Employee or Self-Employed?

Are you self-employed or an employee? It is important that you understand and define your working relationship from the start, as it can be a costly mistake to make. 

If you are an employer, who has wrongly assumed that you are working with a subcontractor, you will end up needing to provide the government with both sides of CPP and EI. Plus, they will add penalties and interest on top of that! 

On the other side, if you are working for someone and wrongly assume that you are an employee. You may be surprised with your tax bill at the end of the year. As you now are a sole proprietor and owe both sides of CPP and all your income tax! You may even have needed to register for GST! 

As with all things business, the CRA has rules to help you figure out if you are self-employed or an employee. 


When the contract for the relationship was first established, was the intent for a contract of service (employee) or contract for services (self-employed)? It is important that both sides are of the same understanding of the intent of the relationship. Written agreements can help to make sure both sides have the same intent going in. In the event of the CRA looking at the business relationship, written contracts will be examined. 

It is important to note that even if your intent was clearly stated, the actions of your relationship must follow allow the same lines.

Working Relationship 

Once you have determined the intent of your relationship, there are six other factors that help to determine if your intent matches the reality of the working situation. You do not have to meet all six of them, they are merely metrics used to help the CRA understand your relationship. However, enough of them need to be met to show a  trend towards either a contract of service or contract for service. 

#1. Control

How much say does the person doing the work have? In a typical employee-employer relationship, the employee will be under the direct control and subversion by the company. They may be told exactly how to do the job, and the employer will always have the final say on process and what jobs need to be done. The employer will also have authority over the employee when it comes to pay, as they will determine when and how much is paid.

In a subcontractor relationship, the person working does so independently. The company does not usually have a say on how/when the work is done, and if they can work for multiple other companies at the same time. They also retain the ability to refuse work from the company, something an employee can not do. 

#2. Tools and Equipment

Who owns the tools? If you are an employee, the company will usually provide you the tools to work with, or reimburse you for money spent. Whereas a subcontractor will have bought their own tools, and will be responsible for all upkeep and repairs on them. A subcontractor will also usually have their own workspace, where they are responsible for the entire cost. 

#3. Ability to Hire

As a subcontractor, you should be able to hire whoever you want to help with your work. The company does not have power over who you hire to do the job. If you are an employee, you will need to complete the job yourself, and you will not be able to hire someone to do the job without getting approval. 

#4. Financial Risk

As an employee, you should experience no financial risk. Your employer will continuously pay you based on their schedule, and all expenses incurred for business will be reimbursed. 

Subcontractors take on financial risk, as they are based off contracts with companies. They do not have a guaranteed continual agreement with a company, and are responsible for costs relating to a job. They also have a need to market their services to other companies. 

#5. Investment & Management

An employee will not have an investment stake in the company. They will not need to put their own money into the company for it to complete a job. Whereas a subcontractor has money invested in their company and may manage employees.

#6.Opportunity for Profit

A subcontractor is able to lose money or make a profit from the business relationship. They have it within their control to negotiate the rate paid for the job. They also must pay for the expenses and possible employees time that relate to the project.  

Whereas an employee is not able to realize a profit or a loss when the company does. They are paid a standard rate for their hours worked. Sometimes employees are paid by commission, however this is not deemed a profit because there are no expenses related to it that the employee must incur. 

The CRA provides a more indepth guide here, as the above are brief summaries of each factor. If you are unsure which relationship you have or are concerned that you are being treated wrong, you can request a ruling from the CRA. 

** Quebec has different rules for determining if you are a subcontractor or employee.

Taxable Benefits

Employers often give their employees additional compensation and perks beyond their normal salaries. This can be an important aspect of employee morale. However, it is imperative that employers understands that these are taxable benefits. As with all employee compensation, the CRA has rules for these that you must follow. In previous blog posts we have discussed mileage reimbursement, and employee gifts and awards. This post will explain a few taxable benefits and give you the resources to navigate the maze of CRA payroll obligations.


Parking can be considered a taxable benefit even if you as the employer own the lot. Now before you start to worry that you are missing parking on your employees pay cheques, there are situations in which it is not a taxable benefit to provide parking. These include: 

  • If your employee has a disability
  • It is a lot that provides both public and employee parking, For example, working at a mall.
  • You need to provide parking for an employee who uses their car for business purposes during the day. 
  • The parking situation is considered scramble parking, which means that there are less parking spots than employees. 

