An employer of record Canada provider is the legal employer of your Canadian worker on its own entity for about $599 a month, the fee Deel and Remote currently charge, so you can hire in Canada without registering a Canadian company. The provider runs payroll, withholds the CRA CPP and EI employer contributions, and applies the provincial notice, severance and vacation rules.
On top of the fee you fund the employer’s Canada Pension Plan and Employment Insurance contributions, set each year by the Canada Revenue Agency: a 5.95% CPP rate and an EI premium at 1.4 times the employee rate in 2026. For a single hire the EOR is usually the cheaper and faster route; once you reach roughly five to ten people in Canada, a local entity or a nonresident employer account with the CRA tends to win on cost.
Canada hiring costs at a glance
| Cost item | Who pays | Typical amount (2026) | Source |
|---|---|---|---|
| EOR monthly fee | Employer | $599 per employee per month (USD) | Deel, Remote |
| CPP employer contribution | Employer | 5.95% of pensionable earnings, up to a yearly ceiling the CRA sets | CRA |
| EI employer contribution | Employer | 1.4 times the employee rate, up to a yearly insurable-earnings ceiling | CRA |
| Vacation pay | Employer | Set by province, varies with tenure | Provincial employment standards |
| Statutory holiday pay | Employer | Set by province | Provincial employment standards |
| Entity setup instead | Employer | One-time extra-provincial registration plus ongoing accounting and payroll admin | CRA |
The flat EOR fee is the predictable part of your monthly cost; the employer contributions scale with salary, and the CRA reviews their ceilings annually. An EOR folds the fee and the contributions into one invoice, which is most of the appeal at low headcount, and the provincial vacation and holiday pay obligations travel with the role regardless of who employs the worker.
How an EOR works in Canada
An employer of record is the legal employer of your Canadian worker on its own Canadian entity, so you direct the day-to-day work without becoming the employer of record yourself. The provider runs Canadian payroll, withholds and remits federal and provincial income tax and the CPP and EI contributions to the CRA, administers vacation and statutory holiday pay, enrolls the worker in provincial health coverage, and issues the Record of Employment when the role ends.
Onboarding through a provider with an existing Canadian entity typically takes a few days to two weeks, against the weeks or months of registering your own entity. The timeline turns on collecting the worker’s documents, enrolling them in the provincial health plan, and setting up payroll deductions with the CRA, not on Canadian work-permit processing, which runs separately if your hire is not already entitled to work in Canada.
Cost comparison
| Headcount | EOR fee (USD per year) | Route that usually wins | Why |
|---|---|---|---|
| 1 hire | $7,188 | EOR | No setup, fastest to onboard |
| 5 hires | $35,940 | EOR | Still simpler than an entity |
| 10 hires | $71,880 | Canadian entity or nonresident account | Fixed entity costs spread across more people |
The EOR side scales linearly at the $599 monthly fee Deel and Remote list, so the annual cost runs about $7,200 for one person and about $72,000 for ten. A Canadian entity or a nonresident employer registration with the CRA carries a largely fixed cost in setup, accounting and payroll administration that barely rises with headcount, which is why it tends to overtake the EOR somewhere around five to ten hires.
That flat fee versus fixed overhead sets the crossover, and the headcount where an entity wins is lower when your hires are senior and highly paid, because a flat per-head fee stops mattering next to a high salary. The cost of an employer of record guide breaks down how those fees vary across countries and providers.
Legal compliance in Canada
Employment standards in Canada are set by each province rather than the federal government, so the rules that apply to your hire depend on where they work. Ontario, British Columbia and Quebec each enforce their own employment standards statute, and federally regulated industries such as banks, telecom carriers and interprovincial transport follow the Canada Labour Code instead of a provincial act.
Quebec adds a language obligation the other provinces do not. Under the Charter of the French Language, as amended by Bill 96, offers of employment, written individual employment contracts and written communications to an employee must be available in French, and an adhesion contract drawn up only in another language is not binding until it is translated.
Hiring a Canadian worker as a contractor instead of an employee shifts the payroll obligations but carries misclassification risk. The CRA applies a common-law test, looking at control, the ownership of tools, the chance of profit and the risk of loss among other factors, to decide whether a worker is really an employee or a contractor; in Quebec a three-factor test under the Civil Code applies instead.
A sales hire in Canada can create a permanent establishment for your company under Article V of the Canada-United States tax convention, which deems a permanent establishment to exist where a person habitually exercises authority to conclude contracts in your name, per the consolidated treaty text. That can trigger Canadian corporate income tax and GST/HST registration, while engineers and back-office staff are less likely to create one, and the permanent establishment guide covers how that exposure builds and how to limit it.
Payroll taxes in Canada
Employers pay a 5.95% CPP contribution on pensionable earnings in 2026, matching the employee rate, up to a yearly pensionable-earnings ceiling the CRA sets and reviews each year. A second, lower-rate CPP contribution on earnings above the standard ceiling is phasing in under the CRA’s enhancement schedule.
The employer Employment Insurance premium runs at 1.4 times the employee rate, withheld on insurable earnings up to a yearly ceiling the CRA sets, and the CRA remittance schedule depends on your average monthly withholding amount.
The EOR also withholds federal and provincial income tax from each paycheck under the CRA’s TD1 personal tax credits form and remits it on the schedule the CRA assigns by your withholding amount, so the worker’s take-home pay already reflects both layers of Canadian income tax.
