Hiring Your First Employee as a Contractor in Canada: What to Know
What a Canadian contractor must set up before hiring a first employee: payroll account, deductions, workers' compensation, safety, pay rates and training.
This is general information, not legal or tax advice. Employment rules vary by province, so confirm details with your accountant and provincial authorities. Hiring is the step that turns a self-employed tradesperson into a business owner, and it comes with obligations you cannot skip.
Employee or subcontractor?
If you control when, where and how the person works, they are likely an employee regardless of what you call them. See hiring subcontractors for the difference.
Set-up checklist
- Payroll account with the CRA for source deductions (income tax, CPP, EI). In Quebec you also deal with Revenu Québec and the QPP, QPIP and related programs.
- Workers' compensation registration (WSIB, WorkSafeBC, CNESST and others)
- Employment agreement covering pay, hours, probation, duties and termination
- Minimum standards: overtime, vacation pay, statutory holidays and breaks per your province
- Health and safety: orientation, required training and records
- Insurance updates: insurance guide
- Record of employment (ROE) and year-end slips (T4)
Know the true cost
An employee costs more than their hourly wage: employer CPP/EI contributions, vacation pay, workers' compensation premiums, tools, vehicle, training and unproductive time. Many contractors estimate 20–30% on top of wages. Build it into your hourly rate and quotes.
Make sure there is work
Before hiring, confirm you have enough booked jobs and healthy cash flow: cash flow guide.
Train and delegate
Write down how you do the job (checklists, photos, standards) so the new hire does not rely on your memory. See job site management.
Where it fits in growth
Hiring is one step of a bigger plan: how to scale a contracting business.