How to Hire the Right Employees for Your Canadian Small Business

Hiring employees can be one of the most exciting—and nerve-wracking—steps in growing a business. For small business owners and sole proprietors, adding your first team member or expanding your staff often comes with big questions. How do you know when it’s the right time? What rules and requirements do you need to follow in Canada? And most importantly, how do you make sure you’re choosing the right people to help your business succeed?

The truth is, hiring doesn’t have to be overwhelming. With the right preparation and structure, it can become a smooth, empowering process that transforms your business and frees you to focus on what you do best. This guide will walk you through everything you need to know—from planning your first hire, to meeting Canadian legal requirements, to building strong onboarding systems.

Key Takeaways

• Hiring requires planning, compliance, and organization.
• Choose the right employee type for your business needs.
• Use checklists, templates, and HR tools to stay on track.
• Avoid mistakes by being thorough in screening and onboarding.
• With the right hires, your business can grow stronger and more resilient.

Why is Hiring the Right Employees So Important?

It’s easy to assume hiring is just about filling an empty role, but in reality, it affects every part of your business. Each new employee brings their own energy, ideas, and way of working—and that can have a big impact on your productivity, culture, and bottom line. The right hire can take tasks off your plate, boost efficiency, and even spark innovation. But the wrong hire? That can cost you time, money, and morale.

For Canadian small business owners, hiring also comes with legal responsibilities. Once you bring someone onto your team, you’re required to comply with both federal and provincial standards, which means things like:

• Registering with the Canada Revenue Agency (CRA) for payroll deductions
• Offering mandatory benefits such as Employment Insurance (EI)
• Keeping accurate and detailed employment records

These requirements aren’t optional and ignoring them can lead to costly penalties.

When you put care into your hiring process, you’re not just finding someone to fill a seat—you’re building the foundation for long-term success. The employees you choose today will help shape your business for tomorrow.

Steps to Prepare Before Hiring

Because hiring is such an important decision for your business, the work really starts before you ever share a job posting. Preparation is what sets you up for success—it ensures you know exactly what you’re looking for, what you can realistically offer, and how you’ll measure whether a candidate is the right fit. Skipping this step often leads to rushed decisions and costly mistakes, while taking the time to prepare makes the entire hiring journey smoother and far more effective.

With that in mind, let’s break down the key steps you’ll want to take before you begin the hiring process. These steps will help you stay organized, focused, and confident as you move forward.

Step 1 – Examine Your Business Needs

Begin your preparation by taking a step back and an honest look at your business as it stands today. Ask yourself: 

• What tasks are falling behind because I don’t have enough time? 

• Which parts of the business could grow faster if I had more support? 

By identifying the gaps in your operations, you can better define the role you need to fill. This step ensures you’re hiring strategically—not just reacting to the day-to-day stress of being short-handed. 

For example, if customer inquiries are going unanswered, perhaps you need an administrative assistant. If your sales are steady but marketing is lagging, a marketing coordinator may be a better first hire.

Step 2 – Budget for Hiring

Secondly, once you’ve identified the role you need, it’s time to ask: Can I afford this hire, and in what capacity? Hiring costs go beyond salary. You must also factor in obligations like: 

• Employment Insurance (EI)
• Canada Pension Plan (CPP) contributions
• Paid vacation
• Training time 
• Technology or tools

For many small businesses, this step is also where you weigh whether to bring someone on full-time, part-time, or on a contract basis. Building a realistic budget upfront gives you a financial roadmap for the hiring process and prevents surprises down the line.

Step 3 – Create Detailed Job Descriptions

Next comes one of the most overlooked but critical steps: writing a clear, detailed job description. Think of this as both your recruiting tool and your performance guide later on. A vague posting like “looking for help with admin” won’t attract the right candidates. Instead, outline the day-to-day responsibilities, required skills, and the outcomes you expect from the role. 

For example, “answering customer inquiries within 24 hours” is more specific than “managing emails.” A strong job description helps candidates self-select, saving you time and ensuring you attract people who are genuinely qualified.

Step 4 – Decide on Employment Type

After you’ve defined the role and budget, you’ll need to decide on the type of employee that makes the most sense for your situation. Not every business needs a full-time worker right away. Perhaps you need seasonal staff to handle a busy holiday season, a contractor for a short-term project, or even a remote employee who brings specialized expertise from outside your local area. Choosing the right type of employee allows you to stay flexible while still meeting your goals. 

