Employee or Independent Contractor

A simple CRA checklist for growing employers

One of the most common questions we hear at Tenfold HR Solutions is this: When does a contractor relationship need to become employment?

In Canada, what you call someone matters far less than how the working relationship operates in real life. The CRA looks at the full picture, including what both parties intended and what actually happens day to day.

employee vs contractor

Why it matters

If someone is truly an employee, employers are generally responsible for payroll deductions and remittances like CPP, EI, and income tax, and there can be financial consequences when this is missed.

In Alberta, employees are also covered by employment standards minimums such as overtime, vacation, general holidays, and termination rules.

Below is a simple checklist we use when we help Alberta employers navigate employee vs independent contractor status.

Quick checklist

If you answer yes to several of these, your contractor may be functioning like an employee

1. Control

  • Do you control the hours of work or set the schedule?
  • Do you decide how the work must be done, not just what the outcome is?
  • Do you train, supervise, or manage performance?

2. Tools and equipment

  • Do you provide the main tools, software, equipment, or workspace?
  • Do you cover ongoing costs like repairs, subscriptions, or insurance?

3. Subcontracting or hiring help

  • Does the worker need your permission to bring in help?
  • Must the worker do the work personally, with no ability to send a substitute?

4. Financial risk and opportunity for profit

  • Does the worker have real expenses they manage and control?
  • Could they lose money on the work?
  • Can they increase profit by managing time, pricing, or costs?

5. Investment and management responsibility

  • Is the worker operating like a business with their own clients, marketing, and admin?
  • Do they manage their own business decisions and overhead?

6. How integrated the role is

  • Is the person embedded in your team meetings, internal systems, and processes?
  • Is the work ongoing and core to day to day operations, not a defined project?

When a transition usually makes sense

In our experience as an Alberta HR consultant team, these are common turning points where employment becomes the cleaner and safer option

  • The role has shifted from project based work to set hours every week
  • The worker is managed like a team member, not a vendor delivering a scope
  • The relationship is long term with no clear end date
  • The work is integral to business operations
  • The worker relies on your organization as their primary income

Changes When Someone Becomes an Employee

Once a worker is classified as an employee, Alberta employment standards apply. This includes rules around hours of work, overtime, vacation, general holidays, job-protected leaves, and termination.

In addition, employers become responsible for payroll deductions and remittances such as CPP, EI, and income tax. As a result, proper classification is essential to avoid compliance risks and unexpected costs.

How to Transition and Stay Compliant

Start by confirming whether you need a role or a project. Then, align your documentation with reality, typically through an employment agreement and clear expectations.

Next, set up compliant payroll and time tracking. Build a simple onboarding plan, and ensure managers understand responsibilities around hours, overtime, and time off.

If you’re unsure, you can request a CRA ruling to confirm classification.

At Tenfold HR Solutions, we provide practical support, from quick reviews to updated documentation and ongoing HR guidance.

Reach Out to Tenfold HR Solutions to Learn More

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