Canada Pension Plan and Employment Insurance Explained
This document provides information on what the Canada Revenue Agency (CRA) looks at when determining if employment of a casual nature is pensionable under the Canada Pension Plan (CPP) and insurable under the Employment Insurance Act (EIA).
If after reading this document you are still unsure whether the casual employment is pensionable and insurable, see “How to request a ruling”.
All employers are required by law to deduct CPP contributions and 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.
Employee or 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. For general information about determining whether a worker is an employee or self-employed, please see Guide RC4110, Employee or Self-employed?
If the worker is self-employed, the employment is neither pensionable nor insurable. Therefore, the remainder of this article will not apply to the employment in question. However, all self-employed workers pay both the employer and employee portions of CPP contributions at the time they file their income tax return and may opt into the EI program for self-employed individuals. Please see Employees and self-employed workers – Responsibilities, benefits, and entitlements for more information.
If, on the other hand, the worker is an employee, continue reading to determine whether the employment is pensionable or insurable, or both.
Pensionable and insurable employment?
To be considered casual the employment must meet the following two conditions:
1. it must be casual; and
2. it must be for a purpose other than the employer’s trade or business.
If the employment meets these two conditions, it is not pensionable and not insurable.
If the employment meets only one of these two conditions, the casual employment provisions under the CPP and EI legislation do not apply and the employment is considered pensionable and insurable, unless another provision of the CPP and/or EI legislation makes it not pensionable and/or insurable.
Is the employment casual?
To determine if the employment is casual requires the analysis of the factual working relationship between the employer and employee.
The length of time the employment lasts is a factor in determining if the employment is casual but it is not the only one. To be considered casual, the employment must be unreliable, occasional and unpredictable. If the employment is stable and expected to continue, it would not be considered casual.
Is the employment related to the employer’s trade or business?
If the employer is in a particular business and the employment of a worker is related to that business, the casual employment is pensionable and insurable, unless another provision of the CPP and/or EI legislation makes it not pensionable and/or insurable.
The employment does not have to be identical to the type of work or business that the employer is in. If the employment is considered necessary and benefits either directly or indirectly the employer’s business, the employment is in fact for the purposes of the employer’s trade or business.
Example of employment that is pensionable and insurable
A florist hires a worker under a contract of services (an employer-employee relationship) to paint the outside of the florist’s shop. The work is done on an infrequent basis with no set schedule or time; therefore the employment is considered to be casual. However, the employment is necessary and desired, and it directly benefits the florist’s business, therefore, the employment is considered to be for the purpose of the employer’s trade or business. Since only one of the two conditions for casual employment is met, the employment is pensionable and insurable, unless another provision of the CPP and/or EI legislation makes it not pensionable and/or insurable.
Example of employment that is not pensionable or insurable
A florist hires a worker under a contract of services (an employer-employee relationship) to paint the outside of a florist’s personal residence, on an infrequent basis with no set schedule or time. The employment is casual and does not directly or indirectly benefit the florist’s business. Therefore, the employment meets the two conditions for casual employment, and the employment is not pensionable or insurable.
Election to pay CPP contributions
In cases where the employment is not pensionable, if conditions are met, the employee can elect to pay CPP contributions on the earnings by completing Form CPT20, Election to pay Canada Pension Plan Contributions.
If a worker or payer is unsure 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 obtain a ruling for Canada Pension Plan and Employment Insurance purposes.
For more information
To get more information, call 1-800-959-5525.
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