Labor laws in Ontario: Everything You Need to Know

Because of its central location in Canada, the province of Ontario is an excellent option for businesses who want to hire or expand into the country by setting up talent hubs. But first you will need to make sure your business is complying with all labor laws and rules in Ontario.

Here’s our guide on expanding into Ontario, Canada, as well as some key Ontario labor laws and legislation that you’ll need to understand before building your Canadian talent hub.

Why companies expand in Ontario

Ontario is Canada’s most populous province, with 38.8% of the country’s population living in the area. 

Toronto, the capital and largest city in Canada, is centrally located in Ontario, making it a perfect place for any business, small or large, to expand to. The city is a major hub for tech, startups, and finance.

A brief glimpse into Ontario history

After the American Revolution (1765-1791), British loyalists started moving to Canada. In the aftermath of World War 2, immigrants left Europe for Toronto, making the region a hub for multiculturalism. 

Today, Canada’s close relationship to the United States has helped the country maintain a strong business presence. Ontario alone is bordered by 5 US states: Minnesota, Michigan, Ohio, Pennsylvania, and New York. It’s no surprise that Ontario is Canada’s largest hub for international trade and commerce. 

Key labor laws in Canada and Ontario

Each of Canada’s 13 provinces have their own specific laws and nuances employment and labor laws. 

The local government of Ontario has their own requirements and regulations for labor compliance. Canada and all of its provinces put a strong emphasis on worker rights and human rights. 

Unlike Quebec, which is greatly influenced by the French, Ontario draws most of its legal practices from Britain. 

Employment contracts

Written employment contracts are mandatory in Ontario and outline the formal agreement between employers and employees. 

Employment contracts should outline: 

• Holiday pay and vacation entitlement 

• Employee benefits plan 

• Critical illness leave and sick pay 

• Payment of wages and overtime (keep a close eye on your payroll in Canada)

• Severance and termination 

Employment agreements must be signed and agreed upon prior to the new employee’s start date. Anything agreed upon after the start date that isn’t included in the employment contract can be challenged if any compliance problems arise in the working relationship. 

Terminations in Ontario

In Ontario, standard termination practices exist under Ontario's Standard Employment Act (2000). 

Ontario labor laws strongly protect an employee's civil rights. If an employee is wrongfully terminated, then employment contracts can be scrutinized by the court system and Ontario Ministry of Labour. 

The maximum amount of compensation that employers can give to terminated employees  under this act is 34 weeks. 

Standard termination practices are: 

• 1 week compensation per year of service as notice or termination pay up to 8 weeks 

Or

• 1 additional week’s compensation per year of service up to 26 weeks as severance pay. 

Employees are only eligible for severance pay if they’ve been employed 1) somewhere for more than 5 years and 2) by a company with a revenue of over $2.5 million CAD.  

Dismissed employees are entitled to a significant amount of compensation if they are terminated without a cause. Law in Ontario dictates that wrongful termination lawsuits should be determined on a case-by-case basis by the courts. The court makes their decision by reviewing both the employment contract and determining if the employer gave advanced notice of termination or a severance payment in lieu of notice.  

In Ontario, reasonable notice is determined case-by-case. Some determining factors by the courts include: 

• Years of service and seniority 

• Age and educational background

• Managerial statues and nature of position 

• Circumstances of hiring and termination 

• For short-term employment (agreed upon before the start day), how long it’ll take to find a position elsewhere 

• Availability of other employment 

• Stipulations in the employment contract for termination 

Employers must always comply with Ontario’s Human Rights Code, R.S.O 1990, C. H.19 which prohibits hiring or firing based on discrimination for: 

• Race

• Gender identity 

• Gender expression

• Age

• Marital status 

• Family statues 

• Disability 

Employee safety is strongly protected and upheld under this code. Employees can't be terminated for reporting sexual or verbal harassment, or as a repercussion for notifying management of workplace harassment. 

Recently, however, employers have begun using termination clauses in contracts as a way to opt out of giving employees “reasonable notice” of termination. Cases made against these termination clauses are determined on a case-by-case basis. 

Hiring foreign workers

To hire foreign workers anywhere in Canada, including Ontario, a company must have LMIA approval and proper documentation before workers can immigrate to Canada. This documentation proves that the employer was not able to legally find a Canadian citizen to fill the position, and therefore needed to hire a temporary foreign worker for the job. 

Documentation and approval will vary and depend on each individual case. 

