Learn the basics about classifying a new worker as an employee or an independent contractor.
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.
Employee vs. independent contractor
An employee is a person hired by the employer. The employer generally has more control over an employee. An independent contractor is a self-employed person who provides services to businesses, generally on their own terms.
Use the CRA's guidelines to determine your worker classification.
If your worker is an employee, you 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.