Healthcare Payroll Guide · Ontario
Payroll Services for Healthcare
The complete payroll guide for Ontario healthcare practices. Covers professional corporation payments for doctors and dentists, locum and associate classification, on-call pay, shift premiums, overtime exemptions, nurse and PSW payroll, benefits administration, maternity and parental leave, WSIB, multi-clinic tracking and the payroll errors that trigger CRA audits. From $125/month. 900+ five-star reviews.
Why Healthcare Payroll Is More Complex Than Other Industries
Healthcare payroll combines the complexity of professional corporation structures with the compliance demands of a highly regulated workforce. A medical clinic may have the owner physician paid through a professional corporation (not payroll), an associate doctor paid as a percentage of billings through their own PC (not payroll), a locum physician who is an independent contractor (not payroll), nurses and PSWs who are employees (payroll with overtime, shift premiums and benefits), and reception staff on standard payroll. Five categories of workers, three different payment structures and two different CRA reporting obligations under one roof.
A single misclassification of a locum physician as an independent contractor when CRA considers them an employee can produce a $30,000 to $80,000 reassessment for unremitted CPP, EI and income tax. We handle payroll for medical clinics, dental practices, physiotherapy clinics, chiropractic offices, optometry clinics, veterinary practices and multi-disciplinary health centres across Ontario. For a general overview of our payroll services, see our payroll services page.
Worker Classification in Healthcare: Who Goes on Payroll and Who Does Not
| Worker Type | Payroll? | CPP/EI/Tax | How They Are Paid |
|---|---|---|---|
| Owner physician/dentist (through professional corporation) | Yes (salary/dividends from own PC) | CPP and tax on salary. No EI (shareholder-employee with 50%+ ownership). No deductions on dividends. | Owner pays themselves a salary and/or dividends from their professional corporation. Optimal split calculated annually by CPA. Salary creates RRSP room. Dividends avoid CPP/EI but do not create RRSP room. |
| Associate doctor/dentist (through their own PC) | No. Not your payroll. | No deductions by the clinic. The associate's PC handles their own payroll internally. | The associate's professional corporation invoices your clinic for a percentage of their billings (typically 30% to 45% of production for dentists, 25% to 35% for physicians). You pay the invoice. No T4 issued. No payroll deductions. |
| Locum physician (short-term coverage) | Depends on relationship | If employee: CPP + EI + tax. If contractor: no deductions. | If the locum sets their own schedule, has multiple clients and invoices through a corporation, they are a contractor. If the clinic sets the schedule, provides the patients and the locum works exclusively for you during the engagement, CRA may classify them as an employee. |
| Registered nurses (RN), registered practical nurses (RPN) | Yes. Employee payroll. | CPP + EI + tax deducted. Shift premiums and overtime included. | Hourly rate + shift premiums (evening, night, weekend) + overtime (1.5x after 44 hours). T4 issued. Benefits typically provided (extended health, dental, group insurance). |
| Personal support workers (PSW) | Yes. Employee payroll. | CPP + EI + tax deducted. | Hourly rate. May include shift premiums for evenings and weekends. Variable hours common. Vacation pay at 4% on each cheque. |
| Dental hygienists | Yes. Employee payroll. | CPP + EI + tax deducted. | Hourly rate ($38 to $55/hour in Ontario). Some clinics pay per patient or per day. Must be on payroll regardless of pay structure. Own malpractice insurance required. Dentist Services → |
| Physiotherapists, chiropractors, optometrists (associates) | Depends on structure | If employee: CPP + EI + tax. If through own PC: no deductions. | If the practitioner has their own professional corporation and invoices the clinic for a percentage of billings, they are not on your payroll. If they are paid hourly or salary by the clinic without their own PC, they are employees on payroll. |
| Reception, admin, office manager | Yes. Employee payroll. | CPP + EI + tax deducted. | Salary or hourly. Standard payroll. T4 issued. Vacation pay at 4% or 6%. |
The Locum Classification Trap: Many clinics treat locum physicians as independent contractors and pay them without payroll deductions. CRA applies the same two-factor test used in every industry: does the clinic control when and where the locum works, does the clinic provide the patients, equipment and space, and does the locum work exclusively for this clinic during the engagement? If the answers are yes, CRA reclassifies the locum as an employee and the clinic owes all unremitted CPP, EI and income tax plus employer contributions and penalties for every year under review. A locum earning $150,000 over 2 years who is reclassified costs the clinic $30,000 to $50,000 in reassessment.
