Payments to workers of placement and employment agencies

Placement or employment agencies may hire workers, either as their own employees, to work for clients of the placement or employment agency or as self-employed workers.

Depending on the situation, your withholding and reporting responsibilities as the placement or employment agency or as a client of the placement or employment agency will be different.

On this page

• Steps
• References

Steps

1. Determine the employment status of the placement or employment agency worker

   Workers hired by a placement or employment agency  may be one of the following:

   • Employees (even if the employee is working on the premises of a client of the placement or employment agency)
   • Workers placed by a placement or employment agency and employed under the direction and control of a client of the placement or employment agency (whether the agency pays the workers or not)
   • Self-employed workers

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   • Employee

      If the worker is an employee of the placement or employment agency and is not placed under the direction and control of a client of the agency, do not continue to the next step.

     You, as the placement or employment agency, must deduct CPP contributions, EI premiums and income tax as you would for your other employees. You also have to report the payment on a T4 slip.

     Self-employed worker

      If the worker is a self-employed worker, do not continue to the next step.

     The worker is responsible for remitting CPP contributions and income tax in the same way as other self-employed individuals.

     Generally, if you make payments to a self-employed worker for their services, you must report the amounts on a T4A slip.

     Learn more depending on the worker’s situation:

     • Payments to First Nations workers
     • Payments of fees for services
   • If the placement or employment agency worker is in any other situation, continue to Step 2 - Determine if the worker’s employment is pensionable and insurable.

2. Determine if the worker’s employment is pensionable and insurable

   1. Determine if the worker’s employment is pensionable

      The employment of a worker placed by a placement or employment agency is pensionable if all of the following conditions are met:

      • The employment is performed in Canada
      • The agency’s contract with the client is limited to providing the worker
      • The agency receives a fee, reward, or other remuneration for placing the worker in that employment
      • The worker performs services for a client of the agency
      • The terms and conditions under which the services are performed are similar to a contract of service (employer-employee relationship)
      • The worker is paid by the agency or by the client of the agency

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      •  If the worker’s employment does not meet all of the conditions above, the employment is not pensionable.

      • If the worker’s employment meets all of the conditions above, the employment is pensionable.

        The payer of the worker (the placement or employment agency or the client) is deemed to be the employer for CPP purposes.

   2. Determine if the worker’s employment is insurable

      The employment of a worker placed by a placement or employment agency is insurable if all of the following conditions are met:

      • The employment is performed in Canada
      • The agency’s contract with the client is limited to providing the worker
      • The worker is placed in that employment by the agency to perform services for and under the direction and control of the agency’s client
      • The worker is paid by the agency for performing of the services

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      •  If the worker’s employment does not meet all of the conditions above, the employment is not insurable.

      • If the worker’s employment meets all of the conditions above, the employment is insurable.

        The placement or employment agency is deemed to be the employer for EI purposes.

   What if you are not sure if your employee’s employment is pensionable or insurable

   If you or a person working for you is unsure of a worker's employment status, either of you may request a CPP/EI ruling to determine whether the employment is pensionable, insurable, or both.

   Learn more: Request a CPP/EI ruling

3. Determine which deductions you need to withhold from the amounts paid to the worker

   If a placement or employment agency places a worker to work under the direction and control of a client of the agency, the following deductions must be withheld, depending on whether the agency or the client pays the worker:

   • Paid by the agency

     The placement or employment agency paid the worker and is responsible for:

     • Income tax – Do not withhold (the worker is responsible for their own income tax)
     • CPP contributions – Withhold
     • EI premiums – Withhold

   • Paid by the client of the agency

     The client of the agency paid the worker and is responsible for:

     • Income tax – Withhold (calculate income tax deductions using the bonus or irregular payments method)
     • CPP contributions – Withhold
     • EI premiums – Do not withhold

    Learn more on how to calculate: How to calculate

4. Report the payment on a T4 slip

   The payer of the placement or employment agency worker (either the placement or employment agency or the client of the agency) is responsible for reporting the payments made to the worker.

   Depending on the placement or employment agency worker’s situation, you must report the following amounts on a T4 slip:

   • Box 29 – Employment code 11
   • Box 24 – EI insurable earnings
   • Box 26 – CPP/QPP pensionable earnings
   • Box 56 – PPIP insurable earnings (individual working in the province of Quebec)
   • Code 81 – Placement or employment agency worker (gross income)

    Learn how to report the payment: T4 slip - Information for employers

References

Resources

• CPP/EI Explained, Placement/employment agencies

Legislation