This article provides information on what the Canada Revenue Agency (CRA) looks at when determining whether a courier is an employee or a self-employed worker.
Employees and self-employed workers have different responsibilities, benefits, and entitlements, and it is important for both, as well as for their employers and payers, to be aware of these differences. For more information, see Responsibilities, benefits and entitlements for employees and self-employed workers.
If after reading this article, you are still unsure of a courier’s employment status, see How to request a ruling.
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 have to remit these amounts to the CRA along with their share of CPP contributions and EI premiums.
For more information on employer responsibilities and obligations, go to our Payroll menu page.
How to decide if a courier is an employee or a self-employed worker
The CRA looks at the working relationship between the courier and the payer. Continue reading to learn about indicators that can help you decide whether a courier is an employee or a self-employed worker.
For general information about deciding whether a worker is an employee or is self-employed, see Guide RC4110, Employee or Self-employed?
Is the courier an employee?
Generally, an employee is someone who is hired to carry out specific duties under the direction and control of the party that hired them. Under the terms and conditions of employment, an employee is paid a salary or an hourly rate of pay which can take different forms (pre-determined fixed amount, commission, or a combination of the two). An employee is also not in a position to make a business profit or suffer a business loss. An employee’s opportunity to earn higher income is usually limited to working longer hours or receiving a bonus, if the employer approves a bonus or the need for longer hours. Also, an employee does not operate their own business; instead, their work forms an important part of the employer’s business.
The following are some indicators that can help you decide whether a courier is an employee. Keep in mind that this is not a complete list and not all of the following indicators will be present in every situation. Please remember that all facts pertaining to the working relationship need to be considered.
Indicators that a courier is an employee
- has the right to control how, when, and where the courier does the work. Although the employer does not have to use their authority to direct every single task that the courier is assigned, they control how the courier’s work is to be done. This can take the form of verbal or written instructions and can include a driver’s handbook, manual, or directive outlining detailed procedures like how to maintain the vehicle, how to fill in and process waybills, how to dress for work, what to display or not display on the vehicle, how to get approval for time off, when and how to report to work, or how to deal with difficult customers;
- may employ a head driver, manager, or supervisor who makes sure the courier follows these verbal or written instructions and who gives advice or support to the courier;
- often gives mandatory or optional training on how to complete assigned tasks;
- arranges and pays for any training, criminal record checks, or security clearances;
- gives verbal/written permission for vacation leave, appointments, bereavement leave, or other leave. The courier may have to fill out a form to request leave or get a doctor’s note for sick days;
- normally sets the courier’s hours of work and may restrict which days the courier can take leave or specify that they must be available during pre-determined periods of time;
- may have verbal or written rules that allow for disciplinary actions when the courier does not accomplish their tasks according to the employer’s requirements, such as when the courier:
- refuses calls;
- is not efficient;
- reports to work late;
- leaves early; or
- does not wear their uniform;
For example disciplinary actions could include: for the first refusal of calls, the courier will be placed at the bottom of the drivers' list; for the second refusal, the courier will have to meet with the manager; and for the third refusal, the courier will be suspended for one day.
- may put the courier on probation or put a letter in their personnel file as a form of disciplinary action;
- may control whether the courier is assigned dedicated service runs, territories, or routes;
- may assign calls to the courier by seniority or efficiency for on-call service;
- decides the rate of pay/commission rate and can increase or reduce this rate. For example, an employer can reduce the courier’s rate of pay because of financial difficulties or increased costs;
- resolves customer complaints;
- provides benefits to the courier, such as:
- paid vacation;
- sick days;
- bereavement leave;
- other types of paid leave;
- medical/dental insurance; or
- a pension plan;
- enters into contracts for workers’ compensation or cargo or transportation insurance and pays the premiums;
- may provide the courier with a credit card, in the name of the employer, for purchases such as fuel;
- normally arranges for a replacement if the courier is not able to work. The courier does not normally hire and send their own replacement;
- normally supplies tools and equipment required by the courier to complete their duties; however, the courier may provide some tools and equipment. The employer-supplied tools or equipment may include manifests or waybills displaying the employer’s name or logo;
- may impose or provide rental or lease agreements for the communication devices the courier uses to communicate with the manager, dispatcher, or other workers (whether it’s a mobile delivery tracking device, radio, pager, cellular phone, or other device). The employer may also own the radio frequency or the licence;
- sets the customer delivery rates and takes collection action if necessary (the employer suffers any losses from bad debts).
