Employee or Independent Contractor

In most situations where individuals or families hire support workers the worker is considered to be an employee not an independent contractor. The amount of control the payer has over the work performed, the hours of work, and the training and direction exercised over the work are some of the factors used to determine whether the worker is an employee.

It is the right of the payer to exercise control that is relevant, not whether the payer actually exercises this right.

If the worker is an employee, (employer-employee relationship) the payer is considered an employer. Employers are responsible for deducting Canada Pension Plan (CPP) contributions, Employment Insurance IEI) premiums, and income tax from remuneration or other amounts they pay to their employees. They have to remit these deductions along with their share of CPP contributions and EI premiums.

An employer who fails to deduct the required CPP contributions and EI premiums has to pay both the employer’s share and the employee’s share of any contributions and premiums owing, plus penalties and interest. For more information, visit the Canada Revenue Agency website at www.cra.gc.ca/payroll.

There could be a large financial penalty to incorrectly deciding that there is no employer/employee relationship. Assume in most cases you are an employer and if in doubt you can ask for a ruling.

If a worker or payer is unsure of the worker’s employment status, either party can request a ruling to have the status determined. If the business is registered for My Business Account, a payer can request a ruling electronically by visiting the CRA website at www.cra.gc.ca/mybusinessaccount.

Form CPT1, Request for a Ruling as to the Status of a Worker Under the Canada Pension Plan and/or the Employment Insurance Act can also be used to request a ruling. Visit the CRA website at www.cra.gc.ca/forms or call 1-800-959-2221.

All information taken from Employee or Self-Employed Canada Revenue Agency Document # RC4110 (E) Rev.08. See: http://www.cra-arc.gc.ca/E/pub/tg/rc4110/rc4110-08e.pdf for the full document.