Shift Premiums, On-Call Pay and Overtime in Healthcare
| Pay Component | How It Works | Payroll Treatment |
|---|---|---|
| Evening shift premium | Additional hourly rate for shifts between 3 PM and 11 PM. Typically $1.50 to $4.00/hour above base rate depending on the employer and collective agreement. | Added to gross pay. Subject to CPP, EI and income tax. Included in the regular rate for overtime calculation purposes. |
| Night shift premium | Additional hourly rate for shifts between 11 PM and 7 AM. Typically $2.00 to $5.00/hour above base rate. | Same as evening premium. Added to gross pay. Subject to all deductions. Included in regular rate for overtime. |
| Weekend premium | Additional hourly rate for Saturday and Sunday shifts. Typically $1.00 to $3.50/hour above base rate. | Same treatment. Added to gross pay. All deductions apply. |
| On-call pay (not called in) | The employee is available to be called but is not actively working. Typically a flat amount per on-call shift ($50 to $150) or a reduced hourly rate ($5 to $15/hour). | Taxable. Subject to CPP, EI and income tax. On-call hours where the employee is free to do as they wish (just needs to be reachable) are generally not counted as hours worked for overtime purposes. |
| On-call pay (called in) | The employee is called in and works. Paid at regular rate or premium rate depending on the agreement. Minimum 3 hours of pay for each call-in under the ESA. | Taxable. All deductions. Hours worked count toward the 44-hour weekly overtime threshold. The 3-hour minimum reporting pay under the ESA applies even if the employee works only 30 minutes. |
| Overtime (after 44 hours/week) | 1.5x the regular rate after 44 hours in a work week. The regular rate includes base pay plus shift premiums. Ontario healthcare professionals (doctors, dentists, chiropractors) are exempt from ESA overtime provisions. Nurses, PSWs and admin staff are NOT exempt. | Overtime pay subject to all deductions. Blended rate calculation required when the employee earns different rates across the week (day shift vs. night shift). |
Overtime Exemption for Healthcare Professionals: Doctors, dentists, chiropractors, optometrists and other regulated healthcare professionals are exempt from the ESA overtime and hours-of-work provisions. However, nurses (RN, RPN), PSWs, dental assistants, dental hygienists, physiotherapy assistants, reception staff and all non-regulated support workers are NOT exempt. They are entitled to overtime at 1.5x after 44 hours. Many clinics assume all healthcare workers are exempt. They are not. Only the regulated professionals are exempt.
Benefits Administration for Healthcare Practices
| Benefit | Taxable on T4? | Payroll Treatment |
|---|---|---|
| Employer-paid extended health plan (group benefits) | Not taxable (Ontario) | Employer premiums for private health services plans (PHSP) are not a taxable benefit to the employee in Ontario. The premiums are a deductible business expense for the corporation. Not included on the T4. |
| Employer-paid dental plan | Not taxable (Ontario) | Same as extended health. Employer dental plan premiums are not a taxable benefit in Ontario. Deductible for the corporation. |
| Employer-paid group life insurance (up to $25,000) | Not taxable up to $25,000 | Group term life insurance premiums paid by the employer are not taxable if the coverage is $25,000 or less. Coverage above $25,000: the premium on the excess is a taxable benefit on the T4. |
| Employer-paid short-term disability (STD) | Premiums: not taxable. Benefits received: taxable if employer-paid premiums. | If the employer pays the STD premium, the benefit payments received by the employee are taxable income and must be included on a T4A. If the employee pays the premium, benefits are not taxable. |
| Employer-paid long-term disability (LTD) | Same as STD | Premiums not taxable. Benefits taxable if employer-paid. Many healthcare practices structure LTD as employee-paid to keep benefits tax-free when received. |
| Uniform and scrub allowance | Not taxable (if required for work) | If the employer requires specific uniforms or scrubs and provides them or reimburses the cost, this is generally not a taxable benefit. Cash clothing allowances without receipts may be taxable. |
| Parking (employer-provided at the clinic) | Taxable benefit | If the employer provides free parking at the clinic and the parking has a fair market value, it is a taxable benefit on the T4. Exception: parking at a location where parking is generally free (e.g. the clinic owns the lot and does not charge patients) may not have a determinable FMV. |
| Professional development and CE credits | Not taxable | Employer-paid continuing education, conference fees and professional development courses related to the employee's duties are not a taxable benefit. Deductible expense for the corporation. |
Maternity and Parental Leave: Healthcare-Specific Considerations
Healthcare practices have a higher rate of maternity and parental leave claims than most industries due to the demographics of the workforce (nursing, dental hygiene and PSW roles are predominantly female). Handling the leave correctly avoids ESA violations and CRA payroll errors.