For example, if you’re testing a new service offering, a contract hire may be safer than committing to a permanent salary

Step 5 – Using Checklists and Templates

Finally, before you start recruiting, it’s wise to set up systems that will keep you organized throughout the process. Hiring involves many moving parts: creating job postings, scheduling interviews, conducting reference checks, drafting contracts, and onboarding. Using checklists and templates—whether downloaded from government resources, HR software, or created in-house—ensures no step gets missed. This also saves you time and reduces stress, because instead of reinventing the wheel for each hire, you have a repeatable, structured process to follow.

To make this stage even easier, we’ve created a New Employee Hiring Checklist that walks you through each step—from identifying your needs to preparing contracts and onboarding. It’s a simple, practical tool designed to keep you organized and confident throughout the hiring process. Download the checklist here ➡️  Download: New Employee Checklist

The Hiring Process in Canada

Once you’ve laid the groundwork and defined your needs, it’s time to move into the hiring process itself. In Canada, hiring isn’t just about finding someone who can do the job—it’s also about following a structured process that protects your business and sets the tone for your new employee’s success. By breaking it down into clear steps, you’ll avoid common pitfalls and make the experience smoother for both you and your candidates.

Step 1 – Advertising the Position

The first step is to let people know you’re hiring. Posting on Job Bank, Canada’s national employment platform, is a great starting point since it connects you with thousands of job seekers for free. You can also use platforms like Indeed or Workopolis for a broader reach. But don’t stop there—think about where your ideal candidate spends their time. If you’re in a trade or professional industry, associations or LinkedIn groups may be more effective. For local businesses, word-of-mouth referrals or community postings can sometimes attract stronger candidates than a generic online posting.

Pro Tip: Don’t just post and wait—share your job posting on your business’s social media, newsletter, or even at your store, restaurant, salon or office. Candidates who are already connected to your brand are often a better cultural fit.

Step 2 – Screening Applications

Once applications start rolling in, it’s easy to feel overwhelmed. That’s why setting clear criteria in advance is essential. Look for alignment with your job description: do the candidate’s skills and experiences match what you need? At the same time, don’t overlook potential. A candidate who shows enthusiasm, adaptability, and willingness to learn may ultimately be more valuable than someone who checks every technical box but lacks drive.

Pro Tip: Use a simple scoring system when reviewing resumes—for example, rate candidates on skills, experience, and attitude. This makes comparisons more objective and reduces the chance of bias.

Step 3 – Interviewing Candidates

Interviews give you the chance to go deeper and evaluate whether a candidate will thrive in your workplace. Structured interviews—where every candidate answers the same core set of questions—are the most effective way to ensure fairness. Focus on both technical skills and cultural fit. For instance, you might ask about how a candidate handled a challenging situation in the past to gauge problem-solving ability and teamwork.

As for format, in-person interviews often give you a better sense of personality and presence, while virtual interviews can save time and expand your candidate pool. For early screenings, video calls can be efficient, but for final interviews—especially for roles that require close collaboration—meeting face-to-face is usually worth it.

Pro Tip: Always include at least one practical or scenario-based question (“How would you handle X situation?”). It reveals how a candidate thinks on their feet, which is often more telling than rehearsed answers.

Step 4 – Reference and Background Checks

Checking references and performing background checks is about verifying what you’ve been told. Calling a former employer can give insight into a candidate’s work ethic, reliability, and strengths. Be sure to ask open-ended questions like, “What was it like working with this person?” or “Would you rehire them?”

For certain roles—especially those involving finances, sensitive information, or work with vulnerable groups—a background check is essential. In Canada, you can use services like Certn, MyBackCheck, or Sterling Backcheck, which provide criminal record checks, employment verifications, and credit history when relevant. 

Pro Tip: Always ask for the candidate’s consent in writing before performing any background checks—this protects you legally and builds trust with the applicant.

Step 5 – Extending Offers and Finalizing Employment Contracts

When you’ve chosen your candidate, the next step is extending an offer. This isn’t just a handshake agreement—employment contracts are legally binding documents that outline responsibilities, compensation, benefits, and conditions of employment. They protect both you and your employee by setting clear expectations from the start.

Many small businesses use contract templates as a starting point, but it’s often wise to have a lawyer review your contract—especially for your first hires. This ensures you’re compliant with Canadian employment law and reduces the risk of disputes later.

Pro Tip: Don’t delay once you’ve made a decision. Top candidates are often interviewing with multiple employers. Make the offer quickly and be clear about next steps—such as signing the contract, providing documentation, and start dates.

Legal Requirements and Documentation

Let’s dive deeper into one of the most important (and often most confusing) parts of hiring in Canada: the legal requirements and documentation. While this may not be the flashiest stage of bringing on a new team member, it’s absolutely essential. Getting it right keeps your business compliant, protects you from costly mistakes, and shows your employees that you’re running a professional, trustworthy operation.

