US employers expanding into Canada: what changes north of the border

US companies hire in Canada mainly because the working day lines up and the move is short. Vancouver keeps Pacific time with Seattle and San Francisco, Calgary shares Mountain time with Denver, Winnipeg runs on Central time with Chicago, and Toronto, Ottawa and Montréal sit on Eastern time with New York. A team split across the border can hold its stand-ups and planning sessions in normal hours, which is rarely true of hires in Europe or Asia.

Candidates are the other draw. Canada’s larger cities have established technology, finance and engineering employers, and plenty of applicants have already studied with, reported to or sold into US organisations. English is the working language outside Quebec, so most US hiring managers can interview, onboard and manage a Canadian hire with the same materials they use at home. Any expected salary difference is worth testing against live offers in the specific city and occupation, because Canadian pay varies a great deal by province and sector.

Plenty of first Canadian hires are not planned expansions at all. A trusted contractor moves back to Calgary, a US employee’s spouse takes a job in Toronto, or the best finalist for a remote role turns out to live in Halifax. In each case the company already knows who it wants, and the open question is how to employ that person under Canadian rules.

From the first pay, salary is paid in Canadian dollars and Canadian statutory deductions replace the US ones. A US employer withholds federal income tax and FICA, pays its own share of Social Security at 6.2% and Medicare at 1.45%, and adds federal and state unemployment tax. Once the person is working in Canada, three things come off each Canadian payslip instead (income tax, Canada Pension Plan (CPP) and Employment Insurance (EI)), and the employer sends them to the Canada Revenue Agency (CRA).

Outside Quebec in 2026, both the company and the worker put 5.95% into CPP on the slice of pay from CAD 3,500 to CAD 74,600; a second tier, CPP2, takes a further 4% from each side between CAD 74,600 and CAD 85,000. For EI, the worker’s rate is 1.63% and the company’s 2.282%, applied to the first CAD 68,900 of insurable pay. Provinces then add their own employer levies. In Ontario these are the Employer Health Tax (EHT), charged at 0.98% to 1.95% according to the size of the Ontario payroll, and WSIB workplace insurance premiums that vary with the industry class.

The province also decides which income tax tables apply. The CRA calls this the “province of employment”; for a home-based employee it points to the employer’s establishment that the person reports to, or has a reasonable attachment to. Annual T4 slips go out to employees before February is over, and an interruption of earnings, such as a final day of work, triggers a Record of Employment (ROE), normally within 5 calendar days. Our breakdown of US vs Canada payroll costs sets the two systems side by side line by line.

Most employment standards in Canada are set by the province where the person works. The Canada Labour Code covers federally regulated industries such as banks, telecoms and interprovincial transport, so a developer in Toronto falls under Ontario’s Employment Standards Act, 2000 (ESA) and a designer in Vancouver under British Columbia’s rules. US employers used to state-by-state variation will recognise the pattern; the change is that paid time off has a statutory floor for salaried staff as well.

An Ontario new starter is entitled to 2 weeks of vacation per year (3 weeks once they pass 5 years), with vacation pay of 4% of gross wages as the minimum, or 6% for the longer-serving group. The ESA lists 9 public holidays and grants 3 unpaid, job-protected sick days after two consecutive weeks on the job. In British Columbia, sick leave is 8 days in all after 90 days of employment, 5 of them paid. Family leave runs long by US standards: an Ontario parent can be away for well over a year once pregnancy and parental leave are combined. The employer does not pay wages during those leaves, and eligible parents claim maternity and parental benefits from EI instead.

Minimum wage is provincial too. Ontario’s hourly minimum was CAD 17.60 until the end of September 2026 and is CAD 17.95 from October, while British Columbia has paid at least CAD 18.25 since 1 June 2026. Only federally regulated employers use the federal CAD 18.15 rate.

A Canadian employer that ends employment owes notice or pay in lieu, which is the biggest adjustment for most US managers. At-will employment is the default in the US, subject to exceptions such as discrimination, retaliation, contract terms and public policy, so a US employer can usually end the relationship without a notice period. Canadian provinces set minimum notice by length of service instead, and employees may also claim a court-assessed “reasonable notice” at common law, which can run well past those minimums.

