Employment Guide

This resource is a compilation of information for those considering employment as a physiotherapist and for those who are considering hiring a physiotherapist. The contents of this document are taken from the CRA and other websites, for your consideration but are not to be considered legal advice. The resources listed are not exhaustive but will assist you in the decision-making process around employment vs contracting services.

For the purposes of this Guide, the payer is the potential employer and the worker is the physiotherapist.

In Nova Scotia, there are typically two Practice Settings in which a Physiotherapist is employed:

1. Public - Where the employment activity occurs in the public sector and is inclusive of government and government institutions, such as hospitals, schools and universities and community.

2. Private - Where the employment activity occurs in the private sector or as a self-employed individual. The private sector is inclusive of privately owned facilities, organizations and businesses, third party insurers, self-employed private practitioners and owners of a business.

Employment may be full time (30 hours or more/week), part time (less than 30/week) temporary, or casual.

Within those two settings there are two employment categories for a Physiotherapist.

1. You are an employee when:

• Work activity occurs in the public sector. The public sector is inclusive of government and government institutions, such as hospitals, schools and universities and community; 

• Work activity occurs in the private sector in a physiotherapist owned practice or corporation. 

2. You are a self-employed contractor when:

• Work activity occurs in the private sector in non-physiotherapist owned practice.

• Work is through contracted services or as a consultant.

• Work meets the criteria for contractor under CRA (Employee or Self-Employed? (RC4110))

The facts of the working relationship as a whole is what determines the employment status. In an employer-employee relationship, the payer is considered an employer and the worker an employee. Workers and payers can set up their affairs as they see fit; however, the employment status they have chosen must be reflected in the actual terms and conditions of the working relationship.

Employers are responsible for deducting Canada Pension Plan (CPP) contributions, EI premiums, and income tax from remuneration or other amounts they pay to their employees.

If the worker is a self-employed individual, he or she must operate a business, be responsible for their own deductions and remittance, and be engaged in a business relationship with the payer.

If a worker or payer is not sure of the worker’s employment status, either party can request a ruling to have the status evaluated. A ruling indicates whether a worker is an employee or is self-employed, and whether that worker’s employment is pensionable or insurable. (If you have a payroll program account and are registered on My Business Account, you can use the “Request a CPP/EI ruling” service in My Business Account at canada.ca/mycra-business-account.)

If you are self- employed, it is important to do what you can to protect your independent contractor status so that you are not in a position later to have to pay back money to CRA. You can help ensure that your work as a contractor is independent of your employer by making sure it passes the CRA Four Point Test.

The four-point test is the standard that the Canada Revenue Agency uses to determine which type of relationship exists. Their document Employee or Self-Employed? (RC4110) “sets out a method that should, in most cases, allow payers and workers to determine the nature of their relationship.” The method is based on four key points; control, ownership of tools, the chance of profit/risk of loss, and integration.

Let’s look at each of these from the point of view of the contractor/ worker.

Four Point Test

1. Control Independent contractor vs employee:

The primary issue here is who’s running the ship. Does the employer have the right to hire or fire, determine the wage or salary to be paid, and decide on the time, place, and manner in which the work is to be done? If so an employer-employee relationship exists. Note that “if the employer does not directly control the worker's activities, but has the right to do so, the notion of control still exists.”

On the other hand, in a business relationship, the worker decides how the work will be performed. As a contractor, then, it’s important that you maintain the right to decide where, when and how the work will be done. If it comes to the test, and you can show that you were the person responsible for planning the work to be done, choosing the hours of work, and/or setting the standards to be met, for example, you’ll have a much better chance of being deemed a contractor rather than an employee.

2. Ownership of tools Independent contractor vs employee:

An obvious point, one would think; a contractor would supply his own tools. However, because it’s customary for employees to supply their own tools in some trades (think of painters and garage mechanics, for example), the cost of using the tools is a much better indication, according to the Canada Revenue Agency. “When workers purchase or rent equipment or large tools that require a major investment and costly maintenance, it usually indicates that they are self-employed individuals, because they may incur losses when replacing or repairing their equipment.”

Another example would be a home-based IT worker - if he is using his own desktop/laptop computer, mobile devices, etc. this would be indicative of self-employment.

3. Chance of profit/risk of loss Independent contractor vs employee:

In this case, whether you’re involved in an employer-employee relationship or a business relationship depends on your financial involvement.

• Do you have a chance of making a profit?

• Do you run the risk of incurring losses due to bad debts, damage to equipment or materials, or delays?

• Do you cover the operating costs?

If these three things are true, you’re a contractor, not an employee.

4. Integration Independent contractor vs employee:

The Canada Revenue Agency states, “Where the worker integrates the payer's activities to his own commercial activities, a business relationship probably exists... Where the worker integrates his activities to the commercial activities of the payer, an employer-employee relationship probably exists.” The CRA's Employee or Self-Employed? seems to treat this point as a summary category.

One obvious way of “proving” integration to your own commercial activities is to have multiple clients. The contractor who only has one client makes it too easy for others to perceive his relationship with that client as an employer- employee one.(Note too, that having a single client puts your small business in danger of being declared a personal services corporation by the CRA. See the section Does Being Incorporated Give You Contractor Status? below.)

Also, as a contractor, to protect yourself, you should always establish your relationship with each employer in a contract, focusing on the first three points of this four-point test. Having a carefully crafted written agreement setting out the intentions of the parties may offer some protection if one of the parties subsequently changes his or her mind and argues that the relationship is not what it was purported to be. It will also help stave off being recategorized by the Canada Revenue Agency.

Some employers seem to view incorporation as “proof” of independent contractor status – to the point that they will only do business with incorporated contractors. While being incorporated could conceivably be one point of evidence showing an arm’s length relationship between a contractor and employer, it isn’t proof of a business relationship in itself. (See Should You Incorporate Your Small Business? for the advantages and disadvantages of incorporation and How to Incorporate Your Business in Canada if you decide to go this route.)

If you are incorporated but working exclusively for a single employer and performing activities that an employee would normally perform you risk being considered a Personal Service Corporation and losing the ability to claim the Small Business Deduction and other standard business deductions.

As a contractor, it behooves you to take what measures you can to ensure that your status as an independent contractor in Canada is clearly defined because of the serious effect having the CRA declare you an employee could have on your income taxes. If you have taken measures and are still uncertain about whether you’re actually an employee or an independent contractor, discuss the issue with your accountant and/or contact the Canada Revenue Agency.

IF a business hires a contractor who is later deemed to be an employee, both parties lose big:

• The employer will have to remit unpaid taxes and may be subject to penalties and/or interest.

• CPP and EI premiums will all have to be paid.

• Business expense deductions claimed by the "contractor" will have to be repaid (this can have catastrophic financial repercussions in cases where a "contractor" has several prior years of deductions disallowed by the CRA).

Self Employed workers are responsible for running their own business. That means advertising their own services; maintaining, storing and destroying their client records in adherence to PHIA; having a succession plan in place for dealing with their records in the event of the need to close or sell their practice; being responsible for your own payroll remittance and benefits. You are not eligible for company benefits or profit sharing with an employer.

Craft your contract carefully and seek legal advice before signing any contract.

Clinic Checklist

Employed or Self Employed Checklist

Management of Health Information Checklist

Record Keeping Checklist

Sample Contract