Employment Standards

Each province and territory has its own employment standards covering minimum wage, overtime pay, vacation, and working hours. These are not optional guidelines—they’re legal requirements. Even if an employee verbally agrees to something different, you as the employer must still comply with the law. Knowing the rules up front helps you avoid disputes, fines, or reputational damage later. Let’s break them down in more detail.

Minimum Wage Across Canada (2025)

One of the most important standards to understand is minimum wage. Rates vary depending on where your business operates, and in some provinces, they increase annually. Below is a snapshot of the minimum wage rates across Canada for 2025:

Minimum wage as of September 1, 2025. Source: Wagepoint

Overtime Pay in Canada

Overtime rules are another area where each province and territory sets its own standards. In most cases, employees are entitled to time-and-a-half (1.5x their regular wage) once they’ve worked beyond the daily or weekly threshold. These thresholds aren’t the same everywhere, so it’s important to check the rules where your business operates.

Here’s a simplified overview of overtime rules across Canada for 2025:

Source: CanPay.com

Pro Tip: Not every employee is covered by overtime laws. Management roles, some sales positions, and certain industries (like agriculture or trucking) often have exemptions. Always double-check provincial legislation if you’re unsure

Vacation Policies & Pay

Vacation rules ensure employees get the rest they’re entitled to while still being compensated. Each province and territory has its own standards, but most follow a pattern of 2 weeks of vacation after the first year of employment, and 3 weeks once an employee has been with you longer (usually after 5 years).

Source: Time Off Management

Pro Tip: Vacation pay must be paid out even if an employee doesn’t take their vacation. You cannot “skip” vacation entitlements, even if an employee agrees to it.

Standard Working Hours

In most provinces and territories across Canada, the standard workweek is set at 40 hours, with a daily maximum of 8 hours. Once an employee exceeds these limits, overtime rules typically kick in. 

It’s also worth noting that standard hours don’t always apply equally across every industry. Sectors like construction, trucking, agriculture, or healthcare often have unique rules that account for the nature of the work. Some provinces also allow “averaging agreements,” which let employers and employees’ average hours over a set period (like two or four weeks). This can help smooth out schedules in industries where workloads fluctuate seasonally or weekly.

Employers are also responsible for providing rest periods and breaks. For example, most provinces require at least one 30-minute break after 5 consecutive hours of work, though the specifics can vary. These requirements are in place to ensure employees are not only compensated fairly but also able to work safely and sustainably.

Pro Tip: Always confirm the rules that apply in your province or territory—and remember that federally regulated businesses (like airlines, banks, and telecoms) follow federal labour standards instead of provincial ones. If your industry is covered by special regulations, be extra careful to stay compliant.

Contracts and Offer Letters

While a verbal agreement may technically be binding, relying on one is risky. A written employment contract or offer letter protects both you and your employee by clearly setting out the terms of the relationship. It creates a shared understanding from the very beginning and helps avoid misunderstandings later.

At a minimum, your contract should cover:

• Job title and role expectations – a clear outline of duties, responsibilities, and reporting structure.
• Start date and work schedule – including standard hours, days of work, and any probationary period.
• Compensation details – base pay, hourly rate or salary, overtime eligibility, commission structure (if applicable), and pay schedule.
• Benefits – statutory benefits (like CPP, EI, vacation pay) as well as any additional perks you provide (health insurance, retirement plans, bonuses, etc.).
• Vacation and leave entitlements – in line with provincial standards, plus any company policies that go beyond the minimum.
• Termination conditions – notice requirements, severance (if applicable), and grounds for termination.
• Confidentiality and non-compete clauses – if relevant, to protect sensitive business information.
• Other terms – such as probationary periods, remote work arrangements, or expectations around company equipment and technology use.

When drafting your employment contract, avoid overly complicated legal jargon. A contract should be clear and easy for both you and your employee to understand—it’s about building trust as much as protecting your business.

Payroll Registration and Deductions

Once you hire an employee, one of your first responsibilities is to set up a payroll account with the CRA. Through this account, you’ll deduct and send in contributions for income tax, Employment Insurance (EI), and the Canada Pension Plan (CPP). You’ll also need to keep accurate payroll records, including hours worked, wages paid, and all deductions made.

Here’s a simple breakdown of what that looks like:

Canada Pension Plan (CPP)

The CPP helps employees save for retirement and also provides disability and survivor benefits. Both you and your employee contribute equally.

