Deciding if you can hire someone as an employee or independent contractor is a big decision. It impacts taxes, what you need to do for payroll, and more. The government has a lot of rules around this, but here is a basic overview and some links that may help you.
Is my worker an employee or independent contractor?
Generally, employers have more control over an employee. This is because independent contractors, freelancers, and self-employed workers are in business for themselves.
Note: If you need help determining if your worker is a contractor or employee, please contact an accounting or legal professional.
If your worker is an employee, an employer must:
- Withhold income taxes such as federal, provincial, or territorial income tax.
- Contribute to the employee’s Canada Pension Plan (CPP).
- Pay Employment Insurance (EI).
- Issue a T4 after the end of the year.
How you should classify a worker is determined by the CRA. Use the CRA's guidelines to determine your worker classification: Employee or Self-employed?