Expert Spotlight: EOR in Canada – The Best Way to Hire?

Welcome to Employsome Spotlight, a series where we put specific legal questions to employment lawyers who advise foreign companies in key Employer of Record (EOR) markets. No marketing language, no provider spin. Just independent legal perspective from practitioners who deal with these structures every day.

For this edition, we spoke with Jessica Paglia, an employment and labour lawyer at SpringLaw in Toronto. Jessica advises employers on a wide range of compliance matters including employment contracts, terminations, workplace safety, human rights, collective bargaining, and workplace investigations. She has experience with both Canadian and American clients, having previously worked in the Labour and Employment Group at Miller Canfield.

SpringLaw is a Canadian virtual law firm practising exclusively in employment, labour, and human rights law. The firm’s lawyers regularly advise on the compliance realities foreign companies face when hiring in Canada, where employment law varies by province and mistakes can trigger significant financial exposure.

Her answers below are direct and lightly edited for clarity. If you are evaluating whether to use an EOR in Canada, this is the perspective your legal counsel would give you.

This interview was conducted in April 2026 and reflects the legal landscape at that time.

Jessica Paglia is an employment and labour lawyer at SpringLaw in Toronto. JD from the University of Windsor Faculty of Law. Called to the bar in Ontario. Previously worked in the Labour and Employment Group at Miller Canfield, advising both Canadian and American clients. Published in SHRM, Lexology, and Canada Employment & Human Rights Law on topics including remote work compliance, termination clauses, and AI in hiring.

• Canada’s employment law is provincial, not federal, for most private-sector workers. Each province has its own specific rules on minimum wage, overtime, statutory holidays, vacation pay, and termination notice periods. A one-size-fits-all approach will not work.
• Foreign employers hiring Canadian employees trigger Canadian payroll filing and remittance obligations, including federal and provincial taxes, CPP and EI deductions. Failure to comply may lead to penalties.
• There is a meaningful legal distinction between EOR and PEO in Canada. A PEO operates under a co-employment model and typically requires the foreign company to establish some form of Canadian legal entity. An EOR becomes the sole legal employer for all statutory purposes.
• Before signing with an EOR, foreign companies should verify the provider’s experience in the specific province(s) where employees will be located, confirm how employment contracts are drafted and reviewed, and understand the limits of the EOR’s responsibilities.
• Canada’s cross-border employment landscape is evolving rapidly, with regulatory formalization of remote work, enhanced data privacy legislation, expanded workplace health and safety standards for remote environments, and further clarity expected around permanent establishment rules.

Most foreign companies hiring their first Canadian employee assume it works roughly the same as hiring in their home country. We asked Jessica what the most common legal blind spots are for employers without a physical presence in Canada.

“A primary concern would be to ensure they’re complying with the employment standards legislation of the province or territory where the worker resides and performs the work. Each jurisdiction has its own specific rules. Employers should ensure their processes, policies and contracts align with specific employment standards and that they’re fulfilling their necessary obligations.

Another blind spot we often see relates to payroll and tax obligations. Foreign employers hiring Canadian employees will have Canadian payroll filing and remittance obligations, including but not limited to federal and provincial taxes, and CPP and EI deductions. Amounts must be remitted to CRA and reported correctly on individual and summary T4 slips, and failure may lead to penalties. Foreign employers may also need to obtain a CRA business number in order to open a payroll program account to facilitate all of these appropriate deductions and withholdings. Hiring Canadian employees may create a corporate presence in Canada, triggering corporate tax filing obligations as well.”

Jessica Paglia, Employment, Labour & Contracts Lawyer at SpringLaw (Toronto)

Foreign companies entering Canada often conflate the different hiring models available to them. We asked Jessica to break down the main options and how companies should think about choosing.

“The main options here involve either direct employment or using a third-party service like a Professional Employer Organization (PEO) or Employer of Record (EOR).

If a foreign company hires an employee directly, they are required to comply with Canadian and provincial employment and tax laws and obligations, including but not limited to payroll deductions, employment standards, and health and safety regulations. The foreign company would also need to register with the CRA. This path would likely demand a thorough understanding of the Canadian legal and tax framework and will likely require professional guidance.

While PEO and EOR are often used interchangeably, they represent meaningfully differing structures. A PEO typically operates under a co-employment model, meaning the PEO and foreign company share the employer relationship. The foreign company typically remains the employer of record for most legal purposes, and the PEO would handle administration, payroll processing, benefits, and compliance support. Importantly, this means the foreign company would still need to establish some form of Canadian legal entity.

By contrast, an EOR becomes the sole legal employer of the foreign company’s employees for all statutory and administrative purposes, including but not limited to, signing the employment contract, running payroll, remitting CPP and EI contributions, filing T4s, and liability under provincial employment standards legislation. The foreign company would direct the worker’s day-to-day activities, but they would have no formal employment relationship with the employee in the legal sense.”

Jessica Paglia, Employment, Labour & Contracts Lawyer at SpringLaw (Toronto)

EOR providers have grown rapidly as a hiring model for foreign companies entering Canada. We asked Jessica how she views this trend from the perspective of advising employers with Canadian operations.

