Key points
- The label in a contract is a starting point, not the answer; the actual working relationship decides.
- Key factors include control, tools, subcontracting, financial risk, investment and the chance of profit.
- Getting it wrong can leave the payer owing CPP, EI and penalties.
The central question
Is the worker in business on their own account, or working for someone else's business? Courts and the CRA first look at what the parties intended, then test that intention against how the relationship actually works.
The factors
| Factor | Points toward employee | Points toward contractor |
|---|---|---|
| Control | Payer sets hours, methods and supervises the work | Worker decides how, when and where the work is done |
| Tools and equipment | Provided by the payer | Worker supplies and pays for their own |
| Subcontracting and helpers | Must do the work personally | Can hire helpers or send a substitute |
| Financial risk | Expenses reimbursed; no risk of loss | Bears own expenses, may lose money on a job |
| Investment and management | None | Invests in the business, markets services, has other clients |
| Opportunity for profit | Paid a fixed wage for time | Can increase profit through pricing and efficiency |
Different rules apply in Quebec, where the Civil Code governs.
Why it matters
- A payer that treats an employee as a contractor can be assessed for CPP and EI that should have been deducted, plus penalties and interest.
- Contractors are generally not eligible for EI regular benefits and must manage their own tax and GST/HST.
- An incorporated contractor who would otherwise be an employee may be carrying on a personal services business.
Either party can ask the CRA for a ruling on a worker's status using Form CPT1.
Official sources
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