Construction workers

Introduction

This article provides information on what the Canada Revenue Agency (CRA) looks at when determining whether a person working in the construction industry is an employee or a self-employed worker.

Employer responsibilities

All employers are required by law to deduct Canada Pension Plan (CPP) contributions and employment insurance (EI) premiums from most amounts they pay to their employees. Employers must remit these amounts to CRA along with their share of CPP contributions and EI premiums. More information on employer responsibilities and obligations can be found through our Payroll menu page.

How to determine if a worker in the construction industry is an employee or a self-employed worker

To determine if a person is an employee or a self-employed worker, the CRA looks at the factual working relationship between the worker and the payer. This article provides information on facts related to workers in the construction industry, and offers indicators that can help you determine whether a worker in this field is an employee or a self-employed worker.

For general information about determining whether a worker is an employee or is a self-employed worker, see Guide RC4110, Employee or Self-employed

Who is a self-employed worker?

Generally, a self-employed worker is someone who agrees to produce a given result but who is not subject to the direction or control of the person to whom they provide a service. The self-employed worker is free to act as they please.

The following two sections list some indicators that can be used to help determine whether a worker is a self-employed worker. Keep in mind that this list is not exhaustive and not all of the following indicators may be present in every situation. Please remember that all facts pertaining to the working relationship need to be considered.

Indicators of a self-employed worker

Displaying a business presence as a self-employed worker

The existence of a "business presence" normally indicates a worker is self-employed. Listed below are some examples of a business presence that a self-employed worker may exhibit.

Who is an employee?

Generally, an employee is someone who is hired to perform specific duties under the direction and control of the party that hired them. Under the terms and conditions of employment, a worker is not normally in a position to make a profit or incur a loss. An employee is not perceived as operating their own business, but rather as being an integral part of the payer's business.

The following are some indicators that can be used to help determine whether a worker is an employee. Keep in mind that this list is not exhaustive and not all of the following indicators may be present in every situation. Please remember that all facts pertaining to the working relationship need to be considered.

Indicators of an employer-employee relationship

Can a worker be classified as both an employee and a self-employed worker?

No matter which classification the worker falls under, they cannot be considered both an employee and a self-employed worker under one contract or agreement. Each case must be reviewed on its own merits. It is however possible for a worker to be considered an employee under a contract or agreement while at the same time being considered a self-employed worker under another contract or agreement.

Example of a worker who is an employee and a self-employed

Mr. D is an employee of Company X. He works for Company X installing drywall on newly built houses, and he must complete the work himself, based on the company’s schedule. He works at construction sites chosen by the company, on a regular 4-day schedule and he is paid hourly. He has to ask permission to be absent from work.

Mr. D is also a self-employed worker as a licensed painter. He owns a small painting business and has invested in various tools needed for painting. He advertises his services in the local newspaper. In the evening and on weekends, he offers his services to different clients to paint houses. He sets the price for his services, and he can accept or refuse work. Mr. D hires and pays helpers from time to time to help him with painting bigger houses.

In this example, Mr. D is considered an employee under his contract with Company X while at the same time he is considered self-employed for the work performed for different clients.

Corporations

In general, for purposes of the Canada Pension Plan and the Employment Insurance Act, where a worker operates through their own corporation and that corporation enters into a contractual arrangement to provide services to another party, the other party will not normally be seen as being the worker’s employer. This does not mean the worker is self-employed. The worker, in most cases, would be an employee of their own corporation.

Personal services business

A personal services business (PSB) is a business that a corporation carries on to provide services to another entity (such as a person or a partnership) that an officer or employee of that entity would usually perform. Instead, an individual performs the services for the corporation. That individual is called an incorporated employee.

If your corporation is considered a PSB for purposes of the Income Tax Act, you may be interested in reading the Withholding and reporting requirements (PDF 233 KB) document to learn about the tax implications and reporting requirements.

How to request a ruling

If a worker or payer is not sure of the worker's employment status, either party can request a ruling by the CRA to have the status determined. More information on the ruling process is available in How to get a CPP/EI ruling.

For information on the possible implications of a CPP/EI ruling, go to Have you received a CPP/EI ruling?

For more information

To get more information, call the CRA’s business enquiries line at 1-800-959-5525.

Legislative references

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