Is Casual Labour a Valid Expense?
Generally, casual labour is when you have someone working for a few hours on a sporadic or intermittent basis and is not on the Company’s payroll.
Up until about 10 years ago, CRA accepted casual labour as a valid expense. Now however, they do not.
The two options available are:
- Subcontractor, or
- Employee
In either case, the employer must have the individuals’ social insurance number on file. If an individual is to be considered a subcontractor, then the Company must obtain an invoice describing the services rendered after the work is completed. If the individual earns more than $30,000 per annum, then he/she must have a business number and be registered for HST.
Risk
Usually subcontract work is for a specified time or for a particular project. In the event that payments are of a recurring nature, CRA will seek to categorize the individual as an employee. If CRA is successful, the Company will be exposed to interest and penalties for unremitted Employment Insurance Premiums, unremitted Canada Pension Plan Contributions and unremitted Income Tax withholdings, in addition to be liable to make the unremitted payments.
Other Matters
Two other items to consider are the Ontario Health tax. This tax is paid on the Company’s total payroll in excess of $450,000 at the rate of 1.95% If CRA deems payments to subcontractors to be payroll amounts, it may attract EHT if the total then exceeds $450,000.
The second item is Workers Safety and Insurance Board payments. Many Companies in “soft” businesses like professional services and sales are not WSIB registered. However, all businesses in Ontario are required to be registered and pay WSIB premiums. WSIB is doing audits on a regular basis and assessing premiums for the current year and up to 3 years prior, and charging interest on unpaid amounts.
If you think you may need some assistance with these matters, please contact
Robert McGaghran, CPA, CA Robert@sloangroup.ca
to review your specific situation.
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