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Topic guide · For people outside Canada

Hire a Canadian Employee from Abroad

Hire people, payroll, employer of recordSet up a company or branchCross-border and sales tax

Last reviewed 2026-10-20

First edition, partly verified. Every rule here links to the source we opened, and what we could not confirm is listed in the “not verified” section near the end. An independent legal and tax review is still to come: treat this as a research starting point.

This guide goes deeper on one task: a company outside Canada wants one or more employees who live and work in Canada. For the general picture (federal and provincial split, corporate tax rates, language rules, privacy), start with Working with Canadian Companies and come back. The related guides are Hire a Canadian freelancer or contractor, Set up a Canadian subsidiary or branch, and Bring a worker to Canada if the person is not yet authorized to work in Canada.

1. Choose the route

Route What it means Main cost or risk
Your own Canadian entity A subsidiary (or registered branch) employs the person. See Set up a Canadian subsidiary or branch. Set-up and ongoing filings; a permanent establishment is then not in doubt
Employer of record (EOR) A vendor is the legal employer in Canada and bills you for pay, contributions and a fee You still direct the work, so tax authorities may look through the EOR (Andersen)
Register for payroll as a foreign employer You pay the person directly and open Canadian payroll accounts without a subsidiary Registration path is unclear for foreign employers; see section 2
Contractor The person invoices you. See Hire a Canadian freelancer or contractor. Misclassification if the work is really employment

The choice usually turns on how many people you will hire, whether they sell or negotiate for you, and how long you plan to stay. One home-office employee on a fixed task is a different problem from a three-person sales team.

On EORs: an EOR formally employs the worker, but Andersen's February 2026 commentary says that using one "does not, in itself, determine how Canadian tax authorities will characterize the underlying relationship". Where the foreign company controls daily work and integrates the person into its operations, the CRA would likely treat the workers as employees or dependent agents of that company (Andersen). That is a law-firm article, not CRA guidance. It also did not address GST/HST on the EOR's own fees.

2. Payroll registration and source deductions

An employer must register for a CRA payroll program account before the first remittance due date. That is generally the 15th day of the month after the first deduction. If you hire before registering, you must still calculate and remit on time or face a penalty (CRA). CRA defines an employer by the working relationship as a whole, not the contract label.

For the business number, CRA offers a separate registration route for businesses incorporated or located outside Canada (CRA). The payroll page above did not address non-resident employers, so whether a foreign employer with no Canadian entity may register and run payroll on its own was not confirmed. Ask a payroll provider or CPA. CRA's circular on non-resident withholding does confirm that pay to non-resident employees for work in Canada follows the same deduction duties as for residents (Regulation 102) (CRA IC75-6).

If the employee works in Quebec, Revenu Québec requires a new employer to register for source deductions, and you must still open the CRA payroll account separately. You may also owe contributions to the CNESST (Revenu Québec). Revenu Québec's page for employers with no Quebec establishment could not be opened, so ask whether a foreign employer must register (Revenu Québec).

3. Contributions you owe on top of salary (2026)

Item Employee share Employer share Source
CPP (outside Quebec) 5.95% of earnings between $3,500 and $74,600; max $4,230.45 Same as employee CRA
EI outside Quebec 1.63% to $68,900; max $1,123.07 Max $1,572.30 CRA
EI in Quebec 1.30%; max $895.70 Max $1,253.98 CRA
QPIP (Quebec) 0.430% to $103,000; max $442.90 0.602%; max $620.06 Revenu Québec

Quebec employees pay into the Quebec Pension Plan (QPP) instead of the CPP. QPP rates, the Health Services Fund, the CNESST rate and the labour standards contribution are in the Quebec table of Working with Canadian Companies. They were not re-opened for this guide. The CPP2 tier above $74,600 was also not re-checked here; see the CRA CPP2 page cited in that guide.

4. Employment standards and termination

Employment standards are provincial unless the employer is in a federally regulated industry. The comparison table in Working with Canadian Companies covers wage, vacation and holiday floors for five jurisdictions. Termination is where foreign employers are most often caught out, so two examples:

  • Ontario. After three months of service, notice runs from one week (under a year) up to eight weeks (eight or more years). Exemptions include wilful misconduct that is not trivial and has not been condoned, and a fixed term or task (Ontario).
  • Quebec. Written notice is one week for three months to a year, two weeks for one to five years, four weeks for five to ten years and eight weeks at ten years or more. If notice is not given, the employer pays an indemnity equal to the regular wages for the notice period (CNESST). The recourse for dismissal without good and sufficient cause after two years of service was not covered on that page.