In Ontario the ESA scale starts at 1 week and tops out at 8 weeks for people with 8 or more years’ service, and nothing is owed during the first 3 months. The exception for misconduct is narrow: the statute requires wilful misconduct, disobedience or deliberate neglect that is more than trivial, which is a far higher bar than a typical US for-cause dismissal. Employee benefits keep running for the whole statutory notice period. Long-serving staff at larger employers may also be owed ESA severance pay, a separate sum worth up to 26 weeks’ wages.

Whether severance pay applies depends partly on the legal employer’s payroll, so it is worth knowing who that employer is and how large it is. Termination wording in the employment contract should be written against the ESA from day one and checked by Ontario counsel. Our guide to at-will vs reasonable notice in Canada compares the provincial rules in more depth.

US citizens in listed professions who have pre-arranged employment can apply for a CUSMA Professional work permit, and that route does not need a Labour Market Impact Assessment (LMIA). It fits many of the roles US firms fill in Canada. The eligibility detail depends on the occupation and the offer, so confirm it against IRCC’s guidance for business people under trade agreements before relying on it.

Settle whether a particular permit can work alongside an EOR arrangement before the offer goes out. Two official positions are clear. The Temporary Foreign Worker Program states that “staffing or employment agencies who recruit workers for other businesses aren’t considered employers”, which leaves the LMIA with whichever business actually recruits the person, fixes their terms and pays them. Intra-company transferee permits rely on a corporate link between the Canadian and foreign employers, such as a subsidiary or branch, and an EOR or agency employer does not supply one.

Hiring is simplest when the candidate already holds Canadian citizenship, permanent residence or an open work permit, for example from the Working Holiday category of International Experience Canada. An EOR can employ a Working Holiday participant with no employer filings on the immigration side. For anyone else, bring in an immigration adviser early and make the offer conditional on the permit.

Three routes exist for a US business: a Canadian corporation of its own, an independent contractor agreement, or an employer of record. Headcount plans and timing tend to decide between them.

Incorporation itself is fast. Corporations Canada charges CAD 200 to incorporate online under the CBCA and processes the application in 1 business day. The harder part for a US parent is the board: resident Canadians must fill at least a quarter of the seats, and a board of 3 or fewer needs at least one. No one can be paid until the new company has a CRA business number with a payroll account attached, and Ontario registrations for EHT and WSIB may follow. The filing takes a day; the bank account, payroll and benefits set-up that follows is where the weeks go.

Contracting holds up only when the relationship genuinely looks like one business serving another. The CRA considers what the parties intended, then control, tools and equipment, subcontracting, financial risk, investment and the opportunity for profit. Where the CRA decides the person was an employee all along, the unpaid deductions become due with interest, and a penalty of 10% of the amounts not withheld can be added.

Using Employer of Record Canada, you leave the legal employer role to us; we run Canadian payroll, deductions and year-end filings, while your managers direct the work. We charge from USD 560 a month for each employee. Our employer of record explainer for Canada shows how responsibilities are split between you and the employer of record. A parent company run from Britain faces different comparisons on currency and leave, which our guide for UK firms taking on Canadian staff works through.

A US offer letter template seldom transfers to a Canadian hire unchanged, so a short list of decisions saves rework later.

• Province of work. Confirm where the person will actually be working, because leave, holidays, minimum wage and notice all follow it.
• Currency and pay cycle. State the salary in Canadian dollars and agree whether pay runs bi-weekly or semi-monthly.
• Benefits. Decide which extended health, dental or retirement plan you will offer on top of CPP and EI.
• Restrictive covenants. Ontario contracts signed from 25 October 2021 cannot include a non-compete unless the employee is an executive, so protect the business through confidentiality and non-solicitation terms.
• Job adverts. Public adverts for Ontario roles must show what the job pays, as a figure or a band spanning no more than CAD 50,000, since 1 January 2026 where the employer has 25 or more staff.
• Quebec roles. Plan for French: the Charter of the French Language means written communication with Quebec staff, working-conditions documents included, has to be in French.

The EOR services page for Canada lists what we take on at onboarding and what stays with you.