| Leave Type | Duration | Payroll Obligations |
|---|---|---|
| Pregnancy leave | Up to 17 weeks (unpaid under ESA) | ROE filed within 5 days of last day worked. Reason Code: M (Maternity). Employer can provide a top-up to EI benefits but is not required to. If top-up is provided, it is taxable and subject to CPP, EI and tax deductions. |
| Parental leave (birth parent) | Up to 61 weeks (if no pregnancy leave taken) or 63 weeks (standard parental after pregnancy leave) | ROE filed (if not already filed for pregnancy leave). EI benefits paid by Service Canada. Employer top-up (if provided) is taxable. |
| Parental leave (non-birth parent) | Up to 63 weeks | Same ROE and top-up treatment as birth parent parental leave. |
| Benefits during leave | ESA requires the employer to continue benefits (group health, dental, life, LTD) during pregnancy and parental leave if the employee pays their share of the premiums. | Track benefit premium payments during the leave. If the employee does not pay their share, the employer can discontinue coverage but must reinstate on return. |
| Return to work | The employee is entitled to return to the same position or a comparable position with the same pay and benefits. | Reinstate on payroll at the same rate. Seniority and service continue during the leave. Do not replace the employee permanently during the leave without ESA advice. |
Healthcare Payroll from $125/Month. T4s and ROEs Included.
Professional corporation payments, shift premiums, overtime, benefits, maternity leave. We handle it all.
What Our Healthcare Payroll Service Includes
| Service | What We Do |
|---|---|
| Pay run processing (biweekly or semi-monthly) | Every pay run calculated with correct CPP, EI and income tax. Shift premiums (evening, night, weekend) tracked separately. Overtime calculated at 1.5x blended rate after 44 hours. Variable hours from scheduling software or timesheets. |
| Owner physician/dentist salary-dividend optimization | Salary and dividend split calculated annually for the owner's professional corporation to minimize combined corporate + personal tax, maximize RRSP room and optimize CPP contributions. Payroll set up for the salary component with correct deductions. |
| Associate practitioner payment tracking | Associate invoices from their professional corporations tracked and paid. No payroll deductions (these are business expenses, not employment income). Production percentages reconciled against billings. Payments reported at year-end as business expenses, not T4s. |
| Worker classification review | Every locum, associate and contractor relationship reviewed at engagement. Two-factor test documented. Contracts, billing arrangements and work patterns assessed. Classification defensible against CRA audit. |
| Shift premium and on-call tracking | Evening, night and weekend premiums configured in the payroll system. On-call pay (standby and call-in) tracked with correct CPP/EI treatment. Blended rate calculated for overtime on mixed-shift weeks. |
| Benefits administration support | Group benefit premiums tracked. Taxable vs. non-taxable benefits classified on T4s. STD/LTD premium structures reviewed for optimal tax treatment. Benefit continuation during maternity and parental leave monitored. |
