Why it matters
Calling someone a subcontractor does not make them one. The CRA decides from how the work actually runs, and so does WCB Alberta, separately. Getting it wrong costs the company that pays:
- With the CRA, according to its own guidance, an employer that fails to deduct CPP contributions or EI premiums has to pay both the employer's and the employee's share, plus penalties and interest.
- With WCB, a company that hires a subcontractor who has no WCB account of their own has to cover that person as its own worker.
So a GC or a trade that hires helpers should know which side of the line each person is on, and a sub should know what makes them a business in the eyes of both.
How the CRA decides
Outside Quebec, the CRA asks one question: is the person working as a person in business on their own account, or as an employee? It answers it in two steps.
First, intention. What did the two sides mean to set up, an employment relationship or a business one? A written contract helps show it. But the CRA is explicit that the label is not enough: the facts of the working relationship decide, not just what the parties call it.
Second, the facts. The CRA looks at each of these, then at all of them together:
| Factor | Points to an employee | Points to a business |
|---|---|---|
| Control | The payer decides what jobs you do and how; you need permission to work for others | You work independently, choose when and for whom, and can turn work down |
| Tools and equipment | The payer supplies them and pays for repairs and insurance | You own them, pay to maintain and insure them, and have a real investment in them |
| Helpers | You have to do the work personally | You can hire helpers or send someone else, and you pay them |
| Financial risk | Your expenses are reimbursed and you carry no fixed costs | You carry ongoing costs, and you are liable if you do not finish |
| Investment and management | No capital in the business, no business presence | You have capital invested, manage staff, have a business presence |
| Profit | You cannot make or lose money on the job | You control what you earn and what you spend |
Owning your tools is not enough on its own. The CRA notes that many skilled tradespeople have to supply their own tools even as full-time employees.
How WCB Alberta decides
WCB uses its own test, and its answer does not depend on the CRA's. A hiring company must cover a contractor or subcontractor as its own worker unless that person has an active WCB account, or does the work as:
- an employer in that industry,
- a worker of another employer,
- a director of a corporation that WCB accepts as a business,
- a proprietor with personal coverage, or
- a partner in a partnership with personal coverage.
When a company does have to cover a subcontractor who supplies only labour, WCB has it report 100% of what it paid them.
The practical answer for a sub is simple: have your own WCB account, and if you work alone, personal coverage. The practical answer for a GC is a clearance letter on every sub before they start.
A quick check for a crew lead hiring help
If the person you are paying:
- works only for you, on your schedule, as you direct,
- uses your tools and your truck,
- cannot send someone else in their place, and
- risks nothing if a job goes badly,
then the CRA's factors point to an employee, whatever the invoice says. If you pay them as a subcontractor anyway, you carry the risk of the CRA deciding otherwise later.
And the paperwork either way
- Paid as an employee: payroll deductions, a T4, and WCB coverage under your account.
- Paid as a subcontractor for construction work: a T5018 if construction is your main business and you paid them more than $500 in the year, and a WCB clearance on them.
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