When do you graduate from an EOR to your own Canada entity?

The calculation below uses CAD 820 as the illustrative CAD equivalent of the Teamed fee. This is illustrative, not a fixed CAD price. The actual CAD amount depends on the exchange rate at the time of invoice. Teamed charges from $599 USD with zero FX mark-up.

All entity cost figures in this table are typical ranges. They cover outsourced payroll, bookkeeping, CRA remittances, annual filings, and HR admin for a small Canadian entity. They are illustrative, not law figures. Actual costs vary with the province of incorporation, whether you hire in-house finance staff, and the benefits programme you run.

The crossover shifts with salary level and province. CPP employer contribution at 5.95% applies on earnings between the CPP basic exemption and the Year's Maximum Pensionable Earnings. At higher tech salaries the CPP line caps out early. The crossover can shift toward 6 to 7 employees at senior tech salary bands.

Canada has no separate auto-enrolment pension on top of CPP. Unlike the UK, there is no additional employer pension minimum. This simplifies the cost comparison. Run the Crossover Calculator with your own headcount and salary band.

1. Calculate the EOR cost

   Multiply the Teamed fee (from $599 USD) by your planned Canadian headcount. This is the fixed variable cost. It grows linearly as you hire.

2. Estimate the entity fixed overhead

   Typically CAD 3,500 to 5,500 per month for a small Canadian entity. This covers payroll bureau, bookkeeping, CRA remittances, filings, and first-point HR. This cost does not grow much until headcount exceeds 15.

3. Find the crossover headcount

   The crossover is where EOR monthly cost equals entity monthly overhead. For most Canadian tech salary bands, this is around 5 to 8 employees. Use the Crossover Calculator for your own numbers.

4. Factor in non-financial triggers

   The maths gives you a headcount threshold. Stock option plans, SR&ED credits, and multi-province expansion are separate questions that may override the cost crossover in either direction.

5. Plan the graduation date

   Allow 6 to 10 weeks for entity formation and provincial registrations before the first payroll on your own entity. Start the GEMO process while EOR continues running.

These are typical ranges. They are not law figures. There is no law that sets what a Canadian entity costs to form. The range reflects real market rates for professional services. It varies with whether you incorporate federally or provincially, how much share structure work is needed, and which provinces your employees work in.

Why provincial registration is the hidden overhead

Canada has ten provinces and three territories, each with its own employment standards legislation. A federally incorporated entity hiring in Ontario must still comply with the Ontario Employment Standards Act. Hiring in British Columbia adds the BC Employment Standards Act. Every new province adds a registration requirement and a separate compliance track. This does not block the incorporation, but it compounds the setup cost and timeline significantly compared to a single-jurisdiction country.

These figures are typical market ranges for a small Canadian entity with 1 to 15 employees. They are illustrative. They are not law figures. Actual costs depend on how many provinces you operate in, whether you outsource or hire in-house, and the scope of your benefits programme.

Above 15 employees, dedicated Canadian HR capacity and in-house finance typically become necessary. Operating in multiple provinces widens the cost band further.

Most cost comparisons skip the director-liability dimension because it is hard to put a number on. It is worth naming explicitly before you decide.

Personal director duties in Canada

Under the Canada Business Corporations Act and provincial equivalents, directors must act honestly and in good faith, exercise the care of a reasonably prudent person, and avoid conflicts of interest. A director who fails to remit payroll source deductions (CPP, EI, income tax) to the CRA on time can be personally assessed for those amounts. The CRA does not need to first exhaust remedies against the corporation. Personal assessment follows directly from the failure to remit.

The compliance treadmill

• CRA payroll remittances: source deductions must reach the Receiver General by the 15th of the following month for regular remitters. Late remittances attract penalties of 3% to 10% plus interest, and the director is jointly liable.
• Annual corporate tax return (T2): due 6 months after the fiscal year end. Late penalties apply to the unpaid balance.
• Annual return (Corporations Canada): due each year. Missing it risks dissolution.
• Provincial employment standards filings: pay equity plans, workplace harassment policies, and posting requirements vary by province and must be maintained and updated.
• GST/HST returns: quarterly or annual, depending on revenue. Directors are personally liable for unremitted HST under the Excise Tax Act.
• Workers compensation (WCB/WSIB): assessments must be paid annually. Failure to register or pay attracts penalties.

Each filing is individually manageable. Stacked across multiple provinces, they consume real management attention. An EOR carries all of these on its own entity.

• Under 5 Canadian employees at average salaries: EOR is cheaper and faster every month. The entity overhead has nothing to amortise against.
• Market validation phase: you are hiring 1 or 2 people to test commercial fit in Canada. Entity setup commits capital and management attention before you know whether the market will deliver.
• Multi-province uncertainty: you are not sure yet which provinces your team will work in. Setting up provincial extra-provincial registrations in the wrong provinces and then dissolving them wastes money and time.
• Project-based hires: 6 to 12 month engagements where the formation cost will not amortise before the project ends.
• No share option plan needed yet: senior hires are not expecting stock options tied to a Canadian entity, or you are pre-Series A. The entity becomes structurally valuable once options become a compensation lever.

• Sustained headcount above 6 to 8 Canadian employees at average tech salaries: the entity overhead amortises across enough people that per-head cost falls below the EOR fee.
• Canadian Stock Option Plan: the favourable stock option deduction under the Canadian Income Tax Act requires a Canadian Controlled Private Corporation or public company as employer. EOR employment does not qualify. Senior hires expecting options as compensation need your own entity.
• SR&ED tax credit claims: the Scientific Research and Experimental Development investment tax credit requires a Canadian corporation with qualifying employees. EOR employment does not make you eligible to claim SR&ED on those employees.
• Government procurement and tender requirements: some federal and provincial procurement contracts require the supplier to be a Canadian-incorporated entity. Worth confirming early if government contracts are part of the sales plan.
• Tax treaty substance: some cross-border tax structures need actual Canadian substance (employees, address, banking) in your own entity. EOR employment does not count as your substance.

The technical mechanic is contract novation: the employment contract transfers from the Teamed entity to your new Canadian entity on a specified date. All terms carry across. Salary, CPP and EI contributions, vacation entitlement, and continuous service date all remain unchanged. The employee sees a different employer name on their payslip. Nothing else changes.

What we do operationally:

• Stand up your Canadian entity through GEMO, typically 6 to 10 weeks, while EOR continues running in parallel.
• Register the entity with the CRA for a payroll deductions account and business number.
• Complete extra-provincial registrations in each province where your employees work.
• Novate every active employment contract on a single effective date.
• Migrate ongoing benefits without any lapse.
• File the final EOR-period CRA remittances and open the new payroll account from the novation date.
• Provide the same People Ops specialist as the post-graduation primary contact.

The provincial layer of Canada is where Graduation Model support earns its keep. Each province requires separate registration steps. We run that process in parallel with your continuing EOR payroll so there is no gap in employment coverage.

Real HR and legal experts handle your Canadian hires from the first offer letter through every CRA remittance and T4 year-end slip. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Every employer cost passes through at cost, itemised on every invoice. You see the CPP line at 5.95%, the EI premium line, and the vacation accrual for 2 weeks. Nothing is hidden inside the management fee.

Canada has no separate auto-enrolment pension on top of CPP. The CPP employer contribution at 5.95% is both the pension and the social security contribution. EOR payroll, contractor onboarding, and entity setup all live on one platform. Run the Crossover Calculator to see the month the model flips. Start from the Canada hiring overview. Key sources: Employment and Social Development Canada and CRA payroll.