Employee Cost Calculator

True Cost of an Employee in Canada

The true cost of hiring an employee goes well beyond their base salary. In Canada, employers must account for mandatory government contributions, insurance premiums, vacation pay, and benefits. The total cost typically falls between 1.2x to 1.4x the employee's base salary, depending on the province, benefits package, and industry.

Mandatory Employer Contributions

Canadian employers are legally required to contribute to two federal programs on behalf of each employee:

• Canada Pension Plan (CPP): Employers match the employee's CPP contribution. For 2024, the rate is 5.95% on pensionable earnings between $3,500 and $68,500 (maximum employer contribution of $3,867.50). In Quebec, employers contribute to the Quebec Pension Plan (QPP) at a higher rate of 6.40%.
• Employment Insurance (EI): Employers pay 1.4 times the employee's EI premium. The 2024 employee rate is 1.64% on insurable earnings up to $63,200, making the employer rate approximately 2.296% (maximum employer premium of approximately $1,508). Quebec employers pay a reduced rate due to the Quebec Parental Insurance Plan (QPIP).

WSIB/WCB Premiums by Province

Workplace Safety and Insurance Board (WSIB) premiums, called Workers' Compensation Board (WCB) in other provinces, vary significantly by province and industry classification. Rates are expressed per $100 of insurable payroll:

• Ontario (WSIB): Average premium rate approximately $1.30-$1.70 per $100 of payroll (varies by industry classification)
• British Columbia (WorkSafeBC): Average rate approximately $1.55 per $100
• Alberta (WCB): Average rate approximately $1.25 per $100
• Quebec (CNESST): Average rate approximately $1.65 per $100
• Rates can range from under $0.50 for low-risk office work to over $10.00 for high-risk construction or forestry jobs

Ontario Employer Health Tax (EHT)

The Employer Health Tax (EHT) is a payroll tax unique to Ontario that funds the provincial health care system. The rate depends on total Ontario payroll:

• Payroll up to $200,000: Exempt (for eligible employers)
• Payroll $200,000 to $400,000: 0.98% on the amount over $200,000
• Payroll over $400,000: 1.95% on total payroll

This calculator uses 1.95% for Ontario since most businesses with employees exceed the $400,000 threshold when considering total payroll across all employees.

Vacation Pay Minimums by Province

Every province mandates minimum paid vacation for employees. Common minimums include:

• Ontario, Alberta, BC: 2 weeks (4% of wages) after 1 year; 3 weeks (6%) after 5 years
• Saskatchewan: 3 weeks (6%) after 1 year; 4 weeks (8%) after 10 years
• Quebec: 2 weeks (4%) after 1 year; 3 weeks (6%) after 3 years
• Federal jurisdiction: 2 weeks (4%) after 1 year; 3 weeks (6%) after 5 years; 4 weeks (8%) after 10 years

Employee vs Contractor: Key Considerations

While contractors may appear cheaper on paper due to the absence of employer contributions and benefits, the CRA uses specific criteria to determine whether a worker is an employee or an independent contractor:

• Control: Does the payer control how, when, and where the work is done? If yes, likely an employee.
• Tools and equipment: Does the payer provide them? Employee indicator.
• Financial risk: Can the worker profit or lose money? Contractor indicator.
• Integration: Is the work integral to the payer's business? Employee indicator.
• Exclusivity: Does the worker only work for one payer? Employee indicator.

Risks of Misclassifying Workers

Incorrectly classifying an employee as an independent contractor carries serious consequences:

• Back taxes: CRA can assess unpaid CPP, EI, and income tax withholdings for up to 4 years
• Penalties: 10% penalty on unpaid amounts, plus interest
• Repeat offences: 20% penalty on subsequent assessments
• WSIB/WCB liability: Retroactive premiums plus penalties if a worker is injured
• Employment Standards Act claims: Vacation pay, overtime, termination pay, and severance owed retroactively