Real estate agents

• Introduction
• Employer responsibilities
• How to decide if a real estate agent is an employee or a self-employed worker
• Neutral or inconclusive facts
  • Regulated activities
  • Commission rate set by an administrative policy
• Is the real estate agent self-employed?
• Is the real estate agent an employee?
• How to request a ruling
• For more information
• Legislative references

Introduction

This article gives you information on what the Canada Revenue Agency (CRA) looks at when determining the employment status of a real estate agent.

Note: In this article, "real estate agent" refers to a worker, and "real estate broker" refers to a payer. This may be different from the job titles used in your province or territory. Depending on where the services are performed, a worker may be called a real estate salesperson, representative, associate or (in Quebec) real estate broker, while a payer may be called a real estate agent or real estate agency.

General information about whether a worker is an employee or is self-employed is available in Guide RC4110, Employee or Self-employed

Employment status directly affects a person's entitlement to employment insurance (EI) benefits under the Employment Insurance Act (EIA). This status can also affect how a worker is treated under other legislation such as the Canada Pension Plan (CPP) and the Income Tax Act.

Employees and self-employed workers have different responsibilities, benefits, and entitlements. It is important for employees and self-employed workers, as well as for their employers and payers, to be aware of the differences. For more information, see Responsibilities, benefits and entitlements for employees and self-employed workers.

Employer responsibilities

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 the CRA along with their share of CPP contributions and EI premiums.

For more information on employer responsibilities and obligations, go to our Payroll page.

How to decide if a real estate agent is an employee or a self-employed worker

The CRA looks at the facts of the working relationship between the payer and the real estate agent. This article will tell you about facts related to real estate agents and the indicators that can help you decide whether a real estate agent is an employee or a self-employed worker.

Neutral or inconclusive facts

The CRA may consider some facts about the working relationship of real estate agents to be neutral or inconclusive. Neutral or inconclusive facts support either the conclusion that a person is an employee or the conclusion that the person is a self-employed worker. This includes (but is not restricted to) information relating to regulated activities or to commission rates set by administrative policy.

Regulated activities

Real estate activities are regulated by various acts that aim to protect buyers, sellers, real estate agents and real estate brokers. These laws apply equally to employees and self-employed workers. As a result, information about a worker that relates to a regulated activity is considered a neutral or inconclusive fact.

Here are some examples of regulated activities of real estate agents:

• holding an up-to-date professional accreditation
• following a professional code of conduct or ethics, which the real estate broker can enforce
• using currently approved contract forms to present offers and counter offers
  • trading only on behalf of that broker
  • having to remit any money received from a sale to that broker
  • having to submit offers to that broker

Commission rate set by an administrative policy

In some situations, the real estate broker, through an administrative policy, will establish a rate of commissions for all real estate agents (regardless of whether the agents are employees or self-employed). In this situation, the fact that the real estate broker determines the rate is inconclusive in itself.

Is the real estate agent self-employed?

A self-employed worker carries on their own business. The self-employed worker enters into a contract for service (business relationship) with their payer.

For more information on the responsibilities of self-employed workers, go to Business taxes or Small businesses and self-employed income.

In this relationship, the self-employed real estate agent 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 indicators can help you determine if a real estate agent is self-employed. This is not a complete list and not all these indicators will be present in every situation. Consider all facts related to the working relationship.

Indicators that the worker is self-employed

• The real estate agent is required to periodically pay a fixed amount to the real estate broker for administrative fees for services. These services can include the following: reception service, a desk in the office, the use of office facilities and conference rooms, the use of printers, transaction processing, in-house accounting and payroll services, etc.
• The real estate agent controls and establishes the rate of commission.
• The real estate agent is not subject to sales quotas (e.g., minimum listing requirements or dollar volume of sales).
• Normally the real estate agent provides the following work tools and assumes the costs associated with these tools: automobile, camera, computer, cellular phone, personal marketing aids, etc.
• The real estate agent is required to pay expenses associated with their activities, including car insurance premiums and repairs, professional liability insurance premiums and real estate association membership fees.
• The real estate agent is free to hire staff.
• The real estate agent covers the cost of their own advertisement or contributes to the cost of advertising the listings.

Is the real estate agent an employee?

Generally, an employee is hired to perform specific duties under the direction and control of the party who hired them. Under the terms and conditions of employment, an employee 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 indicators can help you determine if a real estate agent is an employee. This is not a complete list, and not all of these indicators will be present in every situation. Consider all facts related to the working relationship.

Indicators that the worker is an employee

• The real estate agent is not required to pay any fee or amount to cover administrative costs for services provided by the real estate broker. These services can include the following: reception service, a desk in the office, the use of office facilities and conference rooms, the use of printers, transaction processing, in-house accounting and payroll services, etc.
• The real estate broker retains a percentage of the agent's sales to cover the administrative costs and only requires payment for these services when there is a sale.
• The real estate broker determines the commission rate (please note that this indicator is not applicable in situations where the commission rate is set by an administrative policy).
• The real estate broker requires the real estate agent to perform specific tasks, such as answering telephone calls during a specific period at the real estate broker's office.
• The real estate agent is subject to sales quotas (e.g., minimum listing requirements or dollar volume of sales).
• The real estate agent must account to the real estate broker for their activities on a daily or weekly basis (e.g., report on objectives, holiday reports, and work schedules; all of which have been requested by the real estate broker).
• The real estate agent cannot hire any helpers or staff to help perform the work.
• The real estate broker covers the cost of advertising the listings.

How to request a ruling

You can ask the CRA for a ruling if you are not sure of a real estate agent's employment status. Either the worker or the payer can make this request. For more information on the ruling process, see 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

• Paragraph 5(1)(a) of the Employment Insurance Act
• Paragraph 6(1)(a) of the Canada Pension Plan