Top 5 Things To Know When Hiring Your First Employee

Written By Gregory Caskie

Read on to learn our top tips for getting your team started.

1. Hire the right person, the right way

For many small businesses in Canada, the first hire might be a full employee—or an independent contractor. Understanding the difference is critical.

Employees work under your direction, are included in payroll deductions (CPP, EI, income tax), and receive a T4 slip at year-end.
Independent contractors work independently, don’t require payroll deductions, and receive a T4A.

Misclassifying someone can result in penalties, back pay, and CRA audits. If you're hiring in Canada, it's worth confirming the right classification up front. It affects your tax responsibilities, employer obligations, and legal compliance.

2. Have an employment agreement in place

A written employment agreement isn’t required by law—but it’s one of the most important tools for avoiding misunderstandings.

For a Canadian micro-business, your employment agreement should include:

  • Basic Details: Employee name, job title, start date (and end date if applicable), and whether the role is full-time or part-time

  • Compensation: Hourly wage or salary, pay frequency, and any overtime rules

  • Work Hours & Location: Expected weekly hours and where the work will be performed

  • Vacation & Holidays: Minimum vacation entitlement (based on provincial standards) and how public holidays are handled

  • Confidentiality Clause: To protect sensitive business information

  • Signatures: From both the employer and employee

Even with a contract, Canadian employment laws override anything that offers less protection than the minimum standard. When in doubt, the employee is entitled to the greater benefit.

3. Understand your obligations as an employer

Hiring employees in Canada means more than issuing a paycheck. You’ll need to stay compliant with provincial and federal laws that govern employment standards and payroll.

  • Vacation Pay: Most provinces require vacation pay to be either paid out with each paycheck or accrued. Follow your province’s minimum standard.

  • Statutory Holiday Pay: Employees are entitled to paid time off or premium pay on public holidays. Rules vary by province.

  • Accurate Payroll Calculations and Remittances: You must withhold and remit CPP, EI, and income tax on a consistent schedule.

  • Government Filings (ROEs, T4s): File Records of Employment when employees leave, and issue T4 slips each year.

  • Workers’ Compensation Registration: Register with your provincial WCB for workplace injury coverage.

  • Workplace Safety and Human Rights Compliance: You're responsible for providing a safe, inclusive, and discrimination-free work environment.

4. Register for a CRA Payroll Account and set up payroll

When you hire your first employee, you’ll need a CRA payroll account to submit taxes and stay compliant.

Register early—before your first payroll run—using the CRA’s Business Registration Online portal. If you already have a business number, you can add a payroll program account.


To open a payroll program account, you will need the following information:

  • *Date employees receive their first wages

  • *Type of pay period (for example: weekly, bi-weekly, semi-monthly, monthly)

  • Months covered for payroll of employees' wages

  • Number of employees (estimated, it’s okay if this fluctuates)

  • Payroll service name (if you are using one)

  • Country of parent or affiliate (if you have a foreign owned corporation)

  • Name of franchisor (if any)

  • Country of franchise's head office (if any)


    *these items are most critical to get right

If you’re using a small business payroll service, this step may be handled for you—but you still need to ensure it’s done right.

5. Build a strong relationship with your employee

Hiring is about more than just compliance—it's about building a great place to work. Investing in a positive working relationship pays off long term.

  • Check in regularly

  • Offer learning opportunities

  • Encourage questions and concerns

  • Set clear expectations from day one

A strong relationship can resolve issues early, build trust, and help you retain good people as your business grows. Communication and clarity go a long way—especially in small teams.

Final Thoughts

Hiring your first employee in Canada can feel overwhelming—but it doesn’t have to be. By understanding the rules, using the right tools, and focusing on the relationship, you’ll set your business up for success.

Need a payroll system built for Canadian micro-businesses? Province Payroll makes it easy to stay compliant and pay your team on time, every time.

Gregory Caskie