🇨🇦 Payroll in Canada: employer costs, taxes & compliance (2026)

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.

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.