• Employees and employers each contribute 5.95% of pensionable earnings (earnings above $3,500 per year).
• In 2025, contributions are capped once the employee earns about $71,300.
• That means the maximum annual contribution is about $4,034.10 each (for both employee and employer).

Employment Insurance (EI)

EI provides temporary income support if an employee loses their job, takes parental leave, or faces other eligible situations.

• Employees contribute 1.64% of insurable earnings.
• Employers pay 1.4 times that amount on top.
• In 2025, the maximum an employee will contribute is about $1,077.48, while the employer maximum is about $1,508.47.

Making Payroll Simple

When you run payroll, you’ll:

1. Deduct the employee’s share of CPP and EI from their wages.
2. Add your share of CPP and EI as the employer.
3. Remit the total amounts to the CRA on your required schedule.

To make things easier, the CRA offers a Payroll Deductions Online Calculator that lets you quickly estimate how much to deduct for CPP, EI, and income tax.

Types of Employees and Hiring Strategies

There’s no one-size-fits-all approach to hiring. The type of employee you choose should reflect your business needs, financial capacity, and long-term goals. The good news? You have options—and each comes with its own advantages.

Full-Time Employees

Think of full-time employees as the backbone of your team. They typically work around 30–40 hours per week and bring stability, commitment, and the potential to grow with your business over the long term. Of course, they also represent the biggest investment, since you’ll need to budget for wages, benefits, and ongoing development.

Part-Time Employees

Part-time staff usually work under 30 hours per week and are a great choice when you don’t quite have enough work (or budget) for a full-time hire. They give you flexibility—plus, many part-time employees grow into larger roles as your business expands.

Seasonal Employees

If your business has peak busy times—like retail during the holidays or tourism in the summer—seasonal workers can be a lifesaver. Their schedules vary but often fall in the 20–40 hour per week range for a defined period. Just be sure your contracts clearly spell out start and end dates to avoid confusion.

Contractors

Independent contractors aren’t technically employees—they’re self-employed individuals you bring on for specific projects. Their hours depend on the project scope, but you’re not responsible for payroll deductions or benefits. They’re great for specialized tasks but be cautious: misclassifying an employee as a contractor can create tax and legal headaches.

Remote or International Employees

Remote workers, whether in Canada or abroad, give you access to talent outside your local market. Remote hours vary (often full-time or part-time schedules), while international hires may require extra steps like work permits or immigration compliance. With the rise of remote work, many Canadian small businesses are thriving with distributed teams.

Choosing the right type of worker is all about aligning your current needs with your long-term goals. But no matter who you hire—whether it’s a part-time assistant, a full-time manager, or a seasonal team—success depends on making smart hiring decisions. That’s why the next step is so critical: understanding how to avoid the most common hiring mistakes that can cost your business time, money, and momentum.

How to Avoid Hiring Mistakes

Even with the best intentions, hiring can go sideways if you’re not careful. Small missteps—like overlooking warning signs on a resume or rushing through interviews—can add up to costly problems down the road. The good news? Most hiring mistakes are preventable if you know what to watch for and build a process that helps you make clear, confident decisions.

Common Resume Red Flags

When reviewing applications, be mindful of potential warning signs. These don’t always mean you should eliminate a candidate, but they do warrant further investigation during the interview:

• Unexplained employment gaps – Time off isn’t always bad, but candidates should be able to explain it clearly (e.g., education, caregiving, travel).
• Vague or generic job descriptions – Watch out for resumes that list duties without accomplishments, which can signal lack of impact.
• Job hopping – Frequent short stints may suggest reliability issues, unless there’s a clear reason (contract work, industry norms).
• Overly inflated titles or responsibilities – If the claims seem too good to be true, verify them during reference checks.
• Errors or poor formatting – Typos, inconsistent formatting, or sloppy presentation can indicate a lack of attention to detail.

A resume is your first glimpse of a candidate’s professionalism. Treat it as a preview of the quality of work you might expect.

Structured Interviews and Assessments

Resumes only tell part of the story. Structured interviews—where each candidate is asked the same set of questions—help ensure fairness and make it easier to compare responses. Adding a simple skills assessment (like a writing test for an admin role or a problem-solving exercise for a manager) can give you a clearer picture of actual ability.

The Role of Probation Periods

Even with careful screening, it’s impossible to know for sure if someone is the right fit until they’re actually on the job. That’s why probation periods are so important.

In Canada, probation periods typically range from 3 to 6 months, depending on the role and provincial employment standards. During this time, you and your employee have the chance to evaluate the fit in real working conditions.

