# Payroll in Canada: employer costs, taxes and compliance

> Machine-readable page from Payroll Overview (https://payrolloverview.com/), the independent index of global payroll providers.
> Canonical page: https://payrolloverview.com/countries/canada/
> Methodology: every figure carries a source and a date in our database; ratings are averages of third-party platforms (https://payrolloverview.com/methodology/).
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> Data updated: January 2026
> Every figure below carries its statutory source and year.

Running payroll in Canada means that every pay cycle you calculate gross salary, withhold income tax and employee social contributions, add your own employer contributions on top, and send the net amount to your workers. You also owe those employer contributions to the government separately. Do that correctly every cycle and you are largely in good shape operationally.
This guide walks through what employing someone in Canada actually costs, how the pay cycle works in practice, what leave and termination rules land on payroll, and when it makes sense to hand the whole thing to a specialist provider.

## Employer costs & taxes

| Item | Value | Source |
|---|---|---|
| Employer social security (on top of gross salary) | 9.6% | OECD (2025) |
| Employee social security (withheld from pay) | 6.8% | OECD (2025) |
| Total tax wedge (taxes as share of labor cost) | 32.1% | OECD (2025) |
| Corporate tax rate | 11.6% | OECD (2025) |

## Pay & payroll operations

| Item | Value | Source |
|---|---|---|
| Payroll cycle | biweekly | Perplexity (AI gap-fill) (2026) |
| 13th-month salary | none | Perplexity (AI gap-fill) (2026) |
| Minimum wage (per month) | CA$2,884 | ILOSTAT (2024) |
| Average wage (per year) | 69,417 | OECD (2024) |
| Statutory work week | 40 hours/week | Statutory working time (national labour law) (2024) |

## Leave & time off

| Item | Value | Source |
|---|---|---|
| Paid annual leave | 10 days | Perplexity (AI gap-fill) (2026) |
| Public holidays | 9 days | Perplexity (AI gap-fill) (2026) |
| Maternity leave | 16 weeks | OECD Family Database (2024) |
| Paternity leave | 0 weeks | Perplexity (AI gap-fill) (2026) |
| Parental leave | 35 weeks | OECD Family Database (2024) |

## Termination

| Item | Value | Source |
|---|---|---|
| Notice period | 5 weeks | World Bank Employing Workers / B-READY (2019) |
| Severance pay (at 1 year tenure) | 5 weeks | World Bank Employing Workers / B-READY (2019) |
| Employment protection (OECD EPL, scale 0-6) | 1.7 | OECD (2019) |

## Labor market context

| Item | Value | Source |
|---|---|---|
| Retirement age | 65 | OECD Pensions at a Glance (2024) |
| Unemployment rate | 6.5% | OECD (2026) |
| GDP per capita | $54,340 | World Bank Open Data (2024) |
| Union density | 28.3% | OECD/AIAS ICTWSS (2024) |
| Collective bargaining coverage | 30.2% | OECD/AIAS ICTWSS (2024) |

## Employer contribution breakdown

| Contribution | Rate |
|---|---|
| Pension & disability | 5.95% |
| Sickness & maternity | 2.28% |

Total: about 8.23% of gross salary, paid by the employer on top of pay.

## Worked example: total employer cost

| Line | Annual |
|---|---|
| Gross annual salary | 69,000 |
| Employer contributions (about 10%) | + 6,622 |
| Total employer cost | 75,622 |

Rounded from the average wage, before benefits, allowances or provider fees.

The gap between what an employee earns and what they actually cost you is real in Canada. Employer social contributions add roughly a tenth on top of gross salary, so a role you budget at a given gross figure will cost meaningfully more once you account for those contributions. See the table below for the exact rates.
The total tax wedge, meaning the share of labour cost that goes to tax and contributions rather than take-home pay, sits at roughly a third of total labour cost. In plain terms, for every dollar of labour cost you spend, only about two thirds ends up in the worker's pocket. That is worth keeping in mind when benchmarking total compensation against other markets.

Canada runs on a biweekly pay cycle, so you are processing payroll 26 times a year. There is no statutory thirteenth-month payment required, which keeps the annual calendar predictable. The minimum wage floor sets the baseline you cannot go under, and the federal minimum translates to roughly 2,884 CAD per month at current rates, though some provinces set their own floors above that, so always check the province where your employee works.

On the leave side, employees are entitled to 10 days of annual leave and 9 public holidays, and holiday pay for worked public holidays needs to show up correctly in the pay run. Maternity leave runs to 16 weeks, and while the leave itself is largely funded through employment insurance rather than direct employer payroll, you still need to handle the accrual accounting correctly. On the termination side, both notice and severance are measured in weeks, with 5 weeks applying to each under the benchmark figures, and both become final-pay line items you need to calculate and process before the worker leaves.

If you do not have a legal entity in Canada, you cannot run payroll there directly, which is where an employer of record comes in. Even if you do have an entity, keeping up with contribution rate changes, provincial variations, and filing requirements takes real ongoing attention. A global payroll provider or EOR handles the registrations, calculates the withholdings at current rates, and keeps the filings on track, which is worth considering honestly against the cost of doing it in-house, especially for a small headcount.