| CRA remittances | CPP, EI and income tax remitted by the deadline. Monthly, quarterly or accelerated frequency. Penalties for late remittance: 3% to 10%. We never miss a deadline. |
| ROE filing | ROE filed within 5 days of every separation, layoff or leave of absence. Maternity leave ROEs coded correctly (Reason M). Insurable hours and earnings calculated. Includes employees returning from leave. |
| T4 and T4 Summary preparation | All T4s prepared and filed by February 28. Shift premiums, on-call pay, taxable benefits (parking, group life above $25,000) and employer top-ups correctly reported. T4 Summary reconciled to total remittances. |
| Multi-clinic payroll | If you operate multiple clinic locations, payroll is managed centrally with hours and costs allocated by location. Separate cost centre reporting for each clinic while running a single consolidated payroll. |
Worked Example: Biweekly Payroll for a Medical Clinic (10 Staff)
| Line Item | Amount | Notes |
|---|---|---|
| Owner physician salary (from professional corporation) | $6,154 | $160,000 annual salary / 26 pay periods. CPP deducted. No EI (50%+ shareholder). Income tax withheld. |
| 2 RNs (regular hours + shift premiums) | $6,240 | RN 1: 80 hours x $42/hour = $3,360 + evening premium $240. RN 2: 80 hours x $40/hour = $3,200 + night premium $360. Overtime: RN 2 worked 48 hours in week 1 (4 OT hours x $60 = $240). |
| 2 PSWs | $3,680 | PSW 1: 80 hours x $24/hour = $1,920. PSW 2: 80 hours x $22/hour = $1,760. No shift premiums this period. |
| 1 dental hygienist | $3,520 | 80 hours x $44/hour = $3,520. Standard schedule. |
| 2 reception/admin staff | $3,360 | Admin 1: 80 hours x $22/hour = $1,760. Admin 2: 80 hours x $20/hour = $1,600. |
| On-call pay (1 RN, 4 on-call shifts) | $400 | $100/shift x 4 shifts. Not called in. Taxable. CPP and EI deducted. Not counted as hours worked for overtime. |
| Total gross payroll | $23,354 | Owner salary + 7 staff employees + on-call. |
| Employee CPP deductions (total) | $1,296 | 5.95% on pensionable earnings above basic exemption (prorated biweekly). Owner CPP included. |
| Employee EI deductions (total, excl. owner) | $282 | 1.64% on insurable earnings. Owner excluded (50%+ shareholder). |
| Employee income tax withheld (total) | $3,840 | Federal + Ontario based on each employee's TD1 and earnings including shift premiums and on-call. |
| Employer CPP (1:1 match) | $1,296 | Employer matches employee CPP. Includes the employer share on the owner's salary. |
| Employer EI (1.4x, excl. owner) | $395 | 1.4x the employee EI amount. Owner excluded. |
| Vacation pay accrued (4%) | $688 | 4% of $17,200 (staff gross, excluding owner who typically does not accrue vacation pay through payroll). |
| Total CRA remittance (this pay period) | $7,109 | Employee CPP + EI + tax ($5,418) + Employer CPP + EI ($1,691). Due by the 15th of the following month. |
Associate Payments Are Not Included Above: This clinic may also pay $8,000 to $15,000/biweekly to associate physicians and dentists through their professional corporations. Those payments are business expenses paid on invoices, not payroll. No CPP, EI or income tax is deducted. The associate's PC manages their own internal payroll. The clinic does not issue a T4 for associate payments.
