Canada is one of the most attractive global destinations for business expansion, thanks to its stable economy, bilingual workforce, and transparent legal system. Whether you’re a U.S.-based startup, a European enterprise, or an Asian tech firm, hiring employees in Canada offers strategic access to North America and beyond.
But expanding into Canada comes with choices. Should you set up a local legal entity? Or use an Employer of Record (EOR) for fast, compliant hiring?
In this comprehensive guide, we compare both options in detail to help you decide which model suits your hiring needs in Canada.
Introduction to Remote Hiring in Canada
Remote hiring in Canada is booming, especially in sectors like tech, healthcare, finance, and engineering. The country offers a highly educated, diverse talent pool and strong employment protections. However, Canadian labor laws vary by province and include federal and provincial tax rules, workplace safety standards, and mandatory benefit schemes.
For companies without a local presence, navigating this landscape can be complex. An Employer of Record (EOR) helps bridge the gap by acting as the legal employer on your behalf. The EOR manages everything—from payroll and benefits to employment contracts and tax filings—while you retain operational control.
This allows companies to hire in Canada quickly, without setting up a subsidiary or permanent establishment.
EOR vs. Setting Up an Entity in Canada
When hiring in Canada, the two most common routes are:
- Establishing a legal entity (e.g., a corporation or branch office)
- Partnering with an EOR to legally employ and pay workers
Establishing an entity is ideal for companies with long-term plans, large teams, or local investments. It gives you direct control over employment contracts, payroll, and operations—but also requires navigating complex regulatory filings and tax reporting.
In contrast, an EOR provides a fast, cost-effective solution to hire Canadian employees without going through incorporation. This is perfect for pilot teams, contract-based projects, or early-stage market testing.
Factors to Consider When Choosing EOR or Entity Establishment
- Speed of market entry: EOR onboarding takes 1–2 weeks, while entity registration can take several months.
- Compliance responsibility: An entity must manage all payroll taxes, provincial laws, and statutory benefits. EORs handle it all for you.
- Cost and complexity: Legal entity setup involves incorporation fees, provincial filings, legal consultations, and accounting support.
- Scalability: EORs are great for short- to mid-term hiring. If you plan to scale significantly in Canada, an entity might make more financial sense long-term.
Why Time to Market Matters for Global Companies
Time is money—especially when you’re expanding into new markets. Setting up a Canadian entity requires government registration (both federal and provincial), tax accounts, a registered address, and ongoing filings. These steps can take up to 3 months.
EORs bypass all of this. You can hire Canadian employees in a matter of days, giving your business an edge in reaching clients, launching services, or starting operations faster than competitors.
Cost Implications of Entity vs. EOR in Canada
Setup and Maintenance Costs
Setting up a corporation in Canada typically involves:
- Federal or provincial incorporation ($200–$500+)
- Legal and accounting fees
- Annual corporate filings
- Employer registration with Canada Revenue Agency (CRA)
- Setting up a Canadian bank account
EORs eliminate these startup costs. Instead, you pay a monthly service fee (usually 10–15% of payroll), which includes employment contracts, payroll, statutory deductions, and compliance services.
Compliance Costs
Legal entities are responsible for:
- Managing Canada Pension Plan (CPP) contributions
- Calculating and remitting Employment Insurance (EI)
- Withholding federal and provincial income taxes
- Remitting to the CRA on a monthly/bi-weekly basis
- Filing Records of Employment (ROEs) and T4 slips
With an EOR, all of these compliance obligations are managed for you—accurately and on time—removing the need for internal HR or legal teams.
Time Savings
- Entity setup: 1–3 months
- EOR onboarding: 7–14 business days
If speed and simplicity are your top priorities, EOR clearly wins.
Compliance and Legal Exposure: Entity vs. EOR
Canada enforces strict labor laws and tax compliance rules that vary across provinces. For example, statutory holidays, minimum wage, paid leave, and workers’ compensation requirements can differ significantly in Ontario vs. British Columbia or Quebec.
