Hiring and Terminating Employees

Small business owners wear many hats within their business including taking on the role of recruiting and terminating employees.  Without a dedicated human resources team, the process of hiring and firing can be time-consuming and overwhelming to business owners.  

Employers need to follow their provincial employment standards and the human rights legislation which outlines the minimum standards for termination notice and severance pay.  In Canada, each province and territory has their own laws with respect to employment and termination laws.

Prior to Hiring

Before you start hiring employees, be sure you are prepared and ready.  Employers with paid employees need to have a payroll deductions account.  To open this account, your business should have a business number.  

If you already have a business number, you can add a new account by:

1. Using My Business Account;
2. Filing out RC1 and mailing the completed form to your tax service office or tax center; or
3. Calling Canada Revenue Agency at 1-800-959-5525 and requesting a payroll deductions account.

If you do not have a business number, you can request a payroll deductions account at the same time.

Hiring Employees

Offer Letter:

• Have the new employee accept and sign the job offer letter.
• This letter should specify the job title, job duties, work hours, benefits, salary, probation period and any other pertinent information.

Social Insurance Number (SIN):

• Employer needs to confirm the employee’s SIN and verify the SIN within 3 days of starting the job.
• SINs that start with the number “9” means the employee is on a work permit.  This person is only permitted to work for a particular employer and for a specified period of time.

Form TD1, Personal Tax Credits Return:

• Employee needs to complete both federal and provincial Form TD1.
• This form is used to determine the amount of tax that will be deducted from an individual’s employment income or other income.‍

Terminating Employees

Notice of Termination:

• Employer must provide employee with written notice of intention to terminate employment.
• Termination letter should be in writing, addressed to the employee, have the termination date specified.
• In lieu of written notice, an employer should follow their provincial or territorial guidelines.

This applies to all employees except:

1. an employee that has not completed three consecutive months of continuous employment;
2. an employee that discontinues their own employment;
3. an employee who is dismissed for just cause (serious misconduct, fraud, breach of trust, etc.);
4. an employee that is laid-off; and
5. an employee whose contract provides an end date and work ends on that date.

Severance Pay

• An employee may have the right to collect severance.  It is advisable to seek legal advice.

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