An example where parking would be a taxable benefit is providing your employee parking in downtown Edmonton and they don’t need their car for business. You would then need to include this in the employees income. 

Company Vehicle

If you provide your employee with a company vehicle to use, you need to pay close attention to how they are using it. The employee needs to be using the vehicle for business purposes only, and return it to the company at the end of the day. If you do allow the vehicle to go home with your employee, it must be for valid business reasons and no personal driving takes place. Your employee must also keep a logbook to prove that all KMs driven were for business reasons. Note: Driving the vehicle to and from work does not count as business driving. When the vehicle is readily available to the employee, and they use it for their personal driving this becomes a taxable benefit. 

The CRA has provided a calculator that can help you determine how much you need to charge your employee for a taxable benefit. As most of the situations will have a combination of both business and personal driving. You can find the calculator here.

 Cell Phone

Cell phones are now vital to running a business. Unfortunately, cell phones are part of the long list of items that can be considered taxable benefits. Luckily, there are provisions that allow you to pay for a cellphone for an employee. The first of which is if the company owns the cellphone and it is used by the employee for business purposes. 

 If it is the employees personal phone, you can reimburse them for the plan only if the following conditions are met: 

  • The plan is reasonable & has a fixed cost
  • Your employee does not incur overages from personal use

If you pay for personal overages or for a premium plan, when the phone is under the employee name, this is a taxable benefit to the employee. 

Another situation that is considered a taxable benefit is, if you reimburse your employees for buying a personal phone. Even if the phone was damaged during the course of doing something business related. It is also taxable to the employee if you give them a fixed allowance for a cell phone


Of course there are many other taxable benefits, you can find the entire guide on the CRA website here. Included in this is a taxable benefit chart that you can reference. It gives you both the payroll taxes on the benefit and which box it needs to go in on the T4.

On-Core can help you with any questions you may have regarding taxable benefits!

Job Creation Tax Cut

On Monday, July 1st, Bill 3 from the UCP came into effect. This bill is what they have called the Job Creation Tax Cut. You have probably heard about it on the news, and you may not be  sure what exactly what this means for you as a business owner in Alberta.

Small Business Tax Rate

First, we will start with what is staying the same. The small business tax rate will not be changing from the current 2% rate in Alberta. What this means, is that all Canadian-Controlled Private Corporations with active business income (excluding things like investment income & rental income), will have a provincial tax rate of 2% up to $500,000. If you are interested in reading more on the Small Business Deduction, you can get that information here

Large Corporation Tax Rate

The Large Corporation tax rate is what has been affected by Bill 3. In the next few years, it will be reduced by 4% overall, going from 12 to 8 percent by January 1, 2022. 

Below is the schedule for the changes laid out by the UCP, the first change of a 1% reduction has already taken place this week. 

July 1, 2019 11%
January 1, 202010%
January 1, 20219%
January 1, 20228%

Some information about the effects of Bill 3 from the Alberta website are:  

  • As of this week, we will have the lowest Corporate Tax Rate in Canada.
  • As of 2022 when the cuts have finished, we have a lower combined federal and provincial tax rate than 44 US States.

As mentioned previously, the UCP has named this the “Job Creation Tax Cut”, they believe that by having some of the lowest tax rates in North America, it will make Alberta a more enticing place to invest in, and therefore create more jobs for Albertans. 

If you would like to read more about Bill 3, you can check it out here.

“Open for Business”

A couple weeks ago the UCP introduced a new bill, Bill 2 or the Open for Business Act. As a business owner, this bill will directly impact the way that you are required to pay your employees. The changes will take place on two different dates, June 26th and September 1st of this year. The changes will be to: minimum wage for youth workers, general holiday pay, and banked time. Below is a summary of the changes, if you would like to read more about this bill you can check out the Alberta website here.

