Worker Misclassification CRA Assessment Calculator
The CRA has reclassified your subcontractors as employees, or a former worker has filed a ruling request. Work out both sides of CPP and EI, the failure-to-deduct penalty, the interest, and the EHT and WSIB sitting on the same payments.
total exposure
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Per Worker, Per Year
| Component | Rate and Ceiling | Per Worker |
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The Full Assessment
| Item | Basis | Amount |
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Where You Stand and What Is Still Available
| Item | Position |
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The Classification Factors the CRA Will Weigh
| Factor | Points to Contractor | Points to Employee |
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Points That Decide This
What to Do Next
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Disclaimer: Where the CRA determines that a worker was an employee rather than a self-employed contractor, the payer is liable for the employee and employer portions of Canada Pension Plan contributions and Employment Insurance premiums that should have been withheld and remitted, together with penalties and interest. For 2026, CPP is 5.95% for each of employee and employer on pensionable earnings between the $3,500 basic exemption and the $74,600 Year’s Maximum Pensionable Earnings, to a maximum of $4,230.45 each, and the second additional contribution CPP2 is 4.00% for each on earnings between the YMPE and the $85,000 Year’s Additional Maximum Pensionable Earnings, to a maximum of $416 each. EI for 2026 is 1.63% on insurable earnings to the $68,900 Maximum Insurable Earnings, giving a maximum employee premium of $1,123.07, and the employer premium is 1.4 times the employee premium to a maximum of $1,572.30. The penalty for failing to deduct is 10% of the amount that should have been withheld, rising to 20% where the failure was made knowingly or through circumstances amounting to gross negligence, or on a second such failure in the same calendar year. Interest is modelled at the prescribed arrears rate of 8% compounded daily. CPP and EI assessments are not confined to the normal three-year reassessment period applicable to income tax. The Ontario Employer Health Tax is 1.95% on Ontario remuneration, with an exemption available to eligible private-sector employers whose payroll is below the prescribed threshold, and the exemption is shared among associated employers. WSIB premiums are assessed on insurable earnings at the rate for the employer’s classification and are administered separately from the CRA. A worker or payer may request a ruling on Form CPT1, and either party may appeal a decision. This page is general information, not tax advice, and classification is a question of fact determined on the whole relationship.
You Are Assessed for Both Sides
This is the part that shocks owners. The corporation is liable not only for the employer contributions it should have made but for the employee contributions it should have withheld. The worker has been paid in full and kept the money, and the payer owes both halves.
| Per Worker at $72,000 a Year | 2026 Amount |
|---|---|
| Employee CPP at 5.95% | $4,075 |
| Employer CPP at 5.95% | $4,075 |
| Employee EI at 1.63% | $1,123 |
| Employer EI at 1.4 times | $1,572 |
| Total per worker per year | $10,845 |
Six workers over three years is roughly $195,000 before penalty and interest. That is the arithmetic that turns a bookkeeping habit into an existential problem for a small corporation, and it is why these files need to be handled properly rather than argued about informally.
There Is No Three-Year Limit
Owners take comfort from the normal three-year reassessment period for income tax. It does not apply here. CPP and EI assessments are not confined to that window, so a long-standing arrangement can be opened up well beyond three years.
In practice the CRA usually works with the years under examination, but there is no statutory comfort in assuming it stops at three. The exposure grows with every year the arrangement continues, which is why the answer is always to fix it going forward first.
Slips Do Not Fix Classification
A corporation that issued T4A or T5018 slips is in a better position than one that issued nothing, but not because the slips solve the problem. They show the payments were reported rather than hidden, which matters a great deal to the penalty rate and to how the auditor reads the file.
Classification is decided on the substance of the relationship. A slip is a reporting document and it does not convert an employee into a contractor.
Where nothing was reported at all, the CRA is looking at two problems rather than one. The misclassification is the visible issue, and the failure to report payments raises a question about whether the deductions claimed for them can be supported. That is a separate and sometimes larger conversation.
The Provincial Layers Nobody Budgets For
The CRA assessment is not the whole bill. Two provincial obligations sit on exactly the same payments and are administered by different bodies that do not necessarily hear about each other quickly.
| Obligation | Rate | Administered By |
|---|---|---|
| Employer Health Tax | 1.95% on Ontario remuneration above the exemption | Ontario Ministry of Finance |
| WSIB premiums | Your rate group percentage on insurable earnings | WSIB |
WSIB is the one that hurts in construction and trucking, where rate groups can run well above three percent. A reclassification that turns six subcontractors into six employees creates a retroactive premium assessment on all of their earnings for the same period.
WSIB exposure is separate from the tax exposure and can exceed it in a high-rate group. It also carries its own clearance certificate consequences, which affects your ability to bid work. Please treat it as a parallel file rather than an afterthought.
A CPT1 From a Former Worker Is Different
Where a former subcontractor files a ruling request, the file is driven by someone with an incentive to be found an employee, usually because they want EI benefits. They will present the relationship in those terms and you will not see what they submitted.
The CRA rules on the specific worker and the specific period, and a finding of employment on one worker frequently leads to an examination of everyone paid the same way. One CPT1 is rarely a contained problem.
The Factors, and How the CRA Actually Weighs Them
No single factor decides it. The test looks at the whole relationship and at the parties’ shared intent where the conduct is consistent with it.
- Control. Who decides how, when and where the work is done. The strongest single factor in most findings.
- Tools and equipment. Who provides and maintains them, and who bears the cost of significant investment.
- Chance of profit and risk of loss. Whether the worker can make more by working efficiently or lose money on a job.
- Subcontracting and hiring helpers. Whether the worker can send someone else in their place.
- Integration. How central the worker is to your business and whether they have other clients.
- Intent. What both parties genuinely understood, evidenced by conduct rather than by a clause in an agreement.
A written contractor agreement helps only where the conduct matches it. A worker who has one client, uses your equipment, works your hours and cannot refuse a job is an employee whatever the agreement says. Where the conduct genuinely supports independence, the agreement becomes strong evidence of intent.
What to Do This Week
- Do not discuss the substance with the auditor before the position is reviewed
- Pull the contracts, invoices and any correspondence for every affected worker
- Assess whether a voluntary disclosure is still open, which it is not once contact has been made
- Fix the arrangement going forward, since exposure grows every month it continues
- Notify your WSIB position separately rather than waiting for it to surface
- Get representation before the proposal letter, not after the assessment
The single most valuable thing on that list is stopping the bleeding. An arrangement that is genuinely employment costs more every month it runs, and continuing it while arguing about the past is the worst of both positions.
What This Calculator Does Not Cover
- Whether your workers are actually employees, which is a factual determination
- Income tax the workers should have had withheld, which is usually credited against their own returns
- Employment standards exposure for vacation pay, holiday pay and termination
- Provinces other than Ontario
- GST/HST where the workers charged and you claimed input tax credits
- Director liability for the unremitted amounts, which attaches personally
Get representation before the proposal letter rather than after the assessment. Our CRA audit representation service covers the trust examination, the CPT1 response, the WSIB position and the appeal.
Frequently Asked Questions
Common questions on worker misclassification assessments.
Related Calculators and Guides
More tools for employers under review.
Get Representation Before the Proposal Letter
Send us the CRA correspondence, the contracts and the payment records. We will quantify the exposure properly, deal with the auditor, respond to the ruling request and handle the WSIB position in parallel.