Temp Risk: Why you’re treated as an employee when you temp, even if you’d rather be paid as a contractor

Some temps prefer to be paid as independent contractors so they can receive full payment for their shift and “do their own taxes.” On the surface, that can feel simpler. You receive the full amount up front and decide how to handle taxes later.

The issue is this: worker status is not determined by preference. In Canada, whether you are an employee or an independent contractor is determined by law, based on the real facts of how the work is performed. If the relationship looks like employment, the CRA treats it as employment, regardless of what the worker or the clinic would prefer.

That distinction matters because being paid as a contractor when the work is actually employment creates real financial and legal risk for temps and clinics both. We'll cover that temp risk and proper compliance below.

Worker status is defined by law, not choice

Under Canadian tax law, you cannot opt into contractor status just because you want to be paid that way. The CRA looks at the actual working relationship to determine whether someone is an employee or a person in business on their own account.

The CRA considers several factors together, not just one. When those factors point to employment, calling the worker a “contractor” does not change the outcome.

In temp work in the dental industry, many of these factors point strongly toward employment.

Control over the work

If the clinic sets the shift time, location, and expectations, that indicates employment. Temps cannot decide to show up on a different day or at a different time, work overnight when the clinic is closed, decide which patient they'll see, or change how the work is performed to suit personal preferences. That level of control is a hallmark of employment.

Tools and equipment

Independent contractors typically provide and maintain their own tools and equipment. In dental work, temps do not bring their own chair, X-ray machine, sterilization equipment, or supplies. The clinic provides everything required to do the work. This strongly points to employment.

Financial risk

Contractors assume business risk. For example, if a contractor performs work and the end customer does not pay, the contractor may not get paid either.

Temps do not absorb this risk.

If a patient does not pay the clinic, the temp is almost always still paid for their shift. The temp does not refund pay, does not discount their rate, and does not absorb losses related to patient billing or collections. The clinic bears that risk, not the temp.

When you are paid regardless of whether the clinic ultimately gets paid, you are not operating a business. You are being paid as a worker. That is a core indicator of employment.

Ability to subcontract or send a replacement

True contractors can usually subcontract work or send someone else to complete it. Temps cannot send another temp in their place to cover a scheduled shift. The clinic hires a specific individual to fill a specific role. That again points to employment.

Taken together, these factors are why temp work is often treated as employment under Canadian law, even if both sides would prefer contractor treatment.

You still pay income tax as a contractor, but the risk shifts to you

It’s important to be clear: contractors still pay income tax. The difference is how and when it’s paid.

As a contractor, no tax is withheld when you are paid. You are responsible for setting money aside and paying what you owe when you file your return. With irregular or short-term temp work, it’s easy to underestimate how much to set aside, especially as income adds up across multiple clinics.

If you underpay during the year, the CRA can charge interest. In some cases, the CRA may also require tax instalments, meaning you are expected to prepay tax throughout the year rather than settle up once at filing time.

Being paid as an employee spreads tax payments out automatically and reduces the risk of a large, unexpected bill.

CPP costs are often much higher than expected

When you are an employee, CPP contributions are split between you and the employer. When you are treated as self-employed, you generally pay both portions yourself.

Many temps focus on income tax when thinking about contractor pay and underestimate the CPP impact. Paying both sides of CPP can significantly increase the amount you owe at tax time compared to being paid as an employee.

With employee pay, CPP is handled each pay period and shared with the employer, which makes the cost predictable and manageable.

EI protection is different under contractor pay

Employees have EI premiums deducted at source and build insurable earnings automatically. Contractors generally do not accumulate EI the same way.

While there is a separate EI framework for self-employed individuals, it is not the same as employee EI and does not provide the same automatic coverage tied to each pay period.

For temps, contractor treatment can reduce certainty around EI protections, especially if work is intermittent.

Reclassification can happen later and creates stress

If the CRA later reviews a temp arrangement and determines the work should have been treated as employment, the consequences can show up years later.

That can mean amended tax slips, reassessments, interest, and administrative work long after the shift income has been spent. Even when some amounts are ultimately assessed to the clinic, the temp still experiences the disruption and uncertainty of retroactive changes.

This is one of the most common sources of frustration for workers who initially preferred contractor pay.

Why this is a serious liability for clinics

Treating temps as contractors when the work is actually employment creates a large, hidden liability for clinics.

If the CRA later determines a temp should have been treated as an employee, the clinic can be required to pay what should have been withheld and remitted, along with interest and penalties. This can include employer CPP and EI contributions and other amounts that should have been deducted at the time of payment.

What makes this risky is that the liability builds quietly. Each shift paid incorrectly adds to potential exposure, even if everything feels fine in the moment. The issue often surfaces years later, triggered by an audit, a worker complaint, or a CRA ruling request.

Clinics cannot rely on the fact that a temp asked to be paid as a contractor. Worker preference does not matter to the CRA. If the facts point to employment, the clinic remains responsible.

This is why many clinics insist on treating temps as employees. It’s not about being rigid. It’s about eliminating a risk that only becomes visible when it’s expensive and disruptive to unwind.

Recent federal policy proposals and budget commitments show that the government is strengthening enforcement against worker misclassification, including increased funding and enhanced information-sharing between the CRA and other regulators to crack down on employers who misclassify employees as independent contractors.

How Fairly Payroll for Temps benefits you

Fairly does not do your taxes. What Fairly Payroll for Temps does is help clinics treat temps as employees when they are hired through Fairly and payroll is turned on, which aligns pay treatment with how the CRA typically views temp work.

For temps, that means:

• Income tax is withheld as you earn it, reducing year-end surprises

• CPP is handled correctly and shared with the employer

• EI insurable earnings are tracked properly

• Your income is reported cleanly and consistently

• You avoid the risk of later reclassification and reassessments

You can still file your own taxes like everyone else. The difference is that being paid as an employee shifts compliance and temp risk away from you, reduces uncertainty, and aligns your pay with the law from the start.

Even if contractor pay sounds more flexible, employee pay through Fairly Payroll for Temps is designed to protect you from the financial and administrative problems that tend to show up later.