Misclassifying employees as contractors can lead to fines and back payments for missed benefits. The CRA uses a series of tests to determine the relationship, focusing on:

  • •Control: Who decides how, when, and where work is performed?
  • •Ownership of Tools: Does the worker use their own equipment?
  • •Financial Risk: Is the worker responsible for their own expenses?
  • •Opportunity for Profit: Can the worker profit or suffer a loss based on their work?

Employees are subject to payroll deductions for CPP, EI, and taxes, while independent contractors manage their own contributions. Clear contracts and regular reviews can help employers avoid misclassification issues.