Quebec runs its own parallel payroll system rather than the CRA’s: the Quebec Pension Plan mirrors CPP, the Quebec Parental Insurance Plan replaces EI for parental benefits, and the CNESST adds a health-and-safety contribution, administered by Retraite Quebec and the CNESST rather than the CRA.
EOR versus a local entity
The choice among an EOR, a contractor and your own Canadian presence turns on headcount, speed and how much employer control you need, and Ogletree frames three routes for a non-Canadian employer: an EOR, a contractor, and registering with the CRA as a nonresident employer.
An EOR fits a first hire or a small team when speed matters and you want employment handled without an entity, and the provider carries the employer liability on its Canadian company. A nonresident employer registration with the CRA lets you employ someone directly without a Canadian company, using a business number and a payroll program account, per the CRA’s nonresident registration page, and it suits a handful of hires where you want direct employment but not a subsidiary.
A Canadian subsidiary suits scale, usually ten or more hires, or when you need to hold intellectual property, grant equity, or run payroll for a larger team. The line between a PEO and an EOR turns on who holds the employer liability and whose entity employs the worker, which matters more as headcount and compliance load grow.
Scaling framework
| Stage | Headcount | Model | Trigger to move on |
|---|---|---|---|
| First hire | 1 | EOR | You need entity control or equity grants |
| Early team | 2 to 5 | EOR | Admin load rises or you add a second country |
| Growing team | 6 to 10 | EOR or nonresident registration | Fixed entity costs start to win |
| Scale | 10+ | Canadian entity | You need IP holding, equity, or large payroll |
Most employers start on an EOR because it needs no setup and handles the provincial rules from day one, then move to a nonresident employer account or a Canadian subsidiary once the flat fees add up to more than the fixed cost of running their own payroll. The trigger is usually cost at scale or a need the EOR cannot meet, such as granting equity or holding intellectual property in Canada.
Termination rules in Canada
| Province | Statutory notice by tenure | Severance | Source |
|---|---|---|---|
| Ontario | One week for an employee with under a year of service, rising with tenure to a maximum of eight weeks | Yes, with five or more years of service and an employer global payroll above CA$2.5 million; up to 26 weeks | Termination and notice, severance |
| British Columbia | None in the first three months, one week after three months, two weeks after one year, three weeks after three years plus one week per additional year to eight weeks maximum | No separate statutory severance; common-law reasonable notice may apply | BC Employment Standards |
| Quebec | Written notice that scales with length of service under the Act respecting labour standards | Common-law reasonable notice may apply on top of statutory notice | CNESST |
Ontario separates notice from severance: notice is owed by tenure, while severance pay adds up to 26 weeks of regular weekly wages for employees with five or more years of service when the employer’s global payroll exceeds CA$2.5 million, per the Ontario severance pay guide. British Columbia has no separate statutory severance, but common-law reasonable notice can run longer than the statutory minimum. Quebec’s Act respecting labour standards sets written notice by length of service, with common-law notice potentially on top, and federally regulated employers fall under the Canada Labour Code, which has its own individual and group termination provisions.
FAQ
An EOR in Canada currently costs about $599 per employee a month, the fee Deel and Remote both list, on top of the employer’s CPP and EI contributions. The CPP rate is 5.95% of pensionable earnings in 2026 and the employer EI premium is 1.4 times the employee rate, both up to yearly ceilings the CRA sets.
To legally hire an employee in Canada you need a Canadian employer on record, either your own registered entity, a nonresident employer account with the CRA, or an employer of record that employs the worker on its Canadian entity. The EOR route needs no registration and handles payroll, tax withholding and the provincial employment standards that apply to the role.
Yes, a US company can hire a Canadian employee without a Canadian entity by using an employer of record or by registering with the CRA as a nonresident employer, both of which employ the worker in Canada without a subsidiary. An EOR is faster and carries the employer liability, while a nonresident registration gives you direct employment with a CRA business number and payroll account.
Employer payroll contributions in Canada run at 5.95% of pensionable earnings for CPP in 2026, plus an EI premium at 1.4 times the employee rate, both up to yearly ceilings the CRA sets. On top of those you fund vacation pay and provincial health coverage, which vary by province and tenure.
No, an EOR itself does not create a permanent establishment for your company, because the worker is employed by the EOR’s Canadian entity rather than yours, but a sales hire with authority to sign contracts in your name can, under Article V of the Canada-United States tax convention. The risk turns on the worker’s authority to bind your company, not on who runs the payroll, and engineers and back-office staff are less likely to trigger one.
Yes, employment contracts and written communications to an employee in Quebec must be available in French under the Charter of the French Language, as amended by Bill 96, and an adhesion contract in another language is not binding until translated.
Onboarding a Canadian employee through an EOR typically takes a few days to two weeks when the provider already has a Canadian entity, against the weeks or months of registering your own. The timeline depends on collecting the worker’s documents, enrolling them in provincial health coverage, and setting up payroll with the CRA.
No, a US employee cannot work in Canada on their US status alone; working in Canada generally requires a work permit from Immigration, Refugees and Citizenship Canada, and an EOR usually cannot sponsor a work permit on its own. The immigration route depends on the worker’s nationality, the role, and whether a labour market assessment or an exempt category applies.
Yes, at low headcount, an EOR is cheaper than a Canadian entity because its flat monthly fee needs no setup, but a Canadian entity or a nonresident employer registration tends to win on cost once you reach roughly five to ten hires. The crossover turns on the EOR’s per-head fee versus the entity’s largely fixed accounting and payroll-administration cost.
