Guide to Labor Laws in Ontario, Canada

Because of its central location in Canada, the province of Ontario is an excellent option for businesses who want to hire top talent or expand internationally.  But first, you will need to make sure your business is complying with all labor laws in Ontario. 

Why 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 hub for tech, startups, and finance, making it a great place to find top talent.

Key labor laws in Canada and Ontario

Each of Canada’s 13 provinces have their own specific laws regarding 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. 

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

• 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: 

• One week compensation per year of service as notice or termination pay up to eight weeks 

Or

• One 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 somewhere for more than five years, and if they’ve been employed 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.  

Notice period

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 

Discrimination

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 

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 one week is 48 hours. For hourly employees, 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 eight hours off in-between shifts. 

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

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

Ontario recently increased the minimum wage at the end of 2023 to $16.55 CAD. Employees that work more than 44 hours in one must be provided with overtime pay. If an hourly 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 Justworks’ global EOR 

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%

• $150,001-$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. 

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. An employee will have to provide proof from the family member’s doctor to be eligible for this type of leave. 

Vacation leave

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

Employees with over five years of service to a company are entitled to three weeks of vacation time. 

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

Justworks Can Help Manage International Hiring

Choosing the right EOR to help you expand your business internationally can be a game changer. Justworks’ global EOR services enables small businesses to hire international employees quickly, pay them in the local currency, and provide local benefits. It’s hard to know where to start and what to put in place abroad to protect business and your employees. At Justworks, we have in-country legal teams and entities set up to ensure that your payroll is protected and that you’re remaining compliant abroad. 

From access to top talent pools around the world to streamlined international hiring processes, the advantages of working with an EOR (and using Justworks) are undeniable. Get started today. 

FAQ

What are the three basic rights every employee has in Ontario? 

The three basic rights that every employee has in Ontario are: the right to know, the right to participate, and the right to refuse unsafe work. 

What are my rights as an employee in Ontario? 

One of employee’s main rights in Ontario is the right to equal treatment with respect to employment. This covers everything during your employment from hiring and recruiting to dismissal and severance pay. 

What act are most employees protected under in Ontario? 

The Employment Standards Act (2000) is the main law and set of guidelines that determine and dictate all workplace employment in Ontario. 

What is the minimum severance pay in Ontario? 

The minimum severance pay employees in Ontario are guaranteed is one week's pay. The amount and length of severance pay in Ontario is usually determined by the employee’s length of service to a company.