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A guide to compensation packages in Canada

July 27, 2021
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A cornerstone of any hiring strategy is total compensation. But calculating employee compensation in new international markets can be a significant challenge, especially when hiring in Canada. Why? Not only are there several different labor regulations that impact employee compensation in Canada, but these regulations often vary by province.
You’ll need a firm understanding of local laws to ensure your business is offering a competitive compensation package that will attract and retain top Canadian talent.
To help you navigate the complexity, here’s a comprehensive look at local requirements that impact employee compensation in Canada.

Minimum wage requirements

Employers need to be aware of minimum wage requirements in the provinces in which they operate. For example, the current minimum wage in Ontario is $14.25 per hour , and it ’s expected to increase to $14.35 on October 1, 2021. Minimum wage in Alberta is $15 per hour and is the highest in Canada.
However, there are exceptions to the minimum wage rules in each province. Ontario, for example, sets a minimum wage of $13.40 per hour for students under 18 years of age that work 28 hours or less each week. Specific professionals—like hunters, fishermen and guides—may also have different minimum wage requirements.
Additionally, employees that are provided room and board by their employers may have different minimum wage requirements.

Vacation entitlements

Organizations must provide employees with vacation pay. Minimum requirements vary based upon years of service, and laws have recently changed.
Here’s a summary of vacation requirements in most provinces of Canada:
  • One or more year of service. Employe e are entitled to at least two weeks of vacation at 4% of gross earnings.
  • Five or more years of service. Employees are entitled to at least three weeks of vacation at 6% of gross earnings.
  • Ten or more years of service. Employe es are entitled to at least four weeks of vacation at 8% of gross earnings.
Employers have flexibility around the timing of the vacations. For example, employers don’t need to allow all four weeks of an employee’s allotted vacation to be taken at once if it interferes with business operations. They can instead request that employees spread that time over multiple periods.

Public holidays

Another compensation requirement for employees in Canada is public holidays. Employees can elect to work a holiday, but an alternative day off must be provided and the person must be paid a premium rate on that day.
Here is a list of holidays in Canada that employers typically count as a paid day:
  • New Year’s Day
  • Good Friday
  • Victoria Day
  • Canada Day
  • Labour Day
  • Thanksgiving
  • Remembrance Day
  • Christmas Day
  • Boxing Day

Paid time off and illness

In addition to vacation time, employees in Canada also have sick time, which falls under “personal leave.” Employers must provide employees with at least five paid days of personal leave annually. Employees qualify for paid leave after working three consecutive months for an employer.
Qualifying reasons for an employee to take personal leave include:
  • Treating an illness or injury
  • Taking care of health obligations for a member of the family
  • Taking care of educational obligations for a family member under the age of 18
  • Managing an “urgent” situation involving a family member
  • Attending a citizenship ceremony, as defined under the Citizenship Act
Employers can ask an employee to provide supporting documentation for paid leave within 15 days of the request.
Additionally, employees who suffer from work-related injury or illness may be eligible for a benefits package through workers’ compensation in Canada that is administered by individual provinces.

Other types of employee leave

In addition to vacation time and paid time off for illness or injury, there are other types of leave that must be offered to workers in Canada (though some are not required to be paid leave).
Understanding the difference between various types of unpaid and paid leave in Canada will help you create an attractive and legal compensation package.
Here are a few considerations:
Maternity and parental leave. Employees are entitled to up to 17 weeks of maternity leave, which is not required to be paid by the employer. The Employment Insurance Act provides eligible employees with maternity or parental benefits during the period they are on leave. In addition to maternity leave, employees can take up to 63 weeks of parental leave.
Compassionate care leave. Employers must offer compassionate care leave, but it’s not required to be paid. An employee may qualify for this type of leave when he or she needs to look after a family member that has a serious medical condition and is at risk for death.
Critical illness leave. You must provide employees with critical illness leave. This type of leave applies to employees with a family member or child that is critically ill. Employees can take up to 37 weeks of leave within a 52-week period to provide care to a child under the age of 18 years. And employees can take up to 17 weeks within a 52-week period to provide care to support an adult. Regulations do not require that this leave be paid.
Medical leave. Employers must provide employees with at least 17 weeks of leave for illness or injury, organ or tissue donation or attending medical appointments. If the sick leave is three days or longer, you can request a note from the employee’s medical provider. It’s not required that you pay for this type of leave.
Leave for court or jury duty. Employers are required to offer leave for employees to serve as witnesses in court or participate in the jury process. This leave is not required to be paid.

Employee benefits in Canada

In addition to employee leave, an employer in Canada must provide specific employee benefits, including:
Employee pension. The Canada Pension Plan is a savings plan for all Canadians that are employed. As of Jan. 1, 2020, employees and their employers must each contribute at least 5.25% of their earnings to the pension plan, though the percentage may vary by province.
Employment insurance. Employers are required to provide employment insurance, which is typically 55% of an employee’s average weekly earnings. The maximum employee benefit runs from 14 to 45 weeks and varies based on unemployment rates in the region. Income replacement is available due to sickness, maternity or parental leave and compassionate care leave.
Understanding these benefits ensures you’re compliant with local employment law and helps you create a compensation package in Canada that workers are accustomed to.

Optional supplemental benefits

Employers can provide employees with any additional benefit (beyond those discussed above) to make their company more attractive and stand out against the competition. These include additional retirement options for employees and supplemental health care benefits.
87% of Canadian employers provide employees with extended health care benefits to supplement governmental health insurance.
Healthcare spending and wellness accounts, as well as a stipend to gym facilities, are also potential benefits.

How can an employer of record help?

Expanding your business into a new country comes with a steep learning curve around employment law and appropriate benefits packages. An employer of record, like GEO, can hire employees in Canada on your behalf, ensuring you stay in compliance with local laws, and help you offload time-consuming tasks like benefits administration and payroll management.
Learn more about how our employer of record solution in Canada, can help you manage the nuances of employee compensation in Canada.

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