Canada Revises Low-Wage Hiring Rules for Small Businesses

Canada has updated its criteria for hiring temporary foreign workers for the lowest-paid jobs, providing more flexibility for some small employers to fill in the gaps. New guidelines from Employment and Social Development Canada (ESDC), effective August 18, 2026, allow employers who only have one or two employees at a specific location to hire one low-wage temporary foreign worker, and in some industries, up to two. The changes impact the existing cap on the TFWP for low-wage occupations, where the cap is calculated as a percentage of the job.

The updated framework will make a significant difference for small businesses that are still using foreign workers to fill positions but are still burdened with high expectations on wages, recruitment, housing, transportation, and health insurance, as well as Labour Market Impact Assessments (LMIAs).

Canada Changes Low-Wage Temporary Foreign Worker Rules

The new regulations are geared toward those employers who have very small workforces. The previous calculation for small employers was offered only when the employer was small (defined previously) in the whole company. The new method instead considers the number of workers who work at a particular job site.

For companies that have several locations, this can have a big impact. In certain workplaces, a smaller unit (of fewer than 10 employees) can now be eligible for the small-employer calculation even though the larger organisation has more employees.

The new policy will allow a company that employs fewer than 10 workers at a specific site to hire up to one temporary foreign worker with low wage requirements. Some employers in certain sectors with demand for workers might be able to recruit up to two temporary foreign workers with low wages.

The change does not eliminate the general restrictions on the TFWP for Canada. Rather, it modifies the definition of the workforce cap for very small workplaces.

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What Is the New Hiring Cap for Small Employers?

Employers are generally allowed to hire a certain percentage of low-wage temporary foreign workers at a particular job site in Canada.

The current standard is 10% of all employees. Some sectors, subsectors, and occupations have a higher 20% cap, such as construction, food manufacturing, hospitals and nursing and residential care facilities, and certain caregiver occupations.

However, if you have a minimal work site, applying a percentage could be a practical issue. In an example where the employer has fewer than 10 employees, a 10% calculation might result in less than one employee. The revised rule provides an alternative calculation in these circumstances.

The new framework thus enables:

• Employers to hire up to one low-wage temporary foreign worker from a work location with less than 10 employees.
• Employers in certain in-demand industries to hire up to two low-wage temporary foreign workers.
• The other calculation to use is when the standard 10% or 20% calculation would allow for fewer workers.

Because of this, the change has a special impact on small restaurants, care providers, construction firms, food production employers, and other employers that could struggle to recruit enough workers in their area.

Which Sectors Can Hire Up to Two Workers?

The new rules offer some more flexibility for employers in areas that have the higher 20% low wage cap.

The occupations currently on Canada's list include those in construction, food processing, hospitals, nursing and residential care facilities, and some in-home caregiver roles.

Temporary foreign workers are a key component of some employers' workforce strategies, as these industries have been experiencing a constant demand for workers.

For instance, a small healthcare business at one site with fewer than 10 staff members could be eligible for the two-worker calculation if the positions are deemed to be in the applicable sector rules. Likewise, an eligible small construction or food-manufacturing operation can take advantage of the new method.

But employers should not presume that just because they are in one of these industries, they will automatically be approved. The position, job location, salary, recruitment activities, and other TFWP requirements are still being evaluated.

Who Qualifies as a Low-Wage Worker?

The difference between low-wage and high-wage jobs is significant because the workforce cap is only for low-wage jobs.

Canada applies the relevant stream based on a comparison of the wage offered for the position to the provincial/territorial hourly wage threshold. For LMIA applications received from July 17, 2026, the thresholds include C$36.92 per hour in Ontario, C$38.40 in British Columbia, C$37.50 in Alberta, and C$36.00 in Quebec.

A position that is paid at or below the applicable threshold is considered to be in the low-wage stream and will be evaluated under the other requirements of the program, whereas a position paid above the threshold is considered to be in the high-wage stream and will be evaluated under the high-wage stream.

The low-wage cap does not come into effect in the same manner for jobs that are processed through the high-wage stream. It is important that the employer determines the correct classification of their wages when applying for an LMIA.

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LMIA Requirement Remains in Place

The rule change does not remove the need for an LMIA (TFWP).

An LMIA is a tool used to determine if there is a positive or neutral impact on the labour market in Canada when the hiring of a temporary foreign worker is considered. To hire or keep a worker on the TFWP, employers typically require a positive or neutral LMIA.

Employers must be able to prove they have taken reasonable steps to hire Canadians and permanent residents before hiring temporary foreign workers. The minimum wage requirements in place in Canada today also include minimum advertising and recruitment requirements, including the advertising of position(s) for at least 8 consecutive weeks in the 3 months prior to the LMIA application.

The employer must also show that the business is a real business and that they are offering a real job.

So, the new small-employer cap must not be seen as a de facto work-permit program for foreigners. Employers will also have to go through the applicable federal process and meet the requirements of the TFWP.

Employer Responsibilities Under the Low-Wage Stream

There are some protections in place for the low-wage TFWP in Canada.

Employers are normally required to provide or arrange transportation to and from Canada for employees. They will also have to provide access to adequate and affordable housing, the cost of which will be a programme requirement. Employers are also obliged to offer private health insurance if there is no provincial or territorial plan.

The employer is not allowed to ask the foreign worker on a temporary contract for the fees for their recruitment. This includes any fee that is collected by the recruiter or third party directly or indirectly.

Employers are also required to abide by workplace safety regulations, employment contracts, wage conditions and other terms and conditions of the TFWP.

