From CRA’s perspective Casual Labour is NOT an eligible expense and can create problems for both the employer and the employee. Eligible business labour expenses are limited to either a) employee wages or b) subcontractor invoices.
A) Employee Wages – Most situations where employers use ‘casual labour’, the individual should have been included on payroll. Taxes, CPP, and EI must be deducted and remitted as source deductions. This amount also needs to be included in the total payroll for WCB.
B) Subcontractor – In some situations, these individuals may qualify as self-employed subcontractors and provide an invoice for services rendered. CRA limits these individuals to those that are running a legitimate business with a variety of customers. Some of the criteria CRA uses to qualify as a self-employed contractor include:
– Control – Self-employed individuals have more control over their schedule and how they perform the services.
– Risk – Self-employed individuals incur financial risk with the opportunity for profit.
– Integration – Self-employed individuals are not as closely integrated with their clients.
– Tools – Self-employed individuals provide their own tools and equipment.
If you are paying for Casual Labour you run the risk of CRA charging you for BOTH the unpaid employer and employee portion of CPP and EI as well as Penalties and Interest for ‘Failure to Deduct’. If the individual qualifies as a subcontractor you run the risk of CRA charging you the unpaid GST as well as Penalties and Interest.
