Do I Need a Local Entity to Hire in Canada?

In Canada, a "local entity" typically refers to a recognized employing presence, such as a subsidiary or branch office, that allows you to be acknowledged as an employer. This setup is essential for fulfilling payroll and employment obligations locally.

Without a local entity, you usually can’t register as an employer, manage payroll with necessary withholdings, or issue compliant employment terms. Canada’s tax authorities, such as the Canada Revenue Agency (CRA), outline employer responsibilities for payroll and tax contributions, which are crucial for compliance.

What is Required to Employ Someone in Canada?

• Local employing entity required to directly employ? Yes (unless using an EOR)
• Payroll registration required? Yes (mandatory employer registration with CRA)
• Withholding/tax remittance required? Yes (employers must withhold income tax and remit to CRA)
• Social contributions required? Yes (employers must contribute to CPP and EI)
• Local employment agreement required? Yes (written agreements are standard practice)
• Mandatory benefits to budget? Yes (statutory benefits like vacation pay and sick leave)
• Works council/collective agreements considerations? Usually (some sectors may require adherence to collective agreements)

Best Options If You're Hiring in Canada

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but it’s important to understand the risks involved.

While hiring contractors can be a viable option without establishing a local entity, Canada has strict regulations regarding worker classification. Misclassifying a contractor as an independent worker can lead to significant liabilities, especially if the contractor is treated like an employee.

• Ensure the contractor operates independently and is not integrated into your business.
• Be cautious if the work is exclusive or closely managed.
• Consider the contractor's role and how it aligns with your business operations.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to set up an entity in Canada, depending on the type of business and required registrations.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated CAD 300–800 per month ($220–$590)
• Payroll provider: Estimated CAD 50–150 per employee per month ($37–$110)
• Employer registrations and recurring compliance: Varies by complexity
• Corporate tax filings and annual reporting: Estimated CAD 1,000–3,000 per year ($740–$2,200)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 per month with Playroll)
• Pass-through statutory costs (e.g., employer contributions to CPP and EI)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Canada

Hiring in Canada can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Canada quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.