10 Common Payroll Errors Healthcare Practices Make
| # | Error | Consequence |
|---|---|---|
| 1 | Treating locum physicians as independent contractors when CRA considers them employees | CRA reclassifies as employee. Clinic owes all unremitted CPP, EI, income tax, employer contributions and penalties. $150,000 locum over 2 years: $30,000 to $50,000 reassessment. |
| 2 | Not deducting EI for owner-physicians who own less than 50% of the corporation | EI exemption applies only if the shareholder-employee controls 50% or more of voting shares. A physician who owns 40% of a group practice corporation must have EI deducted. CRA reassesses for the missed EI. |
| 3 | Paying dental hygienists or nurses as independent contractors | Dental hygienists and nurses who work at your clinic on your schedule using your equipment are employees. Period. CRA reclassification results in reassessment for CPP, EI, income tax and penalties for all years. |
| 4 | Assuming all healthcare workers are exempt from overtime | Only regulated professionals (doctors, dentists, chiropractors, optometrists) are exempt. Nurses, PSWs, hygienists, assistants and admin are entitled to overtime at 1.5x after 44 hours. Not paying overtime is an ESA violation. |
| 5 | Not including shift premiums in the overtime rate calculation | The regular rate for overtime includes base pay plus shift premiums. If an RN earns $42/hour base plus $3/hour night premium, the overtime rate is ($45 x 1.5) = $67.50, not ($42 x 1.5) = $63. Underpaying overtime triggers ESA complaints. |
| 6 | Not tracking on-call vs. call-in hours separately | On-call (standby, not working) is paid but generally not counted as hours worked for overtime. Call-in (actually working) counts toward the 44-hour overtime threshold. Mixing them inflates or understates overtime. Payroll Services → |
| 7 | Discontinuing benefits during maternity leave without ESA compliance | ESA requires benefits to continue during pregnancy and parental leave if the employee pays their share. Discontinuing coverage without the employee's consent is an ESA violation with reinstatement and damages. |
| 8 | Reporting employer-paid health plan premiums as taxable benefits | Private health services plans (extended health, dental) paid by the employer are NOT taxable benefits in Ontario. Including them on the T4 as a taxable benefit causes the employee to overpay income tax and CPP. |
| 9 | Not filing ROE correctly for maternity leave | ROE must use Reason Code M (Maternity). Incorrect reason codes delay the employee's EI maternity benefits. Last day worked, insurable hours and earnings must be calculated correctly. |
| 10 | Missing CRA remittance deadlines | Penalties: 3% (1-3 days late), 5% (4-5 days), 7% (6-7 days), 10% (7+ days or repeated). On a $7,000 biweekly remittance, a 7-day delay costs $490. Repeated late filing triggers accelerated remitter status. |
Healthcare Payroll Setup Checklist
- Register for a CRA payroll account (RP program account) if not already registered
- Collect TD1 (federal) and TD1-ON (Ontario) from every employee before the first pay period
- Document worker classification for every practitioner: employee (payroll) vs. associate through own PC (business expense) vs. locum (contractor vs. employee assessment)
- Configure payroll software with shift premium categories: evening, night, weekend, on-call standby, call-in
- Set up overtime calculation at 1.5x blended rate after 44 hours (for non-exempt staff only)
- Configure owner-physician payroll: CPP deducted, EI exempt (if 50%+ shareholder), income tax withheld on salary component
- Set up group benefit tracking: extended health (non-taxable), dental (non-taxable), group life (taxable above $25,000), STD/LTD (premium structure determines taxability)
- Configure vacation pay accrual at 4% (or 6% for 5+ year employees) for all staff
- Establish CRA remittance schedule (monthly, quarterly or accelerated based on annual deductions)
- Set up ROE electronic filing through Service Canada for separations and maternity/parental leave
- If multi-clinic, configure cost centre reporting by location with consolidated payroll processing
- Set up maternity/parental leave tracking: benefit continuation, employee premium payments, return-to-work date monitoring
Need Healthcare Payroll Set Up Correctly? From $125/Month.
Shift premiums, overtime, benefits, maternity leave, T4s, ROEs. We handle every pay run.
CRA Payroll Audits for Healthcare Practices
| CRA Focus Area | What CRA Reviews | How We Prevent Issues |
|---|---|---|
| Locum and associate classification | CRA reviews whether locums and associates classified as contractors should be employees. Control test, economic dependence test and integration test applied. OHIP billings cross-referenced with reported income. | Every locum and associate relationship documented with two-factor analysis at engagement. Contracts, invoicing records, multi-client evidence and PC registrations maintained. Classification defensible. |
| EI exemption for shareholder-employees | CRA verifies that physicians and dentists claiming the EI exemption actually own 50% or more of the voting shares. Group practice corporations where no single physician owns 50% do not qualify for the exemption. | Share register reviewed annually. EI exemption applied only where the shareholder controls 50%+ of voting shares. If ownership is below 50%, EI is deducted on all insurable earnings. |
| Taxable benefits | CRA reviews T4s for missing taxable benefits: parking, group life above $25,000, employer-paid LTD/STD where benefits would be taxable, personal use of clinic vehicle. Understated T4 amounts result in reassessment. | Every benefit classified at setup: taxable or non-taxable. Parking FMV calculated. Group life coverage verified against $25,000 threshold. STD/LTD premium payer structure documented. T4s include all taxable amounts. |
| Overtime compliance | CRA does not directly audit overtime (that is Ministry of Labour), but understated gross pay from unpaid overtime reduces CPP and EI. CRA cross-references hours against pay. If 50 hours are reported but only 44 hours of pay appear, the missing 6 hours of overtime are unreported pensionable earnings. | Overtime tracked on every pay run. Shift premiums included in the blended overtime rate. All hours and premiums reconciled to gross pay. No gap between reported hours and compensated hours. |
Frequently Asked Questions: Payroll for Healthcare Practices
How should a physician pay themselves from their professional corporation?
