Hiring Your First Employee in Ontario: What You Need to Know

Before You Hire: Getting Set Up

Before you bring anyone on board, there are a few things you need to take care of on the administrative side. These steps are not optional. They are legal requirements, and getting them right from the start will save you from costly mistakes later.

First, you need to register for a payroll account with the Canada Revenue Agency. This is separate from your business number and your HST account. Your payroll account is where you will remit source deductions, including income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums, on behalf of your employees.

You also need to register with the Workplace Safety and Insurance Board (WSIB). In Ontario, most employers are required to carry WSIB coverage. This protects your employees if they are injured on the job and protects your business from related lawsuits. Make sure to register before your new hire's first day of work.

If you have not already, this is also a good time to set up a dedicated bookkeeping system that can handle payroll tracking. Having clean financial records from the start makes everything easier when it comes time to file remittances and year-end tax slips.

Understanding the Employment Standards Act

Ontario's Employment Standards Act (ESA) sets out the minimum standards that employers must follow. As a business owner, you are responsible for knowing and complying with these rules. Ignorance is not a defence if something goes wrong.

The ESA covers a wide range of employment topics, including minimum wage, hours of work, overtime pay, public holidays, vacation entitlements, and termination requirements. For example, as of October 2025, the general minimum wage in Ontario is $17.20 per hour. Employees are entitled to at least two weeks of paid vacation after each 12-month vacation entitlement year, and vacation pay must be at least four percent of gross wages earned.

You also need to be aware of the rules around hours of work. The standard work week in Ontario is 44 hours. Any hours worked beyond that threshold must be paid at 1.5 times the employee's regular rate, unless you have a written agreement that says otherwise and it falls within the ESA's guidelines.

I recommend keeping a copy of the ESA guide handy or bookmarking the Ontario government's employment standards page. The rules can change, and staying current is part of your responsibility as an employer.

Setting Up Payroll

Payroll is one of the areas where I see small business owners struggle the most, especially when they are doing it for the first time. Getting it right is critical, both for your employees and for your compliance with the CRA.

Every pay period, you need to calculate and withhold the correct amounts for federal and provincial income tax, CPP contributions, and EI premiums. As the employer, you are also required to make your own contributions to CPP and EI on top of what you deduct from your employee's pay. Your employer share of CPP is equal to the employee's contribution, and your EI contribution is 1.4 times what the employee pays.

These deductions must be remitted to the CRA on a regular schedule. For most new employers, remittances are due by the 15th of the month following the pay period. Missing a deadline can result in penalties and interest, so it is important to stay on top of this.

At the end of the year, you are responsible for issuing T4 slips to each employee and filing T4 summaries with the CRA. The deadline for this is the last day of February following the calendar year.

If payroll feels overwhelming, you are not alone. Many of my clients choose to outsource their payroll services so they can focus on running their business while knowing their obligations are being handled correctly.

Creating an Employment Agreement

While not strictly required by law for every position, having a written employment agreement is one of the smartest things you can do when hiring. It protects both you and your employee by clearly setting out the terms of the working relationship.

A good employment agreement should include the job title and description, the start date, compensation details (salary or hourly rate, pay frequency, benefits if any), hours of work, vacation entitlements, and the terms for termination or resignation. You may also want to include clauses around confidentiality, non-solicitation, or intellectual property, depending on the nature of your business.

I strongly recommend having an employment lawyer review your agreement template before you use it. The cost of a legal review upfront is far less than the cost of a dispute down the road.

Keeping Proper Records

As an employer in Ontario, you are legally required to maintain certain records for each employee. The CRA and the Ministry of Labour both have record-keeping requirements, and they do not always overlap, so you need to cover both.

At a minimum, you should keep records of each employee's name, address, date of birth, start date, wage rate, hours worked, vacation time and pay, and any deductions made. These records must be kept for at least three years under the ESA, though the CRA requires you to keep payroll records for six years.

Good record-keeping is not just about compliance. It also helps you manage your business more effectively. When you have clear records, you can track labour costs, plan for growth, and make informed decisions about staffing.

Final Thoughts

Hiring your first employee is a sign that your business is growing, and that is worth celebrating. But it also means you are taking on a new set of legal and financial responsibilities that need to be handled with care.

Take the time to set up your payroll account, understand the ESA, register with WSIB, and put a solid employment agreement in place. If any of this feels like a lot to manage on your own, reach out. I work with small business owners across Ontario to make sure their payroll and HR processes are set up properly from the start. Get in touch and let's talk about what you need.