UK business hiring in Canada: routes, costs and the rules that differ

Yes. A UK business hiring in Canada can take on staff there without incorporating, either by contracting with them as independent businesses or through an employer of record (EOR). Through Employer of Record Canada, the contract of employment is signed by us as the legal employer (employer of record), and we also operate payroll with the Canada Revenue Agency (CRA) and file the year-end returns. Your UK managers keep setting objectives and reviewing the work.

Contracting looks simpler until the Canadian test is applied. The CRA asks first what the parties intended, then examines control, who supplies tools and equipment, whether the person can subcontract or hire helpers, financial risk, investment and management, and the chance of profit. Someone working full time for one UK client, on the client’s systems and schedule, will struggle to pass it. If a so-called contractor turns out in law to be an employee, a 10% CRA penalty can apply to whatever CPP, EI and income tax went unwithheld, on top of the arrears and interest.

Forming a Canadian corporation remains the long-term route for many firms. The comparison further down this page shows where each option makes sense, and our article on choosing between an EOR or Canadian subsidiary goes into the trade-offs at greater length.

An EOR does not remove every obligation from the UK side. Your managers still decide duties, hours and performance, and they need to respect the Canadian contract the employer of record issues, including its leave and notice terms. Ontario’s temporary help agency rules can also make a client share liability with the agency for unpaid regular wages, overtime or holiday pay. Funding each payroll on time, and putting pay changes in writing, keeps that risk low.

Canadian payroll works on the same withhold-at-source principle as PAYE, with different contributions and one extra layer: the province. In the UK, employers pay secondary Class 1 National Insurance at 15% on earnings above GBP 5,000 a year for 2026 to 2027, according to HMRC’s rates and thresholds for employers. A Canadian employer instead pays Canada Pension Plan (CPP) and Employment Insurance (EI) contributions, both of which stop at an annual earnings ceiling.

In 2026, a Canadian employer outside Quebec contributes up to CAD 4,230.45 of CPP per person (5.95% of pay above CAD 3,500 and below CAD 74,600, matched by the employee) and up to CAD 416 of CPP2 (4% of the next band, to CAD 85,000). The employer’s EI premium is 2.282% of insurable earnings up to CAD 68,900, a maximum of CAD 1,572.30. Provincial levies come on top: Ontario charges Employer Health Tax (EHT) of up to 1.95% and WSIB workplace insurance premiums set by industry class. In Quebec, employer and employee each pay 6.30% to the province’s own pension plan, the Régime de rentes du Québec (QPP), instead of CPP.

Our 2026 worked example takes a CAD 85,000 salary in Ontario. The employer’s total comes to CAD 93,029.25, a 9.45% on-cost, and CAD 102,515.97 with the EOR fee included. The employee takes home CAD 63,679.42 after CPP, CPP2, EI, federal and Ontario income tax and the Ontario Health Premium. The example assumes a single person with no credits beyond the basic ones, an employer paying EHT at 1.95%, and office work insured by the WSIB in Class L (CAD 0.18 per CAD 100).

Canadian statutory leave is shorter than the UK’s, so UK employers usually decide to offer more than the minimum. Almost all UK workers are entitled to 5.6 weeks’ paid holiday a year, and an employer can count bank holidays within that, as GOV.UK’s holiday entitlement guidance explains. Ontario’s Employment Standards Act, 2000 (ESA) sets a floor of 2 weeks’ vacation, moving to 3 weeks at 5 years’ service, with vacation pay worth 4% or 6% of gross wages; its 9 public holidays come on top.

Public holidays vary by province. Ontario’s 9 include Family Day in February and Boxing Day, British Columbia has 11, among them BC Day on the first Monday in August and 30 September, and Quebec has 8, including the Fête nationale du Québec on 24 June. Sick leave differs as well: Ontario gives 3 unpaid, job-protected days a year and bars employers from asking for a medical note for them, whereas British Columbia, after 90 days’ employment, allows 5 paid days and 3 unpaid.

Parental leave is long. In Ontario, a birth parent can combine 17 weeks of pregnancy leave with 61 weeks of parental leave (63 weeks for a parent who took no pregnancy leave). The employer pays nothing during those weeks; income comes from EI benefits, or from Quebec’s own parental insurance plan for Quebec residents. A UK firm that promises its Canadian hire the same holiday allowance as its London staff will be offering well above the Canadian floor, which is a perfectly reasonable choice as long as the contract says so clearly.

Benefits packages follow a similar logic. Core medical care in Canada is publicly funded by the provinces, so Canadian employers typically offer extended health and dental cover, and sometimes a group retirement savings plan, rather than the private medical insurance and workplace pension a UK employee would expect. Agree early which of these the employer of record will provide and what they add to the monthly cost.

