Organizations who want to attract top talent need to adapt to the evolving work landscape and demands of the workforce.

Did you know? 57% of workers would seek new roles if their company didn’t allow remote work


Attract top talent - wherever they are

Using a Canadian EOR enables organizations like yours to attract top talent that might be reluctant to relocate, or prefer the comfort of working from home. Remote work, plus an EOR relationship also allows organizations to retain employees who want to return to their home country.

Bridgewater Talent Integration, your Canadian employer of record

Bridgewater Talent Integration is a Canada employer of record, and we help organizations seamlessly integrate Canadian talent into their team. Our talent integration team seamlessly handles every administrative detail, from contracts to payroll and benefits to offboarding, and stays on top of evolving provincial and federal regulations, so you don’t have to.

We provide our clients with a trustworthy partner for success fostering trust and confidence in every interaction and are proud to deliver:

  • Provincial expertise:

    Collaborating with top employment lawyers in each province we employ in, we've crafted employment contracts and policies tailored to each region, minimizing the financial and legal complexities of international hiring. We vigilantly monitor evolving employment and taxation laws – so you have the peace of mind to lead strategically, unburdened by administrative concerns.

  • Onboarding as little as one day:

    Bypass the obstacles of relocation, work visas, and prolonged hiring timelines with our agile employment service. Attract top talent in Canada effortlessly, offering them enticing full-time permanent roles. Avoid the complexities, costs, and headaches associated with visas, relocation logistics, or the establishment of a local entity. We pave the way for swift and seamless onboarding, empowering you to build a formidable team without unnecessary hurdles.

  • Payroll precision:

    Our certified payroll compliance professionals (PCP) have extensive expertise in federal and provincial rules, encompassing CPP, EI, and income tax deductions. Let us guide you with optimal strategies for managing taxable benefits, paid leave, and expenses. We unravel the complexities of deductions, providing clear explanations for you and your employees.

  • Seamless and transparent talent integration:

    Every aspect, from offers and contracts to payroll, benefits, and offboarding, is expertly managed by our talent integration team. We serve as your guiding force, providing insights into employment laws and best practices, fostering a tripartite relationship where we operate seamlessly in the background, allowing you to channel your focus entirely on your business.

  • Cost–effective solutions:

    Take advantage of the low Canadian dollar and avoid the hassle and costs of setting up a legal entity. Avoid the delays and paperwork needed to establish and operate a legal entity and stay focused on your core business goals.

Ready to simplify and streamline the way you add Canadian talent to your organization?