Whether you need a receptionist for a 3-month maternity cover, an extra set of hands during summer, or a specialist for a fixed project, temporary staffing in Canada involves choices that carry real legal and financial consequences. This guide covers the agency vs direct-hire decision, what Ontario's ESA requires for temp workers, how to structure fixed-term contracts that hold up, and a realistic cost breakdown.
Staffing agency vs direct hire: when each makes sense
Staffing agencies charge a markup—typically 15–25% on top of the worker's bill rate—to cover their recruitment costs, employer payroll taxes (CPP, EI employer share), WSIB premiums, and margin. On a $20/hour temp worker, the effective cost to your business is $23–$25/hour. That premium buys you speed (agencies can often place a temp within 24–72 hours) and administrative offload (they handle payroll, ROE, and ESA compliance for the worker).
Direct hire is cheaper per hour but requires your time. Posting, screening, interviewing, running a reference check, and doing payroll setup takes 10–20 hours for a typical hire—time that has real value for a small business owner. The break-even calculation is roughly: if the agency markup costs less than the dollar value of your time spent on direct hiring, use the agency.
Use an agency when: you need someone within a week, you're covering an absence for a role you haven't hired for before, or you need volume (multiple temps simultaneously). Hire directly when: you have 3–4 weeks, the role requires someone who understands your business specifically, or you have a strong candidate already in your network.
What Ontario's ESA says about temporary workers
Ontario's Employment Standards Act applies to temporary workers the same as it does to permanent employees, with no blanket exceptions for short-tenure staff. Specific things employers frequently get wrong:
No probationary exemption past 3 months.After a worker has been continuously employed for 3 months, they are entitled to ESA notice (or pay in lieu) on termination. There is no “probationary period” that extends this window beyond 3 months. Ontario common law may imply longer implied notice for non-fixed-term employees—which is why proper fixed-term contract drafting matters.
Vacation pay accrues from day one. All employees in Ontario are entitled to vacation pay (4% of gross wages) from their first day of employment, regardless of tenure. For temporary workers on short placements, this is typically paid out as a percentage on each paycheque rather than as a separate vacation period.
Public holiday entitlements apply.Temporary workers are entitled to public holiday pay for Ontario's 9 statutory holidays if they meet the “last and first day” qualifying rule (worked their last scheduled day before and their first scheduled day after the holiday, or had a valid reason for absence).
Temp-to-perm: how to structure the arrangement
If you hire a temp with the intention of potentially converting them to permanent, be careful about how the arrangement is structured from the start. Continuous employment matters for ESA purposes: the employee's length of service for notice calculation runs from their original start date—not from the date they were offered a permanent role.
If you're using an agency and decide to hire the worker directly, most agencies charge a placement or conversion fee—typically 15–20% of the worker's first-year salary. This fee is sometimes negotiable, particularly if the worker has been on assignment with you for several months. Read the agency agreement carefully before signing; some have exclusivity clauses that prevent direct hire for 90–180 days after placement.
When converting a temp to permanent, issue a new offer letter with the new employment terms—title, salary, benefits, and any changes to duties. Acknowledge the original start date in the offer letter to avoid disputes about continuous service later.
Fixed-term contracts: drafting them correctly
A fixed-term employment contract must specify a clear end date (e.g., “September 30, 2026”) or a clear end condition (e.g., “upon the return to work of [Employee Name] from parental leave”). Vague language like “approximately 3 months” or “until the project is complete” has been treated by Ontario courts as an indefinite arrangement, with implied reasonable notice obligations on termination.
Include an explicit termination clause that specifies what happens if the employer terminates the contract early—typically the lesser of: notice/pay in lieu equivalent to the remaining term, or the ESA minimum. Without this, early termination of a fixed-term contract can require the employer to pay out the full remaining term as damages. The case Howard v. Benson Group Inc. (Ontario Court of Appeal, 2016) is the frequently-cited precedent: an employee terminated early in a fixed-term contract was awarded the full remaining term of the contract, not just ESA minimums.
Have a lawyer review your fixed-term template once rather than repeatedly dealing with the fallout of a poorly worded contract. For more on employment contracts, see our guide on employment contract basics for Canadian employers.
Costs breakdown: agency temp vs direct fixed-term hire
To illustrate the difference concretely, consider a 3-month temporary administrative assistant role at $22/hour, 35 hours per week (420 hours total):
Via staffing agency (20% markup):$22 × 1.20 = $26.40/hour effective cost. Total: $26.40 × 420 hours = approximately $11,088. The agency handles payroll, source deductions, ROE, WSIB, and EI. Your administrative time is minimal.
Direct fixed-term hire:$22/hour base. Employer CPP contribution (~5.45% of insurable earnings), EI employer premium (~1.4x employee rate, approximately 2.28%), and WSIB premium (varies by industry, typically $1.20–$3.00/hour for office roles). Effective cost: approximately $24.50–$25.50/hour. Total: approximately $10,290–$10,710. Plus your time: posting, screening, interviewing (estimate 12–16 hours), and payroll setup. At a realistic $50–$100/hour owner value, add $600–$1,600 to the direct cost.
The net cost difference is smaller than the sticker markup suggests, particularly once you account for owner time. For roles you hire for repeatedly (the same temp position each year), direct hire builds efficiency over time. For one-off or emergency coverage, the agency premium is generally worth it. For more on the seasonal hiring context, see our guide on how to hire seasonal workers in Canada.
Frequently asked questions
Are temporary workers entitled to ESA notice in Ontario?
Yes, once they've been employed for 3 months or more. Temporary workers on properly drafted fixed-term contracts whose term expires are not entitled to ESA notice for the contract end, but early termination of a fixed-term contract can require paying out the full remaining term unless the contract has an explicit early termination clause.
Can I hire a temp from an agency as a permanent employee later?
Yes, but check your agency agreement for a conversion or placement fee clause, typically 15–20% of the first-year salary. Some agreements also include a mandatory waiting period (90–180 days) before the worker can be hired directly. These clauses are sometimes negotiable, especially if the assignment has been long.
What's the minimum a temporary worker must earn in Ontario?
The Ontario general minimum wage of $17.60/hour (as of October 2025) applies to temporary workers the same as all other employees. There is no minimum wage exemption for temporary or fixed-term workers. Staffing agency workers are often paid at or just above minimum wage for administrative and light industrial roles.
Do temporary workers qualify for EI in Canada?
Yes. Temporary workers who have worked the required insurable hours (typically 420–700 hours depending on the regional unemployment rate) and whose employment ends through no fault of their own (end of fixed-term contract, shortage of work) are eligible for EI. The employer must file an ROE within 5 days of the last day of employment.
Is a staffing agency considered the employer for ESA purposes in Ontario?
When a worker is placed by a staffing agency, the agency is generally the employer for ESA purposes, handling payroll, source deductions, and ROE filing. The client business (you) can be considered a joint employer in certain circumstances, particularly if you exercise significant control over the worker's day-to-day activities. Ontario's ESA was amended in 2018 to clarify joint employer liability, review the rules before assuming full liability sits with the agency.