The Canada Revenue Agency has a handful of unique rules for barbers and hairdressers. If you run a salon or barber shop, and you have these professionals working in your facility, it’s important to know your obligations. The situation differs slightly from other industries.

Employing Barbers and Hairdressers

When you hire barbers or hairdressers as employees, you treat them just like regular employees. That means you pay their wages and deduct income tax. You also must pay their Canada Pension Plan contributions and Employment Insurance premiums as usual. There’s a key exception for Aboriginal employees who are defined as “Indian” under the Indian Act. If your employee’s income is tax exempt, you don’t have to pay income tax or CPP to the Canada Revenue Agency, but you should pay EI premiums. In most cases, wages for Aboriginal workers are only tax exempt if the income is earned on a reserve.

Requiring Employees to Provide Own Tools

Typically, as an employer you provide the tools of the trade to your employees, but there are some cases where you can require your employees to bring their own tools. If you want your barbers and hairdressers to buy their own scissors or other supplies, you need to pay them a salary. You also need to give them Form T2200, Declaration of Conditions of Employment. This document certifies that you require your employees to pay some of their own expenses, and it allows employees to deduct those expenses on their tax return. In some industries, you can also require commissioned employees to buy their own tools, but that rule doesn’t apply to most barbershops and salons. To qualify, commissioned employees have to work outside of their employer’s place of business, and as most hairdressers and barbers work on site, they don’t qualify.

Requiring Employees to Provide Own Tools

Typically, as an employer you provide the tools of the trade to your employees, but there are some cases where you can require your employees to bring their own tools. If you want your barbers and hairdressers to buy their own scissors or other supplies, you need to pay them a salary. You also need to give them Form T2200(or Form TP-64.3), Declaration of Conditions of Employment. This document certifies that you require your employees to pay some of their own expenses, and it allows employees to deduct those expenses on their tax return. In some industries, you can also require commissioned employees to buy their own tools, but that rule doesn’t apply to most barbershops and salons. To qualify, commissioned employees have to work outside of their employer’s place of business, and as most hairdressers and barbers work on site, they don’t qualify.

Self-Employed Barbers or Hairdressers

In many cases, you may not hire barbers or hairdressers. Instead, you may simply rent them a chair and let them be self employed. This is where the main difference among hairdressers, barbers, and other professions comes into play. These individuals are self-employed, so you need to pay EI premiums to the CRA based on their earnings. You must pay their portion as well as your portion, which is their payment times 1.4. There are two ways you can calculate the EI premiums for your self-employed barbers or hairdressers. If you know how much they’ve earned, you can use that figure and calculate EI premiums as you normally do for an employee. If you don’t have those numbers, multiply the number of days worked that week times 1/390 of the maximum annual insurable earnings. Then, multiply the total by 1/78. Let’s say a self-employed barber works five days in 2017, and that year the maximum pensionable earnings is $55,300. In this instance, your calculation looks like the following: 5 * $51,300 * 1/390 * 1/78 = $8.43. That’s the EI payment for the week. To sum things up, if you employ a hairdresser or barber, you face roughly the same payroll expectations as an employer in any other industry. On the other side of the coin, if your barbers or hair dressers are self employed, you have a few extra obligations compared to a business owner who pays most other types of self-employed contractors.

References & Resources

• cra-arc.gc.ca
• cra-arc.gc.ca