Employee vs Independent Contractor

Some families who hire Nannies on a short-term basis, choose the contractor route, although our professional recommendation is to always hire a Nanny your employee because Canada Revenue Agency sees Nannies as employees. 


If you or the Nanny are ever audited by Canada Revenue Agency, you as the employer will be responsible for paying the employer and employee's portion of the Nanny's CPP and EI, taxes, interest and a penalty. 


Is your Nanny an Employee or an Independent Contractor?

In determining the nanny’s status as an employee or as an independent contractor, Canada Revenue Agency does the following tests:


1. Control: Do you determine the work to be done by the Nanny? Do you determine the Nanny's work hours? Do you review the work the Nanny has completed?


2. Tools & Equipment: Are you retaining the right of use over the tools and equipment that the Nanny uses for their work? Do you supply the necessary equipment for the Nanny to use to care for the children (e.g. high chair, crib, stroller) when the nanny is at work?


3. Financial Risk: Do you reimburse the Nanny for the costs of children's activities (e.g. entrance fee for the zoo, Science World or a play group)? Do you reimburse the Nanny for the costs of transportation during work hours?


4. Integration: Do you have a continuous relationship with the nanny?


If you answered “NO” to all of the above questions, your nanny is an Independent Contractor.  She must supply you with an invoice for their services and you pay them the amount on the invoice.


If you answered “YES” to any of the above questions, your nanny is deemed as your Employee and you are their Employer. This is true regardless of whether your nanny is a full-time, part-time, live-in, or live-out employee.


As an Employer, you are responsible for providing a contract of employment for your employee. You have the right to choose the nanny/worker, and set the terms and conditions of employment.


You are also responsible for making sure those terms and conditions meet the conditions required under the province’s Employment Standards Act.


Payroll requirements as an employer:

  • You must register for a business number with Canada Revenue Agency (CRA)
  • You must provide your nanny with a wage statement (also known as a pay stub) detailing the number of working hours, salary rate and other requirements
  • You must remit payroll withholding taxes to CRA. This includes the nanny's income tax, CPP (Canada Pension Plan), EI (Employment Insurance) and the employer's portion of CPP and EI
  • You must provide a T4 to your nanny at the end of each fiscal year and file your T4 summary to the CRA by the deadline. Should you file late, you will be penalized a late fee starting at $100 and up
  • You must provide a Record of Employment to the nanny when employment is concluded
  • Employers must keep payroll records including the Nanny’s name and date of birth, the date the employee started work, wage rate, hours worked each day, amount and type of benefits, gross and net wages, amount and purpose of each deduction, dates statutory holidays were taken, the amount of pay earned, dates of annual vacation, and the amount of vacation pay earned. These records must be kept at the employer's residence or a payroll company, for six years after the worker's employment ends.
  • You may have to register for Workers' Compensation coverage for the nanny

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