These are statutory minimums. Courts in common-law provinces can award longer "reasonable notice", and a termination clause that breaks the statute can fail entirely; that discussion is in Working with Canadian Companies. Do not use an at-will US employment template.

5. Quebec specifics

  • Pension and parental plans. QPP and QPIP replace CPP and the federal EI parental benefits, with EI premiums at the lower Quebec rate (table above).
  • Language. Written employment contracts and job offers must be in French, and employers with 25 or more employees must register with the OQLF. See Doing business in Quebec: French-language rules.
  • Registration. Revenu Québec source deductions and CNESST are separate from the CRA accounts (section 2).
  • Non-resident rules. Revenu Québec says wages paid to an employee who is not a Quebec resident are still subject to source deductions and employer contributions, with special requirements (Revenu Québec). That page concerns non-residents, not Quebec residents working for a foreign employer.

6. Permanent establishment and other tax exposure

Hiring one person can create a Canadian tax footprint even without a subsidiary. The questions are fact-driven:

  • Home office. In a 2023 technical interpretation, the CRA's view was that an employee's home office, in and of itself, does not create a permanent establishment (PE) for a US employer. It could if the employer has ready access to the home, pays rent for it, or intends it as an office at its disposal (summary of CRA 2023-0965771C6; a secondary copy, not the CRA page).
  • OECD 2025 update. Under November 2025 changes to the OECD commentary, a home office may be a PE if the employee works there for at least 50% of working time over a rolling 12 months and there is a genuine commercial reason for the presence. BLG notes the CRA had not issued a formal statement adopting it, and that employee preference or cost savings do not count as a commercial reason (BLG, March 2026).
  • Dependent agent and services. Under the Canada-US treaty, an agent with authority to conclude contracts in your name can create a PE (Article V, paragraph 5). Services provided by an individual present in Canada for 183 days or more in any 12-month period can too (paragraph 9) (Finance Canada consolidated text). Other countries' treaties differ.
  • GST/HST. Whether a non-resident "carries on business in Canada" is a question of fact, and the location of employees and agents is a listed factor. It can happen without a PE (CRA RC4027). Sales-tax registration is covered in GST/HST for foreign businesses selling in Canada.

A sales or contract-negotiating employee is a much higher risk than a back-office one. Get a written opinion before the first hire if the role touches customers.

7. Benefits norms

Benefits beyond the statutory contributions (extended health, dental, retirement savings, paid time off above the legal floor) are market practice rather than law in most roles. This guide did not find a primary source on typical packages, so ask your payroll provider or EOR for the local norm for the role and province.

8. Checklist

  • Confirm the person is authorized to work in Canada (citizen, permanent resident, or holds a valid permit)
  • Choose entity, EOR or direct payroll route, with counsel's view on PE
  • Identify the province where the work is done
  • Register for the CRA payroll account before the first remittance date
  • In Quebec, also register with Revenu Québec and the CNESST
  • Set up CPP/QPP, EI and QPIP deductions with a payroll provider
  • Write a province-specific employment agreement with a termination clause that meets the statute
  • In Quebec, issue the contract and job offer in French
  • Document where and why the person works from home, and who has access to the space
  • Track days worked in Canada against the treaty tests and your PE analysis
  • Confirm whether the role creates GST/HST or corporate-tax filing duties
  • Decide benefits and provide the local statutory time off and holiday entitlements

9. What to ask a lawyer or accountant

  • Can we register for payroll and employ this person directly without a subsidiary, and what filings follow?
  • Does this role, as drafted, create a PE or a "carrying on business" finding for income tax or GST/HST?
  • If we use an EOR, who is the employer for tax, employment-standards and workers' compensation purposes?
  • Does our home-country employment template work, and what must change for the province?
  • What termination exposure would we face at one, three and five years of service?
  • If the employee is in Quebec, which Revenu Québec and CNESST registrations apply to a foreign employer?

10. What this guide did not verify

  • Whether a foreign employer with no Canadian entity may register for and operate payroll accounts directly (the CRA payroll page was silent on non-resident employers).
  • Revenu Québec rules for employers with no establishment in Quebec (the page could not be opened).
  • 2026 QPP, Health Services Fund and CNESST figures, and CPP2, which were not re-opened here.
  • Quebec's recourse for dismissal without good and sufficient cause.
  • Typical benefits packages and provincial health or payroll taxes.
  • Any treaty other than Canada-US, and CRA's current position on the OECD 2025 PE update.
  • The 2023 CRA interpretation was read through a secondary host, not the CRA source.

11. Sources opened

Research, not advice. Rules change and depend on your facts: confirm with a qualified Canadian professional before you act. Items we could not verify are labelled in the text.

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