The aim of these requirements is to ensure that the use of temporary foreign workers does not lead to a failure to enforce normal employment standards or to a transfer of employment costs to workers.

How Many Employees Count Toward the Cap?

The other significant change in the policy is the method of calculating the workforce.

ESDC takes into account employees who work at the relevant work location, including full-time and part-time employees. It also considers certain temporary foreign workers, workers with other types of work permits, and employees who are on leave but expected to return.

The new guidance, as reported by the Economic Times, says that an employer's application for an LMIA will include positions that are vacant, which can also be included in the calculation. Employees who work less than 30 hours per week, on average, are considered to be part-time employees.

Employers need to take care to consider their staff carefully when deciding if they meet the small employer criteria.

Rural Employers Have Separate Temporary Flexibility

Other measures aimed at assisting employers in rural areas of Canada are included in the small-employer change.

Eligible employers in participating rural regions will be able to take advantage of temporary measures that will impact the percentage of low-wage positions occupied by temporary foreign workers from April 1, 2026 to March 31, 2027. Eligible employers in some participating provinces and territories are allowed to keep the current proportion over the standard cap or alternatively opt for a 15% cap instead of the standard 10%.

The rural measures are in addition to the new calculation of employers at a worksite with fewer than 10 employees.

Eligibility is based on the location of the employer, province or territory, and conditions of the programme. Employers will need to keep showing their efforts in recruiting Canadians and permanent residents and meet other TFWP requirements.

Restrictions on Low-Wage Hiring in Some Urban Areas

Although some small employers are more flexible, Canada has limited access to the low-wage stream in some urban labour markets.

The federal government has a policy that denies LMIA applications for low-wage jobs in CMA's with an unemployment rate of 6% or above, with certain exemptions and programme rules. The ban has been in effect since September 2024.

Thus, a small employer is not able to exclusively use the new one-worker or two-worker calculation. Where the position is, the job is an important consideration in the processing of an LMIA application.

It's important that employers review the most up-to-date federal guidelines before starting recruitment or applying.

What the Changes Mean for Canadian Employers?

The updated guidelines may offer a viable solution for small businesses facing a shortage of employees, as it allows them to seek candidates abroad.

Even if a small business has just a few employees, having someone go on vacation can cause a lot of trouble for the company. The employer may not have been able to hire a TFW before, as the fraction allowed was under one worker.

The new computation opens up additional space for these businesses while maintaining the government's overarching protection of the labour market.

These rules may have a larger effect in industries like construction, health care, food production, and food care services, where two low-wage temporary foreign workers are allowed for qualifying small workplaces.

Employers will also have expenses and administrative obligations, such as the LMIA processing fee. The current low-wage programme in Canada charges C$1,000 for every position requested and offers exceptions for certain categories.

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What the Changes Mean for Foreign Workers?

The new rules might also generate more jobs for foreign workers in smaller Canadian companies. But the rule does not provide workers with the right to enter Canada or a work permit.

The Canadian employer must meet the applicable requirements, which may involve the LMIA process as applicable. Employees are then required to comply with the necessary immigration and work permit requirements.

Foreign nationals should also be wary of recruiters offering a job or visa under the new regulations. Temporary foreign workers are not eligible to have their recruitment fees reimbursed by Canadian employers or recruiters, and employers are on the hook for meeting programme conditions.

Before paying anyone for immigration services, applicants should check the employer, offer of employment, salary, place of work and immigration paperwork.

Canada's Broader Temporary Foreign Worker Strategy

The new change is part of Canada's ongoing efforts to adjust the mix of temporary immigration and local talent.

The federal government projects that 60,000 foreign workers will come to the country via the TFWP and 170,000 via the International Mobility Program (IMP) in 2026, according to the 2026 immigration levels plan cited by Economic Times. Most work permits under the IMP do not require an LMIA, unlike the TFWP.

This is important because Canada's immigration policy has increasingly become about managing the use of temporary, low-wage workers, while ensuring access to foreign workers in the event of a true labour shortage.

That's reflected in the new small-employer rule. It provides additional flexibility for certain businesses while retaining the screening and wage and worker protection provisions in the TFWP.

What Employers Should Check Before Hiring?

Before beginning the LMIA process, small Canadian employers should consider a number of factors when considering hiring a low-wage temporary foreign worker.

They should validate the number of staff at a particular workplace, not just the size of the broader organisation. They will then decide if the position is within the 10% cap, the 20% cap (if applicable), or the new small employer calculation.

Employers should also check the wage threshold, the requirements for the recruitment, and if the job location is subject to restrictions on processing llow-wageLMIA.

Lastly, they should anticipate the extra duties of transportation, accommodation, and health insurance, employment contracts, and workplace rights.

The federal government has stated that employers are still required to meet all the requirements of the TFW, even when they are able to hire one or two workers because of the revised calculation for the small employer.

Conclusion

Canada's new low-wage temporary foreign worker rules give small employers expanded flexibility – they can hire one worker (or up to two in certain sectors) when the standard percentage-based calculation would otherwise allow them to do so. The adjustment may ease the shortage of workers for small enterprises that struggle to find staff, especially in fields like construction, healthcare, food manufacturing, and care services. Wider protections continue to exist; however, in Canada, employers are still required to comply with LMIA requirements, make recruitment efforts, pay compliant wages, a nd provide other protections such as transportation, housing, health insurance, and working conditions.

The shift could give foreign workers more options for working with small Canadian employers, but it doesn't mean they will get a job or a work permit. With the Canadian labour market continuing to face a shortage of workers and in the context of the country's temporary migration policy, employers and applicants should refer to the most up-to-date federal requirements before acting.

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