Frequently Asked Questions
What are the mandatory employer costs in Ontario for employees?
In Ontario and across Canada, employers must pay CPP (5.95% up to the annual maximum), EI (1.66% for 2026), and WSIB (varies by industry, typically 0.5-3%). Employers in Ontario with payroll over $490,000 also pay Employer Health Tax (EHT) at 1.95%. Benefits, vacation pay, and overhead are additional discretionary costs that vary by employer.
Are contractors really cheaper than employees in the GTA?
Not always. While contractors don't require CPP, EI, WSIB, or benefits, they typically charge 20-50% higher rates to cover their own overhead and taxes. For short-term projects in Mississauga or Toronto, contractors may be cost-effective. For long-term roles, employees often offer better value and commitment. A CPA can help you model both scenarios with your specific numbers.
What is the CRA test for contractor vs employee classification?
The CRA uses a multi-factor test including control (who directs the work), ownership of tools, chance of profit/risk of loss, integration into the business, and intention of the parties. Misclassifying an employee as a contractor can result in retroactive payroll remittances, penalties, and interest. Ontario businesses should consult a CPA before engaging contractors to ensure compliance.
Can I save on taxes by hiring contractors instead of employees?
Possibly, but only if they are legitimately contractors under CRA rules. You save on CPP, EI, WSIB, and benefits, but you lose some control over how the work is done. If the CRA reclassifies your contractors as employees during an audit, you'll owe all the payroll taxes you should have remitted, plus penalties. Toronto and Mississauga CPAs often see this in construction, IT, and consulting industries.
What hidden costs come with hiring employees in Ontario?
Beyond salary, Ontario employers face: CPP (5.95%), EI (1.66%), WSIB (industry-specific), vacation pay (minimum 4% after 1 year), statutory holiday pay, overtime premiums, termination/severance obligations under the Employment Standards Act, benefits (if offered), EHT (if payroll exceeds $490k), and overhead (desk, equipment, training). A GTA CPA can help you budget the true cost of a new hire.