I have three clients who are hairdressers in a salon. They rent the chair from the salon, set their own hours, bill their own clients, etc. and meet the requirements as "Self-Employed".
The EI regulations state that for the purposes of EI, the Salon is the 'Employer', and requires them to submit EI premiums monthly on the estimated earnings of the hairdresser.
The Salon has been invoicing the individual hairdressers for the amount of the EI they submit on their behalf.
I am unsure where this amount is supposed to be entered on the tax return. Schedule 13 calculates the EI premiums required based on the Self-Employment income, but does not have any space for the installments that the hairdresser has paid to the Salon.
Can anyone give me guidance on this? Is the amount of the EI premiums paid entered as a business expense? Is the Salon supposed to issue a T4 showing the EI paid on behalf of the hairdresser?
Yes, the "employer" is supposed to issue a T4 slip, showing employment code 13, gross earnings in box 83, insurable earnings, and EI premiums paid (employee share only). When you enter the T4, the earnings go to the business schedule and the EI premiums paid go to the normal non-refundable tax credits. The "employer" pays the employer's share of EI and should not be billing the hairdresser for EI submitted. That is just wrong - it is their responsibility. I guess you could deduct the amount the hairdresser paid to the employer as some sort of business expense, but they should be told to do it correctly.
I appreciate your quick response. I found the guidelines a bit vague, and understood that because the salon gets none of the fees or tips charged by the hairdresser, that the EI premiums would be the responsibility of the individuals, not the salon.
What you're saying makes perfect sense, and I'm still on hold with CRA trying to get the low-down. Unfortunately, the agent has a strong accent and is very difficult to understand.
Here is the link to CRA for how the "employer" is supposed to report both for employees and the self-employed hairdressers.
It is not showing as a clickable link, but maybe you can copy and paste to your browser. I have found the hair salons often get this wrong.