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Contractor vs Employee


Although it is common for workers to desire to be paid as independent contractors and from your position as an employer it can save on payroll cost by contracting out for services, you must take caution. Should CRA determine that the individual is an employee they will assess payroll deductions and penalties to the employer.

Canada Revenue Agencies determination of whether a worker is an employee or contractor is based on a number of factors:

  • Control-does the worker or the employee control the way the work is done and the work methods used?
  • Ownership of Tools-does the employer supply the equipment and tools required by the worker? Does the employer cover the costs of repairs, insurance, transport, rental?
  • Chance of profit/risk of loss-does the employee assume the financial risk ?
  • Does the employee work for more than one employer?

An independent contractor agreement should be signed prior to engagement.