Hiring Local Employees in Canada: Payroll and Employment Standards

Withholding CPP, EI and income tax, T4s, key Ontario employment standards

Scott Tang, CPAUpdated 2026-11-032026 rules5 min read

The biggest difference between hiring in Canada and hiring in China is that the company must deduct income tax and social security contributions from the employee's pay and remit them at the frequency the CRA sets. It must also follow the province's Employment Standards Act, which sets firm rules on minimum wage, overtime, vacation and notice of termination. The examples below use Ontario.

$17.95

Ontario's minimum hourly wage (from October 1, 2026)

44 hours

Hours worked beyond this in a week earn overtime at 1.5 times the regular rate

The 15th

A regular monthly remitter sends the CRA the amounts deducted in a month by the 15th of the following month

Before you hire your first employee

1
Open a payroll account
A CRA RP account, before the first payday
2
Register with WSIB
In mandatory industries, within 10 days after the first employee starts work
3
Write employment contracts
Position, pay, probation period, termination clauses
4
Pay and deduct
Deduct income tax, CPP and EI every payday
5
Remit on time
At the frequency the CRA sets; regular remitters by the 15th of the following month

What is deducted and paid each payday

Item	Employee pays Deducted from pay	Company pays On top of pay
Income tax	✓Per the CRA payroll deduction tables	✕
CPP (Canada Pension Plan)	✓	✓Same amount as the employee
EI (Employment Insurance)	✓	✓1.4 times the employee's amount
WSIB (workplace injury insurance)	✕	✓At the rate for your industry
EHT (Ontario Employer Health Tax)	✕	◐Only if total payroll exceeds the exemption

Income tax

👤 Employee pays: ✓Per the CRA payroll deduction tables
🏢 Company pays: ✕

CPP (Canada Pension Plan)

👤 Employee pays: ✓
🏢 Company pays: ✓Same amount as the employee

EI (Employment Insurance)

👤 Employee pays: ✓
🏢 Company pays: ✓1.4 times the employee's amount

WSIB (workplace injury insurance)

👤 Employee pays: ✕
🏢 Company pays: ✓At the rate for your industry

EHT (Ontario Employer Health Tax)

👤 Employee pays: ✕
🏢 Company pays: ◐Only if total payroll exceeds the exemption

At year-end (by the end of February of the following year), issue a T4 to each employee. When an employee leaves or their pay stops, issue a Record of Employment (ROE), which the employee needs to apply for EI.

Ontario employment standards: the most common questions

Minimum wage
The general minimum hourly wage is $17.95 from October 1, 2026, and is adjusted for inflation every October.
Overtime
Hours over 44 in a week must be paid at no less than 1.5 times the regular rate; there are exceptions, such as for managerial roles.
Vacation
At least 2 weeks of paid vacation for every 12 months worked, with vacation pay of 4%; after 5 years, 3 weeks and 6%. There are also 9 public holidays.
Termination
Under the Employment Standards Act, the minimum notice or pay in lieu of notice for termination without cause is generally 1 week per year of service, up to 8 weeks. This is only the statutory minimum, not a cap on the total cost: eligible employees may also receive severance pay, and if the contract isn't well drafted, a court may award a longer notice period under common law. Mass terminations have separate rules. We recommend having an employment lawyer calculate the actual amounts.
Job postings
Since January 1, 2026, employers with 25 or more employees generally must include the pay or pay range in publicly advertised job postings (with exceptions), and must also state whether the posting is for an existing vacancy and whether AI is used to screen applicants. Every applicant who was interviewed must be told, within 45 days after their last interview, whether a hiring decision has been made.

What foreign-owned companies should watch for

Write employment contracts for Canada. If you simply reuse a Chinese contract, many of its clauses won't hold up in Ontario, especially the termination clauses.
Payroll withholding is the directors' responsibility. If amounts are deducted but not remitted, the directors can be personally liable in certain circumstances.
Decide first whether someone is an employee or a contractor. It depends on the actual working relationship, not on what the contract happens to say. If you get it wrong, you will have to pay the missed deductions and penalties.
Treat seconded and local employees separately. Employees sent from abroad differ in tax status and CPP exemption (see "Sending Employees to Canada: Personal Tax and Payroll" in this series).

How Sheng Qian CPA can help

Ready before you hire
We sort out the payroll account, WSIB registration and withholding plan in one go; the accounts can be opened when you incorporate through EasyU Incorporation.
Monthly payroll done for you
We calculate pay and source deductions, send remittance reminders, issue T4s at year-end and ROEs when employees leave (the monthly fee and year-end T4s are charged separately; for prices, see "What Sheng Qian CPA Can Do for Foreign Companies: Services from Set-Up to Day-to-Day Operations" in this series). Remitting on time remains the employer's legal responsibility.
Linked with bookkeeping and the T2
The same team reconciles payroll, WSIB, EHT and the books, and also handles the year-end and the T2.

We recommend having an employment lawyer review your employment contracts and termination clauses.

Sources

Disclaimer

This article is general information only and is not tax or legal advice. Every company's situation is different; please consult a CPA or an employment lawyer about your specific arrangements. Service fees are as set out in our written quote.