How to Hire Your First Employee in Canada

CRA payroll account registration

Before you pay a single dollar of employment income, you must register a payroll program account (RP) with the Canada Revenue Agency. You can do this online through CRA My Business Account using your business number, or by calling CRA at 1-800-959-5525. Registration is free and typically takes one to three business days.

Once registered, you are responsible for deducting and remitting Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and federal income tax from every pay cheque. You also pay the employer's share of CPP (equal to the employee's deduction) and EI (1.4 times the employee's deduction). Remittances are due the 15th of the month following the payroll date for most new employers.

Failing to register or remit on time results in penalties starting at 3% of the amount owed for the first failure, scaling to 10% for repeated failures. CRA issues T4 slips for all employees each February for the prior tax year, your payroll system or accountant can generate these.

Ontario Employer Health Tax and WSIB registration

Ontario Employer Health Tax (EHT) is a provincial payroll tax. Small businesses with total Ontario remuneration below $1,000,000 per year are exempt. If your payroll exceeds that threshold, you register with the Ontario Ministry of Finance and remit monthly. For most first hires at an SMB, EHT will not apply until your total payroll grows significantly.

WSIB (Workplace Safety and Insurance Board) registration is mandatory for most Ontario businesses with employees. You must register within 10 days of your first hire. The premium rate depends on your industry classification and ranges from under 1% to several percent of insurable earnings. Some industries (certain professionals, employers with fewer than two workers in specified sectors) are exempt, check the WSIB website for the current exemption list.

WSIB premiums are paid by the employer, not deducted from the employee. Operating without WSIB coverage when registration is required exposes you to full liability for workplace injury costs plus an administrative penalty. Register before the employee starts.

Employment Standards Act minimums every employer must know

Ontario's Employment Standards Act (ESA) sets the floor for every employment relationship. Key minimums for a first employer:

• Minimum wage: $17.60/hr for most employees as of October 2025. Student minimum wage ($16.60/hr) applies to students under 18 working under 28 hours/week or during a school break.
• Hours of work and overtime: Regular hours cannot exceed 8 per day or 48 per week without written agreement. Overtime pay (1.5x regular rate) applies after 44 hours worked in a week.
• Vacation: Employees earn 2 weeks of vacation per year after 12 months of employment (3 weeks after 5 years). Vacation pay accrues at 4% of gross wages.
• Public holidays: Ontario has 9 public holidays on which most employees are entitled to a paid day off or premium pay if they work.
• Termination notice: After 3 months of employment, 1 week of notice (or pay in lieu) is required per year of service, to a maximum of 8 weeks under the ESA. Common law notice may be significantly higher.

The ESA also covers leaves of absence (personal emergency, sick, family medical, pregnancy, and parental leaves), you cannot discipline or terminate an employee for taking an ESA-protected leave. The full ESA is available on the Ontario government's website and is worth reading in full before your first hire.

Creating a written offer letter and employment agreement

A verbal job offer is legally binding but practically dangerous. A written offer letter or employment agreement protects both parties by documenting the agreed terms. At minimum, include: the job title, start date, hours of work, rate of pay (and pay frequency), whether the role is full-time or part-time, and a termination clause that limits severance to ESA minimums.

The termination clause is the most important legal element. Without one, courts apply common law reasonable notice, which can be months of pay for even a short-tenured employee. With a properly drafted ESA-compliant clause, your maximum exposure is the ESA formula (1 week per year, capped at 8 weeks). Have a lawyer review this clause, a one-time cost of $300 to $500 can save significant exposure.

Have the employee sign the offer letter before their start date, not on their first morning when they may feel pressured. Send it at least three days in advance. For a broader picture of what competitive pay looks like for your role, see salary ranges for Canadian SMBs in 2026.

Day-one checklist before your employee starts

Before the employee arrives on their first day, confirm these are in place: signed offer letter on file, payroll system set up with their TD1 forms (federal and provincial) completed, WSIB registration confirmed, workplace safety orientation prepared, access credentials or keys ready, and a named person who will manage their first day.

On or before the first day, provide the employee with the "Your Rights at Work" poster required under the ESA, it is available as a free download from the Ontario government website. Failure to post or provide this document is a technical ESA violation. Also ensure they complete their TD1 federal and provincial forms so you can calculate the correct income tax deductions from their first pay cheque.

Frequently asked questions