Quick Answer
When you hire a full-time employee for your Canadian e-commerce business, you must register for a payroll account with the CRA, deduct CPP, EI, and income tax from each paycheque, remit them to the CRA, and issue a T4 at year-end. Hiring a contractor is simpler — but misclassification is a serious CRA risk.
The day your e-commerce business needs a warehouse worker, a customer service rep, or a full-time assistant, you enter a new compliance world: Canadian payroll. Getting this wrong is expensive.
Employee vs. Independent Contractor: The CRA Test
The CRA uses a multi-factor test to determine whether someone is your employee or an independent contractor. Key factors:
- Control — Do you control how and when they work? (Employee signal)
- Tools — Do you provide their tools and equipment? (Employee signal)
- Financial risk — Can they profit or lose money independently? (Contractor signal)
- Integration — Is their work integral to your business operation? (Employee signal)
Employer Obligations for Employees
- Register for a payroll (RP) account with the CRA
- Deduct CPP contributions, EI premiums, and income tax from each pay
- Match CPP and EI employer contributions (1.4x employee EI)
- Remit payroll deductions by the 15th of the following month (small employers)
- Issue T4 slips by the last day of February each year
The Risk of Misclassifying Employees as Contractors
If the CRA determines your "contractor" is actually an employee, you owe back CPP, EI, and income tax for every pay period — plus interest and penalties. The worker's missed employer-side CPP and EI contributions become your liability. This is one of the most expensive payroll mistakes an e-commerce business can make.
MaxRefund Manages E-Commerce Payroll in Canada
We set up and run payroll for Canadian online sellers — CRA remittances, T4 slips, and Record of Employment all handled for you.
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