Labor and working hours

Full-time employees should work a maximum of eight hours per day, unless expressly agreed upon in a written agreement. 

The maximum number of hours an employee should work in 1 week is 48 hours. Employers are required to pay employees time-and-a-half for any hours over 40. 

In most cases, employees are required to receive 11 hours of consecutive time off each day. This does not apply to employees who are on call. Employees can agree to come to work on their day off and skip out on having 11 consecutive hours off. 

Unless working a split-shift, employers are required to give employees 8 hours off in-between shifts. 

Employees in Ontario are required to receive at least 24 hours off in 1 consecutive week, or 48 hours in 2 consecutive weeks. 

Employees may not work more than 5 hours without receiving a 30-minute meal or rest period. Employees and employers may agree to split this 30-minute period into 2 15-minute periods within the 5 consecutive hours of work. Meal period and breaks are unpaid unless otherwise stated in the employment contract. 

The minimum wage in Ontario is $15.50 CAD. Employees that work more than 44 hours in 1 must be provided with overtime pay. 

If an employee works on a holiday, they are entitled to public holiday pay at time-and-a-half. 

Payroll in Ontario 

If you plan to hire employees and properly run payroll in Ontario, you have two options:

1. Open a local entity and set up your own HR team 

2. Use a global employer-of-record service like Via

Payroll in Ontario can either be run bi-weekly, bi-monthly, or monthly. 

Social Security 

With very few exceptions, workers over the age of 18 in Ontario with an income over $3,500 CAD per year are required to contribute to the social security benefit system in Canada, also known as the Canadian Pension Plan (CPP)

These benefits help with: 

• Retirement 

• Post-retirement benefits

• Disability benefits 

• Survivor benefits 

Employee contribution rates: 

• Canadian Pension Plan: 5.4% of annual gross salary

• Employment Insurance: 2.21% of annual gross salary

Employer contribution rates: 

• Canadian Pension Plan: 5.4% of annual gross salary

• Employment Insurance: 1.1%-1.3% of annual gross salary

Income tax

Income taxes are deducted on a personal basis in Ontario and depend on the individual’s overall gross salary. 

Income tax rates in Ontario: 

• $0-$46,226: 5.05%

• $46,226-$92,454: 9.15%

• $92,454-$150,000: 11.6%

• $150,000-$220,000: 12.26%’

• Over $220,000: 13.16%

Holiday and leave

Maternity leave

Pregnant employees in Ontario are entitled to 17 weeks of unpaid maternity leave before or after the birth of the child. If you have already taken the 17 weeks before the baby is born, you may take more maternity leave until the baby is born. 

Family caregiver leave 

In Ontario, family caregiver leave can be taken as unpaid leave. This leave is to provide care if you have a family responsibility to take care of a critically ill family member. You must provide certification from their healthcare provider stating that they have a serious medical condition. 

Family medical leave

Family medical leave is related to family caregiver leave. This is an emergency medical leave that states that you have a family member with a serious medical condition that could lead to death within 26 weeks of your request. 

Vacation leave

If an employee has worked less than 5 years for a company, they are entitled to 2 weeks of vacation time after their first year. 

Employees with over 5 years of service to a company are entitled to 3 weeks of vacation time. 

Vacation pay for those with less than 5 years of service is 4% of their gross wages earned in the previous year. Employees with over 5 years of service are entitled to 6% of their gross wages earned in the previous year.

Vacation leave must be agreed upon in the collective agreement at the start of employment. 

Public holidays 

Statutory national holidays:

• New Years Day

• Bank Holiday (January 2nd) 

• Good Friday

• Easter Day

• Canada Day

• Thanksgiving Day

• Christmas Day

Statutory Ontario-only holidays: 

• Boxing Day 

Why companies partner with Via

Companies of all sizes want to hire employees in Ontario and elsewhere in Canada, but don’t know how to navigate the country’s local labor laws. Via makes hiring Canadian talent and building your global team seamless. 

With our easy-to-use platform, Via helps you manage local HR processes for direct employment such as benefits, payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts ensure that your company remains compliant while expanding abroad. Via assumes responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team. Companies that partner with Via keep all of their employees’ intellectual property. We ensure that this is spelled out in the employment contracts. With Via’s transparent pricing, you can pay full-time employees or contractors in Canada with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums.

Whether you’re looking to start with 1 employee and scale up at your own pace, or begin with a whole team of developers and grow quickly, Via has your back. 

Learn more how Via can help as your Canada employer-of-record.