A combination of salary and dividends optimized for the physician's personal tax bracket, RRSP room, CPP goals and spousal income. Salary creates RRSP room and CPP contributions. Dividends avoid CPP/EI. We calculate the optimal split annually. Most physicians use 55% to 65% salary and 35% to 45% dividends, adjusted based on total corporate income and personal needs.
Are associate doctors and dentists on my payroll?
Not if they practice through their own professional corporation. The associate's PC invoices your clinic for a percentage of billings. You pay the invoice as a business expense. No T4, no payroll deductions. If the associate does not have their own PC and is paid directly by salary or hourly, they are an employee on your payroll. Dentist Services →
Are locum physicians employees or contractors?
Depends on the relationship. If the locum sets their own schedule, has multiple clients and invoices through a corporation, they are likely a contractor. If the clinic sets the schedule, provides the patients and the locum works exclusively for you, CRA may classify them as an employee. We assess every locum relationship at engagement and document the classification.
Do nurses get overtime pay?
Yes. Registered nurses (RN), registered practical nurses (RPN) and personal support workers (PSW) are entitled to overtime at 1.5x the regular rate after 44 hours per week. The regular rate includes base pay plus shift premiums. Only regulated healthcare professionals (doctors, dentists, chiropractors, optometrists) are exempt from ESA overtime provisions.
Are employer-paid health benefits taxable?
Extended health and dental plan premiums paid by the employer are NOT taxable benefits in Ontario. Group life insurance premiums are not taxable if coverage is $25,000 or less. STD/LTD: premiums are not taxable, but if the employer pays the premium, benefits received by the employee are taxable. Many practices structure LTD as employee-paid to keep benefits tax-free.
How does maternity leave payroll work?
File an ROE within 5 days of last day worked (Reason Code M). The employee receives EI maternity benefits from Service Canada. The employer can provide a top-up (taxable, subject to CPP/EI/tax). ESA requires benefits to continue during the leave if the employee pays their share of premiums. The employee returns to the same or comparable position.
Does the EI exemption apply to all physicians?
The EI exemption applies only to shareholder-employees who own 50% or more of the voting shares of the corporation. A physician who owns 40% of a group practice corporation does not qualify. EI must be deducted on all insurable earnings. We verify share ownership annually before applying the exemption. Payroll Services →
What triggers a CRA payroll audit for healthcare?
Locum and associate misclassification, EI exemption claimed without 50%+ share ownership, missing taxable benefits on T4s, OHIP billing cross-referencing against reported employment income, late or missing remittances and T4 amounts not matching remittance totals.
How much does healthcare payroll cost?
From $125/month for the first employee, $75/month for each additional employee. Includes every pay run, shift premium tracking, overtime calculation, benefits administration support, CPP/EI/tax remittances, T4 preparation and ROE filing. Owner salary-dividend optimization included. Know Your Exact Fee →
Can you handle multi-clinic payroll?
Yes. We manage payroll centrally across multiple clinic locations with cost centre reporting by site. Each location's labour costs are tracked separately while running a single consolidated payroll with one CRA remittance. T4s issued from the parent corporation. Hours and costs allocated by clinic for management reporting.
Stop Risking CRA Reclassification. Let a CPA Handle Healthcare Payroll.
Professional corporation payments, locum classification, shift premiums, overtime, benefits, maternity leave, T4s, ROEs. From $125/month. 900+ five-star reviews.
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