Use probation wisely by:

• Setting clear expectations from day one
• Checking in regularly (weekly or monthly) to provide feedback
• Documenting progress and areas for improvement

At the end of the probation, you should have a clear sense of whether to confirm the hire, extend the probation, or part ways.

Why Patience Pays Off

Avoiding hiring mistakes is all about discipline. Don’t let urgency cloud your judgment—filling a seat quickly can backfire if the person isn’t right for the job. A thoughtful process, combined with careful evaluation during probation, protects your business and sets new hires up for long-term success.

Hiring Employees as a Sole Proprietor

If you run your business as a sole proprietor, it’s natural to wonder whether you’re even allowed to hire employees. The answer is yes—you absolutely can. But just like larger businesses, you’ll need to follow the rules and take on the responsibilities that come with being an employer.

Step 1 – Register for a CRA Payroll Account

The first step is registering for a payroll account with the Canada Revenue Agency (CRA). This account allows you to deduct and remit income tax, CPP, and EI contributions on behalf of your employees. Even if you only hire one person, you’re required to set this up before paying them.

Step 2 – Understand Employment Standards

Employment standards don’t change based on the size of your business. As a sole proprietor, you’re still responsible for meeting provincial requirements, which include:

• Paying at least the minimum wage in your province or territory
• Providing statutory holiday pay
• Offering vacation time and vacation pay
• Following overtime rules where applicable

These standards are non-negotiable—you can’t contract out of them, even if both you and the employee agree to different terms.

Step 3 – Keep Accurate Records

Good record-keeping is essential. You’ll need to track hours worked, wages paid, and all payroll deductions. Proper records not only help you stay organized but also protect you if the CRA audits your business or if disputes arise.

Step 4 – Balance Workload and Financial Feasibility

Hiring can feel like a leap, especially for sole proprietors. Start by asking: Do I have enough steady work to justify bringing someone on? If you’re not sure, consider hiring part-time staff, a contractor, or even seasonal help to ease the transition. As your revenue grows, you’ll have more room to expand your team.

Hiring as a sole proprietor is both possible and powerful. The right employee can free up your time, reduce your stress, and give you space to focus on growth. The key is approaching the process with a plan: understand the rules, budget realistically, and take it one step at a time.

Onboarding and Employee Integration

Bringing an employee on board doesn’t end once they’ve signed their contract. The onboarding process is your chance to set the tone for their entire experience with your business. A thoughtful, well-structured onboarding helps employees feel supported, engaged, and confident in their new role.

Onboarding should go beyond paperwork and training—it’s about introducing new hires to your company’s culture, values, and vision. Assigning a mentor or buddy early on can make employees feel more connected and less isolated. Setting clear expectations from day one helps eliminate confusion, while regular check-ins provide opportunities for feedback and adjustment.

Integration is equally important. Employees thrive when they understand how their work fits into the bigger picture. Celebrating early achievements, whether it’s completing their first project or reaching the end of their probationary period, reinforces a sense of progress and belonging.

Key onboarding and integration steps include:

• Assigning a mentor or buddy to provide guidance
• Setting clear performance expectations and short-term goals
• Scheduling regular check-ins and feedback sessions
• Providing necessary training and resources right away
• Celebrating milestones such as 30, 60, and 90 days on the job

Tools and Resources for Hiring Employees

Hiring and managing staff becomes far more manageable when you have the right tools on hand. For Canadian small businesses, a variety of resources exist to simplify everything from finding candidates to handling payroll. These tools not only save time but also reduce stress by helping you stay organized and compliant.

Helpful tools and resources for Canadian employers include:

• Job Bank – Canada’s free government-run hiring platform with access to a wide pool of candidates
• Indeed, and Workopolis – Popular private job posting platforms to reach an even larger audience
• Templates – Ready-to-use employment contracts, onboarding checklists, and interview guides that keep your process consistent
• HR Software – Tools like BambooHR or ADP to manage employee records, track performance, and handle benefits
• Payroll Software – Programs such as QuickBooks Payroll or Wagepoint to automate CRA deductions and streamline payroll

By combining these resources, you’ll make your hiring process more professional, efficient, and less overwhelming giving you more time to focus on actually running and growing your business.

Let’s Help You Hire the Right Team

Hiring is one of the biggest investments a small business can make. But sometimes the challenge isn’t finding great people—it’s having the cash flow to bring them on board.

That’s where Merchant Growth can support you. Whether you need financing to cover training, payroll, or expansion costs, we offer funding solutions tailored to Canadian small businesses. Hiring the right people is an investment in your future, and we can help you make it happen.

If you’re ready to build a stronger team, talk to Merchant Growth today about how we can help fund your hiring needs.