Minimum Wage on Youth Workers

This will be the first change to take effect, it will happen on June 26th and effect workers who are 13 to 17 years old. The new minimum wage for these employees will now be $13/hour. This is down from the current $15/hour. A couple notes about this change:

• The youth must be enrolled in school, if they are not a student the $13/hour does not apply to them.
• The $13 only applies to the first 28 hours worked in that week, anything over 28 hours must be paid out at $15/hour. Unless it is a break period, than all hours can be paid at $13/hour.
o For example: if a student works 32 hours during a non-break period, 28 hours would be at $13 and the other 4 would be at $15.
• If you are going to lower the wage on one of your employees, you must give them notice before the period in which this change would be taking effect.

General Holiday Pay

The rules surround General Holiday pay will be taking effect on September 1st. Currently, every employee receives 5% of their previous 28 days wages. The new rules will tweak this formula slightly, as not everyone will be eligible for General Holiday pay. The changes will be:

• You must work at least 30 days in the previous 12 months to be eligible
• It must be a normal working day for the employee, or you have actually worked on that day to receive General Holiday pay. If you do work on that day it will be 1.5 times their wage, if it is your normal working day they will be entitled to the same General Holiday pay as before.
o For example: If one of your employees is always off on a Friday, you would not need to pay them Good Friday, as it is not one of their normal working days.

Banked Overtime

This change will also take effect on September 1st. Currently, if an employee works overtime you must pay them or bank their time at 1.5 times their wage. This bill will bring back the older banked overtime structure, in which you only need to give them a 1:1 ratio for this time.

For example, if you an employee works a 10 hour day, you will now only need to give them 2 hours of banked time instead of 3.


If you have any questions about the Open for Business Act and how it will affect your payroll, give us a call today!

How to Save Money on Bookkeeping


Bookkeeping costs can add up quickly, and it doesn’t take long before it becomes overwhelming. This leads to business owners deciding that professional bookkeeping isn’t worth the cost. They may start looking for a bookkeeper on Kijiji who can do their books for cheap. However, like most things in life, you get what you pay for. Professional bookkeeping is worth the cost to the business owner. This may sound biased on a bookkeeping website, but it is the truth. Professional bookkeeping companies offer many advantages over a stand alone person you may find on Kijiji. While the costs are higher to use a professional bookkeeper, there are ways to help save you money. Four of these are all detailed below.


Keep it Business Only


When you have a business bank and credit card, they should be just that, business. When you start purchasing personal items with your business accounts the cost of bookkeeping starts to climb. There are multiple reasons for this. The first reason is that the number of transactions the bookkeeper has to enter has now increased. Another reason for the increased cost, is now the bookkeeper must determine if that transaction is business or personal. This may seem simple from the onset, however places like Wal-Mart can easily be a personal or business purchase. Both of these mean more time is spent on your account and this will be charged back to you.




If you bring your bookkeeper a grocery bag of crumpled up receipts, they will be happy to sort through them and organize your paperwork for you. However, they will not do this for free, your cost of bookkeeping can increase significantly based off how disorganized you are. If have a discussion with your bookkeeper about how they would like to see your paperwork, you can get it organized before stepping foot in their office. This will save you money because they can start working on it immediately.


Another aspect of organization, is to make sure you have everything when you bring in your work. If you are missing statements or receipts, this can slow down the process because now your work needs to be stopped and picked up at a later time.


Answer Questions Quickly


It is unavoidable, your bookkeeper will have questions for you. The quicker you are able to respond to their inquiries and provide the information needed, the less money it will cost you. This is because the longer a bookkeeper is away from your books, the more time they will need to get back into the rhythm of your company. Therefore answering questions quickly will benefit your wallet because the bookkeeper will be able to quickly and efficiently finish off your work.


Know your limitations


You are great at what you do, that is why you have started a business. However, bookkeeping is not always a skill that business owners have. In the quest to save money, you may decide that you can do it yourself. If you do not have any bookkeeping experience or training, this can lead to many costly mistakes. Having a professional bookkeeper fix these mistakes can cost thousands of dollars. If you know your limitations from the beginning you can eliminate the cost of fixing.


This is not to say that you can’t do some things yourself to save money on bookkeeping. Many companies are flexible to letting you do some of your own bookkeeping. For example, you can do your own invoicing in a system that works with an accounting program or you can share a file with your bookkeeper. Invoicing is something that you will most likely be doing yourself, working with your bookkeeper to find a process will save you money on your monthly bookkeeping fees, while allowing your bookkeeper to do the things you aren’t comfortable with.


