Being an independent contractor in Canada means you are legally classified as self-employed, not an employee. While contractors often have more flexibility and tax write-offs, they also give up key employment rights — unless they’ve been misclassified.
Many workers are labelled “independent contractors” even though, in law, they function as employees. When that happens, the label does not override your legal rights, and you may still be owed severance pay and other compensation.
This guide explains how independent contractor status works in Canada, how it differs from employment, and what to do if you’ve been misclassified.
What Is an Independent Contractor in Canada?
An independent contractor is a self-employed individual who provides services to a business under a contract, rather than an employment relationship.
Unlike employees, independent contractors operate their own business and generally control how, when, and where the work is performed. Simply calling someone a contractor, however, does not make it legally true.
Common examples of independent contractors include:
- IT consultants
- Freelance designers or writers
- Truck drivers
- Real estate agents
- Gig workers (such as Uber or DoorDash drivers)
- Skilled trades and construction workers
How Independent Contractor Status Is Determined in Canada
Courts and the Canada Revenue Agency look at the real working relationship — not just the contract — to decide whether someone is truly an independent contractor.
A worker is more likely to be a contractor if they:
- Control how, when, and where the work is done
- Can hire subcontractors or assistants
- Provide their own tools or equipment
- Take on financial risk
- Invoice for services
- Work for multiple clients
If a company controls your schedule, supervises your work, or disciplines you, you may legally be an employee, even if your agreement says “independent contractor.”
💡 Misclassification is extremely common in Canada. If a company treats you like an employee but calls you a contractor, they may owe you full employment rights, including severance pay.
Misclassified Independent Contractors in Canada
Misclassification happens when a business labels someone an independent contractor but treats them like an employee in practice.
This issue is widespread across Canada, particularly in industries such as trucking, construction, sales, IT, healthcare, and gig-based work.
If you’ve been misclassified, you may be entitled to:
- Severance pay (often up to 24 months)
- Wrongful dismissal compensation
- Vacation and holiday pay
- Human rights protections
- Compensation for lost benefits
Independent Contractor vs Employee in Canada
Key differences at a glance:
| Topic | Independent Contractor | Employee |
|---|---|---|
| Control | High control over work | Employer controls work |
| Taxes | Handles own taxes & CPP | Employer deducts tax, CPP, EI |
| Benefits | No benefits | Eligible for benefits |
| Severance | None (unless misclassified) | Yes |
| Tools | Provides own tools | Employer provides |
| Financial risk | Contractor bears risk | Employer bears risk |
Tax Considerations for Independent Contractors in Canada
Independent contractors are responsible for managing their own taxes. In practical terms, this generally means:
- Reporting income as self-employment income
- Paying both the employee and employer portions of CPP
- Registering for GST/HST if annual revenue exceeds $30,000
- Keeping detailed records of income and expenses
What Can You Write Off as an Independent Contractor in Canada?
One advantage of contractor status is the ability to deduct legitimate business expenses.
Common write-offs include:
Home Office Expenses
- Rent or mortgage interest (proportionate)
- Utilities
- Internet
- Property taxes
- Home insurance
Vehicle Expenses
- Fuel
- Maintenance and repairs
- Insurance
- Lease payment
- Parking
Work-Related Costs
- Tools and equipment
- Software subscriptions
- Phone and data plans
- Professional fees
- Office supplies
- Marketing or advertising
Training and Development
- Courses
- Certifications
- Workshops
You can only deduct expenses that are reasonable and directly connected to earning business income.
Benefits and Risks of Being an Independent Contractor
Benefits
- Greater flexibility and control
- Ability to choose clients
- More tax deductions
- Higher earning potential in some industries
Risks
- No EI, vacation pay, or benefits
- No automatic severance if work ends
- Higher CPP contributions
- Greater financial risk
- Responsibility for managing taxes and expenses
Independent Contractor Rules by Province
Independent contractor laws are broadly similar across Canada, but important differences exist — especially around employment standards, termination rights, and how courts assess misclassification.
For province-specific guidance, see our detailed regional pages:
- Independent Contractor Ontario
- Independent Contractor Alberta
- Independent Contractor British Columbia
When to Talk to an Employment Lawyer
If you believe you’ve been misclassified, denied severance, or told you “can’t get severance because you’re a contractor,” get legal advice before signing anything.
Your company may owe you:
- Significant severance pay
- Proper employment classification
- Compensation for lost wages or benefits
📞 Call us at 1-855-821-5900, email help@employmentlawyer.ca, or use our online form for a consultation.