What does it take to start a staffing agency in Ontario?

Why the temporary help agency licence comes before almost everything else

Since July 2024, any business operating as a temporary help agency in Ontario, placing workers with client businesses on assignment, needs a licence under the Employment Standards Act, issued by the Ministry of Labour. Operating without one is not a minor paperwork gap; it can prevent the agency from legally placing workers at all. The licence application requires an application fee and a security deposit, both of which have been reported in the low thousands and tens of thousands of dollars respectively since the rules took effect, but we would confirm the exact current amounts directly with the Ministry of Labour before assuming a specific figure, since these details can be updated. Budget for both as part of your startup capital, not as an afterthought once the corporation is already formed.

The licence also is not a one-time hurdle. Renewals, reporting obligations, and the security deposit itself are ongoing requirements tied to the agency's operations, not a box checked once at startup and forgotten. An agency that grows quickly, adding more clients and placing more workers than it originally planned for, should revisit whether its security deposit and licence terms still match the scale it is actually operating at, rather than assuming the original application covers whatever the business becomes.

Incorporating before you license

Most staffing agencies operate as a corporation rather than a sole proprietorship, both for liability separation from the client businesses they place workers with and because a licensed entity typically needs to be a stable, identifiable legal person the Ministry of Labour can hold accountable. Deciding between federal or Ontario incorporation and getting the corporation's name and structure settled comes before the licence application, since the licence is issued to the corporation, not to you personally.

WSIB and the Employer Health Tax

A staffing agency is an employer of the workers it places, even though those workers report to a client's worksite day to day, which means WSIB coverage is generally mandatory rather than optional for this industry. As payroll grows, the agency also becomes responsible for Ontario's Employer Health Tax once total annual payroll crosses the exemption threshold available to eligible employers, which is worth tracking closely given how quickly a staffing agency's payroll can scale with client demand. Both of these are recurring obligations that need to be built into how you price a placement, not treated as a cost to absorb after the fact.

Why worker classification is a bigger risk here than in most industries

A staffing agency's entire business model depends on correctly treating placed workers as employees of the agency rather than as independent contractors, and getting this wrong exposes the agency to the same scrutiny covered in employee or contractor: how does the CRA decide, but with added exposure because a client relying on misclassified workers can also face joint liability under the ESA for unpaid wages or entitlements. Client contracts should be explicit about who is legally the employer of record, and payroll, WSIB, and vacation pay obligations should be handled consistently with that answer from the first placement onward.

The cash flow gap that catches new agencies off guard

A staffing agency pays its placed workers every pay period, in full, regardless of whether the client business has paid the agency's invoice for that period yet. Client payment terms of 30 or 60 days are common, which means an agency can be funding two months of payroll out of pocket before the corresponding revenue arrives. This gap is the reason many agencies arrange payroll funding or invoice factoring before taking on their first significant client, borrowing against unpaid invoices to cover payroll rather than discovering the gap after payroll is already due. Margins in staffing are also thin enough that this financing cost needs to be built into your billing rate from the start, not treated as a surprise expense once the agency is already running.

The order of operations we generally recommend

Incorporate first, then apply for the temporary help agency licence while setting up WSIB coverage and a payroll system that can run weekly or biweekly cycles reliably, and arrange payroll funding or a line of credit before signing your first client contract rather than after. GST/HST registration and an Employer Health Tax account can be set up in the same window, since both become relevant almost immediately once the agency starts billing and running payroll.

Pricing placements to cover more than the wage

A common early mistake is pricing a placement based mainly on the hourly wage paid to the worker, without fully accounting for WSIB premiums, vacation pay, statutory holiday pay, EHT, and the cost of the financing arrangement covering the payroll gap. Each of those adds real cost on top of the wage, and a markup that only covers the wage itself will erode margin steadily as payroll and financing costs come due. Building the full cost stack into the billing rate from the very first client contract avoids discovering the shortfall months into operating.

Insurance is part of that same cost stack. Client contracts commonly expect proof of commercial general liability coverage, and some also expect coverage specific to placing workers at a third party's site, so this is worth pricing into the placement fee from the outset rather than treated as a line item to absorb quietly once a client asks for proof of coverage.

How we handle this

We help new staffing agencies get the incorporation, payroll, WSIB, and EHT pieces set up in the right order, and we model the payroll funding gap against realistic client payment terms before the agency takes on its first placement. This sits alongside our dedicated staffing agency incorporation support.