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Hiring an employee: what you need to know

A female employer offering a job to an applicant. Stock photo by Getty Images

Once you start hiring workers for your business, you take on new responsibilities as well. Here are some of the basics behind making a new hire.

Who you can hire

There are different limitations on whom you’re allowed to hire. Age and immigration status are the most basic requirements.

A Canadian citizen or permanent resident with a Social Insurance Number is eligible provided they meet the minimum age requirement. These can vary by province and even according to the industry. For example, restaurants in Alberta can hire workers as young as 12. However, young people are generally not legally eligible to work during school hours unless they’ve graduated from high school.

Foreign workers

Most foreign-born employees who aren’t citizens or permanent residents need a valid work permit. You can’t hire such employees on a permanent basis.

Some people can work in Canada without a permit, but they’re mostly for short-term or unique jobs, such as athletes competing in international events, musicians playing shows, public speakers or clergy.

However, full-time international students can also work off-campus while still engaged in their studies.


If you’re going to start paying employees, you need to open a payroll program account with the Canada Revenue Agency. You’ll also need your business number to open that payroll.

You’ll need employees to complete TD1 tax return forms. Employers also make the appropriate payroll reductions, including applicable taxes, pension plan contributions and employment insurance premiums.

Creating a contract

There’s no legal obligation to write up a contract, but it’s a crucial piece of paperwork.

Oral agreements won’t back you up in case of future disagreements or lawsuits. A written contract spells out both an employer and employee’s rights and obligations.

A contract should cover compensation as well as any bonuses, commissions, stock options or profit-sharing. Promised raises or promotions should be included as well.

A contract can also include clauses such as non-disclosure or non-competition agreements to protect your business after employees leave. Be careful though; an overly restrictive covenant can be nullified in court.

Contracts should also cover workplace discipline and termination to avoid lawsuits or dismissal or other punitive measures. Those clauses also spell out notice and severance pay information for employees.

Tax breaks

If you’re a small business, hiring employees could bring you a tax credit. The Hiring Credit for Small Business relieves small businesses from their share of EI premiums.

Employment equity

Canada has federal and provincial laws to promote employment equity, a way to promote employment for women, aboriginals, disabled persons and visible minorities.

It doesn’t impose hiring quotas, but calls on employers to remove any barriers that might keep members of those groups from being hired, and to exercise reasonable accommodation. That might involve putting wheelchair ramps in your workplace, but it won’t force you to hire a blind graphic designer, for example.

Basically, everyone must be given an equal chance at gaining and keeping employment.

Read more:

How the Provincial Nominee Program works

Jobs that do not need a work permit

Employment Equity (federal)

What is a payroll program account?

Hiring Credit for Small Business