Professional bookkeeping can be affordable, especially if you follow all of the tips above. Investing in professional bookkeeping will also save you money on your tax return and accountants bills. It is the right choice for both your wallet and your stress levels!

Dividends vs Payroll


If you are a shareholder in your business, you may have heard about going on the payroll vs. taking dividends. This post will not recommend one over the other, as that is a discussion that you need to have with your accountant. Every situation is unique and taking one or both, requires an intimate knowledge of your books and your goals, both personal and business.

Instead, this post will aim to help you understand what the difference between the two is.

It is important to note that this is only for business that have been incorporated. If you have a partnership or are a sole proprietor, you can not take dividends out of your business.




You may have employees on your payroll already, receiving income as a shareholder will be a similar process. You will be paid on a set schedule and usually as salary, which is a set amount each pay period. You will get a T4 at the end of the calendar year. However, the company will not need to pay any Employment Insurance on your income, only Canada Pension Plan and Income taxes.


The major personal advantage to being on the payroll is that you will have a personal income. This is advantageous to you for many reasons:


  1. You will be contributing to CPP and can claim this in your retirement
  2. It allows you to take advantage of other retirement savings like RRSPs & TSFAs
  3. It can be helpful when applying for personal loans


In addition, it can be a benefit to the company as the salary would be a 100% expense write off. This could be beneficial for helping the company stay under the small business limit.


Disadvantages of taking out payroll, is that you are taxed at a higher level personally. The company also needs to make the payroll remittances to the government for your salary. If you do not have any employees, you will need to make all the arrangements with the government to open up a payroll account. If you are late on a payment, it can lead to large penalties from the CRA.




A dividend will result in you receiving a T5. An example of how you receive dividend income, is that you write yourself cheques throughout the businesses fiscal year and then an accountant declares a dividend in the amount you have taken. You must be careful with this, as it can be easy to take more money than you intended to.  


As with payroll there are personal and business advantages to dividends. Personally, dividends are at a lower rate and do not necessarily follow the calendar year, which can help optimize your tax situation. The advantage for the company is that it does not need to make any sort of remittances to the CRA for dividends.


However, just because dividends are at a lower tax rate, does not mean that it is best for your personal tax situation.You may even need to make personal tax installments. This is something you should discuss with your accountant when making this decision.  


Both dividends and payroll hold their own advantages, and one or both may be right for you. It is important to talk to your accountant before you start doing one.

Payroll Obligations to CRA


As your business starts to grow you may need additional help around the office or the shop. Hiring an employee comes with obligations to the government that surprises many small business owners. This post will address these obligations, and help you better understand what having an employee means for your business. As a disclaimer, this only covers the general Canadian obligations and rules in Alberta, you will need to check if your province has specific rules for payroll taxes.


CRA Deductions

When you get an employee the CRA requires that you take deductions off their paycheques and remit it based on your assigned schedule. This is a major consideration of having employees, and can come with the heftiest fines if you ignore it. The CRA will levy 10 to 20% penalties if you are even a couple days late with your remittances. The reason the CRA is this strict with payroll deductions is because it is not considered the companies money, you are simply holding it in trust for the government.


There are three taxes that you generally must take off an employees paycheque, Canada Pension Plan (CPP), Employment Insurance (EI), and Income Taxes. The employer must contribute to both CPP & EI and remit both the employee and employer portions of all taxes to the CRA. While CPP is 1:1, the employer must remit 1.4 times the EI. There are ways to reduce this liability with providing a short-term disability plan for employees that meets the CRAs criteria. You can find information about that here.


To determine that you are taking the correct amount of income taxes off your employees paycheque, you need them to fill out both a federal and provincial TD1. Once you have filled out this form, you must follow their claims code when providing payroll services. Both the federal and Alberta 2019 TD1s are linked to below for your reference.

Federal TD1

Alberta TD1


Do these three taxes always apply to payroll items?

Payroll is not always simple and straightforward. There are many items that an employee can be paid for that are not just their wages. All of these different payroll items have different rules in regards to taxes. This can get extremely complicated and you have to take extreme care when preparing your employees payroll.

CRA has a helpful chart on what taxes apply to each situation, you can find that chart here.

CRA also provides a payroll calculator that can help your business, you can find it here.