With an entity, you’re responsible for:
- Drafting compliant contracts
- Maintaining payroll and HR documentation
- Managing workplace health and safety (WSIB in Ontario, CNESST in Quebec, etc.)
- Handling audits and employee claims
An EOR reduces your exposure. They are the legal employer on paper, assuming responsibility for all employee-related compliance, while you focus on your business.
Foreign Compliance: Setting Up a Legal Entity vs. Using EOR in Canada
Setting Up a Legal Entity
Here’s what’s involved in establishing a local presence in Canada:
- Incorporate federally or provincially
- Appoint directors (at least one Canadian resident for some jurisdictions)
- Register with the CRA for payroll, GST/HST, and corporate income tax
- Set up Workers’ Compensation accounts
- File monthly/quarterly remittances to CRA
- Manage bilingual contracts in Quebec (if applicable)
While this setup offers control and permanence, it requires time, effort, and capital.
Using an Employer of Record (EOR)
With an EOR:
- You don’t need to incorporate in Canada
- The EOR handles tax, payroll, benefits, and compliance filings
- You retain full authority over work assignments and team operations
- You can scale your team without needing legal infrastructure
This model is perfect for foreign companies testing the Canadian market or hiring a few team members quickly.
Switching from EOR to Entity Establishment in Canada
Many businesses start with an EOR and later shift to a Canadian entity once operations stabilize or scale.
Here’s how the transition works:
- The EOR helps terminate employee contracts and rehire under your new entity
- Payroll, tax IDs, and benefits are transferred
- Legal documentation is updated to reflect your business as the new employer
- Transition is managed seamlessly to avoid service or benefit disruption
This phased approach is ideal for risk mitigation and resource optimization.
Why Choose Asanify as Your EOR Partner in Canada
Asanify offers reliable, end-to-end EOR services in Canada—helping businesses hire compliantly, quickly, and without the cost or complexity of entity formation.
Our Canadian EOR solution includes:
- Legally compliant employment contracts
- Seamless onboarding within 7–10 business days
- Payroll processing in Canadian Dollars (CAD)
- Accurate CRA filings (CPP, EI, tax)
- Administration of statutory benefits and leave
- Local HR expertise across all provinces
- Easy migration support if you set up your own entity later
With Asanify, you get the agility of EOR and the long-term support of a local partner who knows Canada inside-out.
FAQs
1. What is an Employer of Record (EOR) in Canada?
An EOR legally employs your team in Canada and handles taxes, payroll, and compliance while you manage day-to-day work.
2. How does an EOR help with Canadian employment compliance?
EORs manage federal and provincial tax filings, CPP/EI contributions, ROE/T4 submissions, and ensure labor law compliance.
3. What are the costs of using an EOR in Canada?
You pay a monthly service fee, typically 10–15% of gross salary, covering all backend HR, payroll, and compliance services.
4. What statutory benefits do employees receive under an EOR?
Benefits include Employment Insurance, Canada Pension Plan, paid leave, and provincial health and safety coverage.
5. Can an EOR manage contractors in Canada?
Yes, though contractor classification must be handled carefully to avoid misclassification risks under CRA regulations.
6. Do Canadian provinces have different labor laws?
Yes. For example, Quebec requires French-language contracts, and each province has unique rules on minimum wage and holidays.
7. Is a local director required to open an entity in Canada?
In some provinces (like Ontario), yes. Federal corporations also require at least 25% of directors to be Canadian residents.
8. How long does it take to hire using an EOR?
With Asanify, onboarding can be completed in 7–10 business days, including contract signing and payroll setup.
9. Can I switch from EOR to my own Canadian entity later?
Absolutely. Asanify will help you migrate contracts, payroll, and compliance smoothly to your new entity.
10. What makes Asanify the right EOR for Canada?
Our automation-first platform, local legal expertise, and dedicated customer support ensure compliant and efficient hiring across all Canadian provinces.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.