Hiring Grants and the Obligations They Create

A wage subsidy pays part of a salary. It does not make the person a different kind of employee, and it does not reduce anything the Employment Standards Act requires of you.

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A subsidised employee is an employee. The funding agreement adds obligations to the employer; it removes none of the ones employment law already imposes.

Who does this work. Lexaltico LLP’s government funding and grants service is led by Mitch Parmasar, who is not a lawyer and does not provide legal advice. Where a matter calls for legal advice — a funding agreement, a governance question, a repayment demand — it is handled by a lawyer at Lexaltico LLP. The firm is responsible for all of the work described on this page.

Quick Answer

Does a wage subsidy change our obligations as an employer?

No. It adds to them. A person hired with a hiring grant or wage subsidy is an employee with the full protection of Ontario’s Employment Standards Act, 2000 and the rest of employment law: minimum standards, notice on termination, human rights protections, and everything else. On top of that, the funding agreement imposes its own requirements — about the role, the hours, the wage, the duration and the reporting — and breaching those can make the subsidy repayable even where the employment itself was handled correctly.

Ontario law · Lexaltico LLP, Toronto · introductory call

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THE COMMON MISTAKE

Subsidised Is Not a Category of Employee

Employers sometimes treat a subsidised hire as something other than a normal employee — a placement, a programme participant, someone whose position ends automatically when the funding does. That is not how it works. The employment relationship is governed by employment law, and the subsidy is a separate arrangement between the employer and the funder.

The practical consequence appears at the end of the funded period. The money stopping does not end the employment. If the employer wants the employment to end then, that has to be arranged properly at the start, and it is a question about the employment contract rather than about the grant.

THE CONTRACT

Fixed Term Is a Choice, Made at the Beginning

Where a role genuinely exists only for the funded period, a properly drafted fixed-term contract aligned to that period is the ordinary answer. Where the employer hopes to keep the person on, an indefinite contract is right. What causes trouble is an indefinite arrangement everyone assumed would end.

Fixed-term contracts have their own pitfalls in Ontario, including what happens when the term expires and work continues, and what is owed if the employer ends it early. This is worth a short piece of advice at the hiring stage, which is inexpensive, rather than at the end, which is not.

TERMINATION

The Funding Ending Is Not Cause

If a subsidised employee’s employment is ended, the ordinary rules apply: notice or pay in lieu under the Employment Standards Act, 2000 as a minimum, potentially more at common law, and the usual constraints around human rights and reprisal.

That the grant has finished is not cause for dismissal and does not reduce an entitlement. Employers who budget the subsidy as the whole cost of the hire sometimes find the termination cost was never budgeted at all.

THE AGREEMENT'S OWN TERMS

What the Funder Requires

Hiring programmes typically specify what the subsidy is for: the nature of the role, the hours, the wage, the duration, and sometimes who is eligible to fill it — a student, a young person, someone from a particular group. Programmes aimed at young people, such as Canada Summer Jobs (for youth aged 15 to 30), commonly attach conditions of this kind.

Departing from those terms can make the subsidy repayable. Moving the person to different duties, cutting their hours, or ending the placement early are all things an employer might do for perfectly good operational reasons and which the agreement may not permit without approval.

THE OVERLAP

Where the Two Sets of Rules Pull Against Each Other

Occasionally the agreement and employment law point in different directions. A funder may require a placement to run a set number of weeks while the employee is on a protected leave, or has resigned, or has to be dismissed for conduct. Employment law governs what the employer may do about the person; the agreement governs what the employer owes the funder.

Do not resolve that by ignoring one of them. Tell the funder promptly — programmes deal with this constantly and usually have a mechanism — and handle the employment side on its own merits.

RECORDS

You Will Be Asked to Prove the Employment

Claims and reports on a wage subsidy are supported by employment records: the contract, time and attendance records, payroll records, proof of payment, and evidence that the person did the role described. Anything that cannot be substantiated tends to be treated as ineligible.

Ontario employers already have record-keeping obligations under employment standards legislation, so the useful step is making sure those records are in a form that also answers the funder’s questions, rather than running two systems.

HOW WE WORK

What Lexaltico Does on a Subsidised Hire

The cheap version is at the start: a contract that matches the funded period, so that the end of the funding is not an employment problem. The expensive version is after a subsidised employee has been let go and both the funder and the employee have something to say about it.

The programme, the agreement and the reporting are led by Mitch Parmasar, who is not a lawyer. The employment contract, any termination and anything under the Employment Standards Act, 2000 are handled by a lawyer at Lexaltico LLP. Fees are quoted and agreed in writing before work begins.

Common Questions

Frequently Asked Questions

Does a wage subsidy change our obligations as an employer?

No, it adds to them. The person is a full employee under Ontario employment law, and the funding agreement imposes further requirements on the employer.

Can we end the employment when the funding ends?

Not automatically. The money stopping does not end the employment. If the role genuinely exists only for the funded period, that has to be arranged in the contract at the start.

Is the end of the grant cause for dismissal?

No. Ordinary termination entitlements apply, including notice or pay in lieu under the Employment Standards Act, 2000 and potentially more at common law.

Should the contract be fixed term?

If the role really only exists for the funded period, usually yes, properly drafted. Fixed-term contracts have their own pitfalls in Ontario, which is why it is worth advice at the hiring stage.

Can we change the person’s duties or hours?

Check the agreement. Programmes often specify the role, hours, wage and duration, and departing from them can make the subsidy repayable.

The employee resigned mid-placement. What do we do?

Tell the funder promptly. Programmes deal with this constantly and usually have a mechanism; ignoring it is what creates a repayment problem.

What records will the funder want?

The contract, time and attendance records, payroll records, proof of payment, and evidence the person did the role described. Unsubstantiated claims are treated as ineligible.

Does a student placement have different rules?

The employment rules still apply. Programmes for young people, such as Canada Summer Jobs (for youth aged 15 to 30), commonly attach their own conditions about who may fill the role and what it must involve.

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A few questions about your government funding & grants matter optional

None of these are required and your enquiry sends without them. They let the lawyer read your situation before the call rather than during it.

What kind of organisation is it? optional

Where are you with it? optional

Is there an application or response deadline? optionalMost funding programmes close on a fixed date and do not reopen, so tell us any date you have.

Which programme, if you know it? optionalFor example SR&ED, IRAP, CSJ, or an Ontario or municipal grant.

Please do not send confidential documents or details through this form. We will ask for what we need once we have spoken and confirmed we can act for you.

Confidential and no obligation. We reply within 2 business days. You can call +1 416 333 6200 instead if you would rather speak to someone now.

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