Whether a practitioner is an employee or an independent contractor is decided by the real working relationship, not by the label on the agreement. Get it wrong and the clinic can be on the hook for years of unremitted CPP and EI. It is worth setting up correctly from day one.
Almost every clinic faces this question. You bring on an associate, and the obvious move is to call them a contractor and let them handle their own taxes. Sometimes that is right. Sometimes it is a problem waiting to surface. Here is how to tell the difference.
Why the label doesn’t settle it
You can write “independent contractor” at the top of an agreement, but if the CRA looks at how the arrangement actually works and sees an employment relationship, the label does not protect anyone. They look at what is really going on, not what you called it.
What the CRA actually looks at
A few practical questions drive the answer:
- Control. Who sets the hours, the rates, and how the work is done, the clinic or the practitioner?
- Tools and space. Who provides the room, the table, the booking system, and the supplies?
- Risk and reward. Can the practitioner actually profit or lose money, or are they simply paid for time?
- Independence. Can they work for other clinics, send a substitute, or build their own client base?
The more the practitioner runs like their own business, the more they look like a contractor. The more the clinic controls the work, the more it looks like employment.
What’s at stake if you get it wrong
This is the part that catches clinic owners off guard. If the CRA reclassifies a “contractor” as an employee, the clinic, as the payer, can be held responsible for the CPP and EI that should have been withheld and remitted, often both the employee and employer portions, plus penalties and interest, going back years.
What it means for each side
If you’re the clinic owner, an employee means running payroll, withholding source deductions, and remitting them on time. A genuine contractor means none of that, but the relationship has to actually be at arm’s length to hold up.
If you’re the associate, being a contractor means you handle your own taxes, you can deduct your practice expenses, and depending on your profession and revenue you may need to register for HST. Being an employee means a T4, deductions taken at source, and a much shorter list of write-offs.
The HST angle
For massage therapists, an associate who works as an independent contractor may have to charge HST once past the threshold, including potentially on what they bill the clinic, depending on how the arrangement is set up. Physiotherapists stay exempt either way. It is one more reason to get the structure right, and we sort it out with you.
Set it up once, properly
This is a decision worth making deliberately, with an agreement that matches how the relationship really runs. We help clinics and associates structure it so it holds up, and so nobody gets a surprise bill two years later. You can also read about how to pay yourself once your own practice is incorporated.
Frequently asked
Only if the relationship genuinely works that way. The CRA looks at the real arrangement, not the label. If they decide it is actually employment, the contractor label will not protect the clinic.
The clinic, as the payer, can be held responsible for the CPP and EI that should have been remitted, often both portions, plus penalties and interest going back years. The risk sits mainly with the clinic, not the worker.
Mainly control over the work, who provides the tools and space, whether the worker can profit or lose money, and how independent they are, including whether they can work elsewhere or send a substitute.
It can. A massage therapist working as a contractor may need to charge HST once past the threshold, depending on the setup. Physiotherapists are exempt either way. Structuring the arrangement correctly matters.
This article is general information for Canadian clinics and practitioners, not advice for your specific situation. Worker classification depends on the real relationship, so confirm with an accountant before you set it up.