Employment Contracts

Overview 


There is no law requiring written employment contracts in Canada, and as such, there are no mandatory clauses required of an employment contract. However, it is recommended that employment contracts be documented in writing and signed by both employer and employee to avoid potential disputes. A local PEO can handle this process for you and maintain all employee records. 


Types of Employment Contract in Canada 


There are four types of employment contract in Canada, each offering specific protections for both Canadian and foreign workers:

  • Permanent contracts: The most common type of contract for employees in Canada. Permanent contracts usually include health care benefits, an annual salary, and possibly bonuses as well. This contract type is also considered an open-ended contract. Employers of permanent employees must regularly contribute to their Employment Insurance (EI), Canadian Pension Plan (CPP), and withhold applicable income tax.  
  • Freelance/contract employment: This type of employment is typically based around a certain project or period of time. Normally, freelance/contract employees are not entitled to EI or CPP contributions by the employer, and benefits are limited to the individual’s contract fee.
  • Part-time employment: These employees work less than 30 hours per week, and employers contribute to both EI and CPP. Part-time employment can be comprised of a set number of hours (less than 30) each week, and it can also include occasional or weekend work. 
  • Temporary work: Temporary work in Canada is often seasonal, for example, agricultural workers who work during the harvest season, lifeguards, rangers, tourism workers, and others. Temporary workers have specific rights to pay, employee safety, and other employee rights, but EI and CPP contributions are optional. 


Our team from our Toronto office can help you determine which contract type is appropriate based on your business needs and the type of work to be performed. 


Mandatory Clauses 


Given that written contracts are not required for employment in Canada, there are no strict mandatory clauses. However, most employers will furnish an employment contract containing (at least) the following terms:

  • Compensation 
  • Job title and duties 
  • Geographic work location incl. Canadian province
  • Termination notice period required to end the contract 
  • Non-competition clauses 
  • Non-disclosure agreements 

Your company may also wish to include additional information in the employment contract. If so, a PEO can facilitate those additions in compliance with Canadian labor law. 

 

Amending Employment Contracts 


Working with a PEO can help you take the necessary steps to amend an employment contract. When working through a PEO, the contract amendment process is as simple as sending the intended change to the provider, who will first assess the validity of the amendment under Canadian law, and then negotiate any changes directly with the employee. 


Invalidity in Employment Contracts  


An employment contract in Canada — or a part thereof — can be considered invalid for several reasons, including where any party or parties used fraud or duress to induce signing of the contract.  


Employment contracts can also be invalidated if an employer is deemed to have violated employees’ rights or exercised discrimination. Working with a local PEO can help you avoid common errors and properly draw up contracts that are compliant and comprehensive.

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