- may receive a bonus or commission if they bring in new customers;
- may sign a non-competition agreement, that is, an agreement where the courier promises not to work for another courier company. This promise is usually for a specified time and not for an indefinite time;
- generally, can only make deliveries on behalf of the employer;
- does not have a business presence. The courier is seen as a representative of the employer in the eyes of its customers;
- does not have their own customers and cannot benefit from the value of a customer list because it belongs to the employer;
- is required to provide a vehicle and is reimbursed by the payer for vehicle expenses or these expenses are incorporated into the worker’s rate of pay; for example, their commission rate.
Is the courier self-employed?
A self-employed worker carries on their own business and not the business of another person. The self-employed worker enters into a contract for services (business relationship) with their customers and can work when and for whom they choose.
In this relationship, the self-employed worker is not under the direction or control of the payer. The self-employed worker is free to act as they please when it comes to how the work is done and how to fulfill the obligations of the contract.
The following two sections list some indicators that can help you decide whether a courier is a self-employed worker. Keep in mind that this is not a complete list and not all of these indicators will be present in every situation. Please remember that all facts pertaining to the working relationship need to be considered.
Indicators that a courier is self-employed
Generally, the indicators that a courier is an employee, listed above, are not present, and a self-employed courier:
- does not usually have to follow rules of conduct or behaviour, does not have to undergo vehicle or uniform inspections, and is free to make deliveries in the order they want and to choose which route to take;
- is responsible for the cost of tools and equipment they provide if they are lost or damaged. These items may include bicycles, backpacks, bicycle courier bags, clipboards, radio equipment, scanners, cell phones, carts, dollies, uniforms, gloves, vehicle decals/stickers, maps and, GPS;
- provides a vehicle and is not reimbursed by the payer for vehicle expenses;
- is expected to provide a replacement vehicle if their own vehicle is unavailable, even if it means renting one at their own expense;
- may advertise for, hire, train, and pay a replacement driver or helpers without being reimbursed by the payer. The payer is not involved in the process and does not have to give their permission;
- can make a profit or suffer a loss in a business sense. The courier may have an opportunity for profit by fixing the rate that will be charged for delivery and a risk of financial loss from investing in tools and equipment and paying out‑of‑pocket expenses for things like advertising, salaries, fuel, repairs and maintenance costs on vehicles and equipment, late deliveries, lost or damaged packages, traffic violations, bad debts, and office or hub fees;
- has the right to perform courier services for more than one payer on any given day and at any given time.
The fact that the courier has a business presence may show that they are self-employed. Listed below are some examples of a business presence. The self-employed courier:
- has developed accounts with suppliers and customers;
- advertises their services for hire online or in the newspaper;
- maintains an office or staff or both;
- enters into a delivery contract with their own customers or under their own business name;
- contracts for or arranges for workers’ compensation, cargo or transportation insurance, or liability insurance and pays the premiums;
- has a business licence;
- is registered as a business with different government departments and agencies for things like the goods and services tax/harmonized sales tax or business name registrations;
- maintains a separate bank account for the business and negotiates business loans or a line of credit;
- has a separate business telephone line;
- bills customers and collects from them.
Factors that may prove to be inconclusive
There are certain facts about the working relationship of couriers that may be considered to be neutral (because they apply to employees and self-employed workers).
- Sometimes conditions for executing the contract are imposed on the courier. A payer may give a courier instructions outlining where or when to make deliveries.
For example, the employer can instruct the courier to make deliveries between 8 a.m. and 5 p.m. in a certain area of the city and to not change the work schedule without talking to the employer first. This is to make sure that the conditions of the contract between the payer and its customer can be met and does not indicate control over how the work is to be done.
- A courier may give waybills or delivery slips to the payer so that they can be paid.
Can a courier be considered as 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 one 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
Ms. J is an employee of ABC Couriers. She works for the company delivering packages on a set route, between 9 am and 2 pm, Monday to Wednesday. She is provided with a company truck to make the deliveries and has a credit card from the company to pay for gas expenses. She has a uniform she must wear. She has to deliver the packages herself and needs permission to be absent from work. The company is responsible for handling complaints received from clients. Ms. J is paid every two weeks and the company provides benefits such as paid vacation, paid leave and medical and dental insurance.
Ms. J is also a self-employed worker and she advertises her delivery services to transport various goods in the local newspaper. She has registered her business, and operates from her home office. She owns equipment such as a van, trolleys, and office supplies. She can accept or refuse any delivery contract based on her availability and determines the prices of her services. During busy seasons, she also hires and pays helpers so she can take on more work from clients. Each month, she bills her clients and collects payments from them.
In this example, Ms. J is considered an employee under her contract with ABC Couriers while at the same time she is considered self-employed for the work performed for different clients.
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 that 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 courier or a payer is unsure of the courier’s employment status, either party can request a ruling from the CRA to have the status determined. More information on the ruling process is available at 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.
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