Remittance Schedules


Based on the amount of your payroll, the CRA has different schedules for when you must make your payroll remittances. The more payroll you have, the more frequently you need to remit to the government. Below are two charts showing the different frequency levels and when those levels need to remit. Both charts are taken from the CRA website, here

Remitter Type

Remitter type Average monthly withholding amount (AMWA)
Quarterly remitters: new small employers Not based on AMWA. The monthly withholding amount is zero to $999.99 and you have a perfect compliance history.
Quarterly remitters: account opened for 12 months or longer From zero to $2,999.99, and you have a perfect compliance history.
Regular remitters From zero to $24,999.99
Threshold 1 accelerated remitters From $25,000.00 to $99,999.99
Threshold 2 accelerated remitters $100,000.00 or more

Remitting Frequency

Remitter type Remitting frequency Remitting period Remittance due dates
Quarterly Quarterly January 1 to March 31

April 1 to June 30

July 1 to September 30

October 1 to December 31

April 15

July 15

October 15

January 15

Regular Monthly Calendar months 15th day of the next month
Threshold 1 accelerated Up to twice a month 1st to 15th of the month

16th to end of the month

25th day of same month

10th day of the next month

Threshold 2 accelerated Up to four times a month 1st to 7th of the month

8th to 14th of the month

15th to 21st of the month

22nd to the last day of the month

3rd working day after the 7th

3rd working day after the 14th

3rd working day after the 21st

3rd working day after the last day of the month


Even if you fall in the Quarterly remitter section, you can choose to still be a regular remitter. As noted earlier, you need to make sure you are able to make these remittances on time to avoid the penalties. Therefore, choosing to be a regular remitter might help you stay compliant.


How do I pay these remittances?


There are multiple ways that you can pay your payroll remittance to the CRA. The CRA has compiled a complete listing here. Below are the most popular ways we, as a company, have seen employees use.


  • Online Banking, you can talk to your bank about the services they provide
  • My Payment, allows you to pay with credit card or debit online 
  • At the bank
  • Mailing in a cheque


Contact On-Core if you have any questions about your payroll obligations!


If you start a business, you will one day need to start charging GST on your products. Once you start charging it, you will also need to start doing remittances based off the schedule you have chosen. Like most things with the CRA, GST has many moving parts and rules. This post will only cover the basic rules of when to start charging GST on your products. If you are confused by GST and if you need to charge it, your bookkeeping professional will be able to help.

When do you need to start charging GST?


GST does not need to be charged by your company if one of the two situations applies:


  1. You sell only exempt supplies
  2. You are a small supplier.


Those two criteria might not mean too much to you as a business owner trying to figure out if you need to charge GST.


Exempt supplies are defined by the CRA here.  There are too many to be listed on this post, some examples of it are legal aid services, music lessons, and most health services performed by licensed professionals.


A small supplier is a business that has taxable sales that are less than $30,000 in four consecutive calendar quarters. The minute you cross over this threshold you must register for GST. If you remain below the $30,000 you can voluntarily chose to apply for and remit GST, but it is not a requirement.


How do you register for GST?


You can register for GST one of three ways:


  1. Business Registration Online, you can find information here 
  2. Submitting form RC1
  3. Calling the CRA at 1-800-959-5525


Remitting Periods


Once you have determined that you need to start charging GST, you must pick a reporting period. This means the frequency with which you need to file a GST return and remit the amount owing to the government. The period you may choose is based on your income. Below is a chart from the CRA website on your options for reporting period.


Annual taxable supplies threshold amounts Assigned reporting period Optional reporting periods
$1,500,000 or less Annual Monthly, Quarterly
More than $1,500,000 up to $6,000,000 Quarterly Monthly
More than $6,000,000 Monthly Nil


While annually does seem an attractive option if you qualify, there are a couple things you need to consider. The first is that it does not get you out of remitting money quarterly. If you owed more than $3,000 in the previous year in GST, you will need to make quarterly installments. If you neglect to make these installments, the CRA will charge you interest on your GST owed when you file if it is again over the $3,000.


When do you need to file?


It is important to ensure that you are filing and paying your GST on time. If you do not, the CRA will charge you interest and penalties and in extreme cases can even take money out of your bank account to cover the amounts owing.


