Trucking Contractor-Sub Contractor Information

For those of you in the Trucking Industry, the CRA will be addressing the misclassification of Independent Contractors (better known as sub-contractors).

They are spending 77 million dollars over four years starting 2026 to implement a program that will address non-compliances related to the trucking industry.

A subcontractor is an independent businessperson (self-employed) managing their own taxes, tools, schedule, and risks for specific projects, offering autonomy but no benefits like paid leave or insurance, while an employee works under an employer’s control, receives regular pay with taxes deducted, gets benefits (health, vacation), and has legal protections but less freedom. The main difference lies in control, financial risk, and integration: employees are directed by the company, while contractors run their own operation, even if they work for one client.

Employee Characteristics:

• Control: Employer dictates how, when, and where work is done (hours, tools, methods).

• Taxes: Employer withholds income tax, CPP/EI, and pays employer portions.

• Benefits: Receives health benefits, paid vacation/sick days, pension, minimum wage, overtime.

• Risk: Low financial risk; reimbursed for expenses.

• Integration: Part of the company’s ongoing operations.

Subcontractor (Independent Contractor) Characteristics:

• Control: Sets own hours, uses own tools, can hire helpers, focuses on job completion.

• Taxes: Responsible for all self-employment taxes (GST/HST, income, CPP), pays full CPP/EI.

• Benefits: No employer benefits; must fund own insurance, retirement, etc..

• Risk: High financial risk (profit/loss), incurs operating costs.

• Integration: Operates as a separate business; works on specific projects with invoices.

Why It Matters (Tax & Legal)

• Misclassification Risk: Treating an employee as a contractor (or vice versa) creates major liabilities for the hiring entity with tax authorities (CRA in Canada) for unpaid payroll taxes and benefits.

• Legal Protections: Employment laws (like minimum wage, overtime) apply to employees, not contractors, highlighting the need for correct classification.

Key Factors for Determination (CRA/Government View)

• Control: Who controls the work (most important).

• Tools: Who provides tools/equipment (own tools = contractor).

• Financial Risk/Profit: Opportunity for profit or risk of loss (contractor takes risk).

• Business Aspect: Does the worker market services, have own GST/HST number (contractors)