“From the perspective of advising foreign companies with Canadian operations, the rise of EOR providers is definitely a significant and largely positive trend. The EOR model offers a streamlined approach for foreign companies to engage Canadian talent without the administrative burden of establishing a direct legal entity in Canada. The EOR handles the complexities of Canadian payroll, tax remittances, and compliance with provincial standards, which can be particularly appealing to foreign companies who are accustomed to a different legal landscape.

That being said, the EOR model is not without risk. The decision requires research and intention, as the quality and depth of expertise varies considerably between providers, and foreign companies remain exposed to liability if the EOR falls short on compliance.”

Jessica Paglia, Employment, Labour & Contracts Lawyer at SpringLaw (Toronto)

Beyond standard contract terms and pricing, we asked Jessica what specific legal considerations and structural questions foreign companies should be asking their EOR provider, but typically don’t.

“Before signing with an EOR, a foreign company should conduct thorough due diligence. Beyond standard legal services agreements and cost, these are some specific considerations that are often overlooked:

Legal Employer Status: it would be prudent to clarify the legal relationship. For instance, is the EOR truly the employer of record for all legal purposes, including employment contracts, termination liabilities, and statutory obligations? What about responsibility for compliance with employment standards, occupational health and safety, or workers’ compensation? Ensuring a foreign company is aware of the ‘limit’ in responsibilities and services will reduce any ambiguity in the future.

Provincial Compliance: ensure that the EOR chosen has experience in the specific province(s) where employees will be located. Each province differs, and ensuring the EOR has specific knowledge of each province’s obligations, including but not limited to language obligations, minimum wage, overtime, statutory holidays and vacation pay, and termination notice periods, will be important in reducing future potential liabilities.

Tax and Payroll Compliance: verify the EOR’s process for Canadian payroll filing and remittances, including federal and provincial taxes, CPP and EI. Inquire about the process for handling CRA business numbers and payroll program accounts.

Employment Contract Management: ask about how employment contracts are drafted, if they have been legally reviewed, and the most recent timeline for review. A good rule of thumb is to ensure contracts are legally reviewed at least annually to ensure liability is contained.

Data Privacy and Electronic Monitoring: several provinces may have obligations when collecting or sharing employee’s personal information. Ensure these obligations, if any, are discussed and considered.

Dispute Resolution and Termination: inquire about the EOR’s approach to employee disputes, disciplinary actions, or terminations.”

Jessica Paglia, Employment, Labour & Contracts Lawyer at SpringLaw (Toronto)

Canada’s provincial employment standards vary significantly across jurisdictions. We asked Jessica how this complexity affects the way an EOR arrangement actually works in practice.

“The applicable employment law for a remote worker would be the provincial jurisdiction where they perform the work. Note that for tax allocations, this ‘applicable law’ assessment may be entirely different. If choosing to use an EOR, it’s important to ensure they are aware of and compliant with the specific employment standards that apply in each situation. A one-size-fits-all approach will not suffice.“

Jessica Paglia, Employment, Labour & Contracts Lawyer at SpringLaw (Toronto)

We asked Jessica where she sees the regulatory landscape evolving and what foreign companies hiring remotely in Canada should be preparing for.

“With the development of remote-work availability and ongoing regulatory adjustments, the cross-border employment landscape in Canada will likely continue to evolve and grow. We see several trends on the horizon:

Continued formalization of remote work policies: Recent CRA administrative policy updates on remote work for tax withholding purposes signal a growing regulatory formalization of remote work arrangements.

Enhanced Data Privacy Legislation: With the growing transfer of employee’s confidential information across borders, we will likely see legislation being introduced intending to govern the collection and use of employee’s personal information. These regulatory improvements will likely introduce protections and clarify how foreign employers and EORs should collect, hold and transfer employee data.

Evolving workplace health and safety standards: Many of the provincial and federal health and safety regulations were established before the contemplation of remote work as a regular arrangement. We are continuing to see the expansion of these standards to ensure they capture remote work environments. For instance, we have seen many provinces broaden their definition of ‘workplace’ to include the digital sphere or the home office.

Permanent Establishments: The rules around permanent establishments for foreign companies remain complex. We can anticipate further clarity in this area to ensure foreign companies are not incurring unintended corporate tax liabilities.”

Jessica Paglia, Employment, Labour & Contracts Lawyer at SpringLaw (Toronto)

We closed by asking for the single most important thing a founder or HR director should know before hiring their first Canadian employee from abroad.

“Do your diligence and seek expertise from the outset. Do not assume anything without thorough research or advice. Canadian tax and employment law is unique and ever-changing, and understanding and complying with nuances from day one is essential to avoiding significant legal and financial exposure down the line.”

Jessica Paglia, Employment, Labour & Contracts Lawyer at SpringLaw (Toronto)

About Employsome Expert Spotlight: This series features independent legal commentary from employment lawyers who advise foreign companies in key EOR markets. Experts are not compensated and editorial control remains with Employsome. The views expressed are those of the individual lawyer and do not constitute legal advice. For country-specific legal guidance, consult qualified local counsel.

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