The following is a chart for when you need to file & pay your GST by:


Annual 3 months after period end. For example, December period end, GST is due March 31
Quarterly Due the end of the next month after period end. For example, March period end, GST is due April 30.
Monthly Due the end of the next month after period end. For example, January period end, GST is due February 28.

For more information, you can check out the CRA website here.

Anywhere Bookkeeping

The accounting industry is changing and no longer do you need to come to an office to get bookkeeping and accounting services. Sharing a file is easier than ever and clients can do as much or as little work as they want. This post will briefly cover the advantages of using an online software.

The Software

On-Core is trained in, and works with two online accounting software’s. Below this section are pictures of each logo, you can click on them to be taken to their respective websites.

The first is probably the best known. Everyone has heard a radio ad or seen Danny DeVito on TV talking about QuickBooks Online. If you use QuickBooks Desktop you may have even seen a button for transitioning your desktop file to Online.

Transferring from desktop to online is relatively seamless whether you currently use QuickBooks desktop or not.

The second is a software from New Zealand, Xero. Xero has recently acquired Hubdoc and is working on transitioning into the Canadian market. Transferring from your current software to Xero is also relatively seamless.

Transferring to either of these is a great opportunity to clean up your file by eliminating accounts, vendors, or customers that are long inactive. However, with both, you will need to keep a copy of your old software as you will not be able to put in the detail of previous years, just opening balances.



Using online software is a paperless solution to bookkeeping. It can help to eliminate that storage room full of banker boxes that you have! You don’t need to hold onto that gas receipt from 2 months ago until you get to see your bookkeeper. You can simply take a picture, upload it, and toss it! It will be attached to the transaction in your online software and therefore easily accessible to anyone needing to see the backup.  



While not every transaction is able to be automated, these online software’s can eliminate some of the repetitive transactions, saving your company time and money. This is done by linking vendors to their respective accounts. For example, Shell would be automatically be coded to automobile expenses.


Instant overview of your business   

If you stay on top of doing your books, which with automation is a snap, you will know where your business stands whenever you need. Traditional bookkeeping only allows you to get monthly reports on your business after the month is over. With online software, you can work with your bookkeeper to know where your business stands at all times.


No more paperwork drop offs

With online software you no longer need to make monthly visits to your bookkeepers office. With it being paperless, you can get your bookkeeping done by any bookkeeper and not have the stress of needing to deliver your monthly paperwork to get reports.




Can be a little too easy

You may look at that header and think, how can it being a little too easy be a disadvantage? Online software make it easy to do it yourself. However, if you have not had any experience or training in doing your books, this can lead to mistakes being made. This mistakes will be costly to correct.




Online software is worth adopting. Bookkeeping companies are here to support you in the transition, ensuring that you can reap all the advantages of doing books through online software. On-Core has professionals that have been certified in both of these programs. We can train you on how to use these programs, and offer monthly support.


These programs can save you money, and On-Core is here to show you how!

Mileage Reimbursement


Using vehicles is an essential part of modern day business. Whether your employee needs to go visit a client, or goes to pick up stamps from the store. You need to know how to reimburse them for the kilometers driven.


Criteria for Reimbursing Kilometers to Employees:

There are three criteria that you must meet in order to make your employees mileage reimbursement tax free.

1). You must pay them according to the CRA’s reasonable rates. The CRA reasonable rate per-kilometer rate has gone up in 2019 (below is a chart with both the 2019 and 2018 rates). As an employer, you can choose to pay them more than these rates. However, all the reimbursement would become a taxable income to the employee.

2) You are only reimbursing your employees for business KMs driven.

3) You are not reimbursing your employee for any other expenses related to the use of the same vehicle. For example, you do not reimburse them for fuel in addition to kilometers driven.


2019 2018
For the first 5,000 KM $0.58 $0.55
For all KM after $0.52 $0.49


If you do not meet these criteria you must take CPP, EI, and income tax off the monies given to the employee for their KMs.

You can read more about this here, on the CRAs website.

If you have any questions, you can contact On-Core and our payroll specialists would be happy to help!

For information on tracking mileage if you’re a business owner, you can check out our post here. Which includes a free mileage log download sample. It is important to note, the same KM rates apply to business owners.