Statutory notice minimums look similar on paper, but Canadian employees can also claim common-law “reasonable notice”, which is where the larger exposure usually sits. UK law requires at least one week’s notice after one month’s employment, one week per year of service between 2 and 12 years, and 12 weeks after 12 years, according to GOV.UK’s notice period guidance. Ontario’s ESA scale is shorter at the top: it rises from 1 week to a ceiling of 8 weeks, and the first 3 months carry no statutory notice at all.

Ontario can also require severance pay on top of notice, up to 26 weeks’ wages for employees with at least 5 years’ service at larger employers. In Quebec, an employee with 2 years’ service can bring a complaint that a dismissal lacked just and sufficient cause, and the remedy can include getting their job back. The judge-made reasonable notice period has no fixed scale and often exceeds the statutory weeks, which is why a UK firm should have the Canadian termination clause checked by counsel in that province.

Our explainer on at-will vs reasonable notice in Canada sets out the provincial minimums in full.

Incorporating federally costs a UK parent CAD 200 through Corporations Canada’s online service, with a 1-business-day turnaround. Finding resident Canadian directors (a quarter of the board, or one person on a board of 3 or fewer) is often harder than the paperwork. A UK company that prefers to operate in Ontario directly, with no Canadian subsidiary, applies for an extra-provincial licence instead (CAD 330, about 5 business days).

Before anyone is paid, the new company registers with the CRA for a business number and payroll account. In Ontario it also registers with the WSIB and, depending on payroll size, for EHT; in Quebec it deals with Revenu Québec and the CNESST. Payroll software, a Canadian bank account and a benefits provider follow.

For one to a handful of hires, the EOR column is usually the lighter route. Once the Canadian team is large, permanent and perhaps needs to sponsor work permits in its own name, a corporation of your own tends to pay back the set-up effort. Some UK firms start with an EOR and move staff across later. Ontario’s agency rules keep that route open: agencies may not restrict clients from hiring assignment workers themselves. Plan the switch with the employer of record so notice, vacation balances and the Record of Employment are handled cleanly on the day employment transfers.

Time difference, currency and the provincial rulebook cause most of the early surprises. Toronto and Montréal are five hours behind London for most of the year and Vancouver eight, so a Canadian employee’s morning overlaps with the UK afternoon. Salaries are set and paid in Canadian dollars and our fee is billed in US dollars (from USD 560 a head each month, roughly CAD 790.56 at the ECB rate for 24 September 2026), so a sterling budget carries exchange exposure to both.

• Province of employment. Tax withholding follows the establishment the employee reports to or is attached to, and employment standards generally follow where the work is done.
• French in Quebec. Quebec’s Charter of the French Language means job offers are published in French and workplace communication with staff happens in French.
• Ontario job postings. Firms with 25 or more staff have, since 1 January 2026, had to put a pay band of CAD 50,000 or narrower in adverts and let interviewed candidates know the result within 45 days.
• Non-competes. Ontario outlawed them below executive level from 25 October 2021, so confidentiality and non-solicitation terms do the protective work.
• Right to work. Staffing agencies are not employers for LMIA purposes, so check the candidate’s status first; International Experience Canada offers open Working Holiday permits to young people from countries with a youth mobility arrangement with Canada.

Ontario also requires temporary help agencies to hold a licence and bars clients from knowingly using an unlicensed one. Ask any provider how it handles provincial licensing; the other questions worth asking are in our guide to choosing an EOR provider in Canada.

Q01Must a UK business register in Canada before employing someone there?+

A.No, provided it hires through an employer of record. The employer of record holds the employment relationship and the payroll registrations, and the UK company contracts with the EOR for the service.

Q02Is Canadian employer tax higher than UK employer National Insurance?+

A.It depends on salary and province. UK employer NIC is 15% above GBP 5,000 for 2026 to 2027, while Canadian CPP and EI stop at annual ceilings and provinces such as Ontario add EHT and WSIB.

Q03How much holiday must a Canadian employee receive?+

A.In Ontario, 2 weeks’ vacation a year for under 5 years’ service and 3 weeks from 5 years, plus 9 public holidays. Other provinces set their own figures.

Q04Can a UK employer use a non-compete for a Canadian hire?+

A.Not in Ontario, unless the hire is an executive: the ban covers contracts made from 25 October 2021. You can still protect client relationships and information with non-solicitation and confidentiality terms.

Q05What time difference should UK teams plan around?+

A.Eastern Canada, including Toronto and Montréal, is five hours behind London for most of the year, and British Columbia eight.