Clinics and wellness
Your associate is not a contractor just because the agreement says so
Last reviewed: August 2026
How CRA decides whether an Ontario clinic associate is an employee or a contractor, what the clinic owes if it is wrong, and which structures hold up.
If CRA decides that a practitioner you have been paying as a contractor was really an employee, the clinic corporation pays. You are assessed for the Canada Pension Plan contributions and Employment Insurance premiums that should have been withheld from payments you have already made, plus the employer's share of both, plus a penalty, plus interest. The practitioner keeps their money. The liability sits with the payer.
CRA's employer guide T4001 is direct about it: "If you fail to deduct the required CPP contributions or EI premiums from the amounts you pay your employee, you are responsible for these amounts even if you cannot recover the amounts from the employee. We will assess you for both the employer's share and the employee's share of any contributions and premiums owing." The penalty is 10% of the CPP, EI and income tax not deducted, rising to 20% for a repeated failure in the same calendar year made knowingly or under circumstances of gross negligence.
Three practitioners at $140,000 a year each, reassessed over two years, is a six figure problem before the interest. Run the arrangement through our subcontractor or employee check before you sign anyone.
How CRA actually decides
CRA's guide RC4110 sets out a two-step approach for contracts formed outside Quebec. First, what did the parties intend: a contract of service, meaning employment, or a contract for services, meaning a business relationship. Second, does the actual working relationship reflect that intent. As the guide puts it, "the facts of the working relationship as a whole decide the employment status."
The second step is where clinics lose. A signed independent contractor agreement establishes intent and nothing more. The factors CRA then weighs are these.
| Factor | Points to a contractor | Points to an employee |
|---|---|---|
| Control | Worker decides how and when the work is done | Payer has the right to direct the work |
| Tools and equipment | Worker supplies and maintains significant assets | Payer supplies them |
| Subcontracting and assistants | Worker can hire help or send a substitute | Worker must perform personally |
| Financial risk | Worker bears fixed ongoing costs and can lose money | Worker is paid regardless |
| Investment and management | Worker has capital invested and makes business decisions | Payer runs the business |
| Opportunity for profit | Worker's return depends on efficiency and pricing | Worker earns a rate for time or output |
One detail in RC4110 does more damage in clinics than any other. On control, it is "the right of the payer to exercise control that is relevant, not whether the payer actually exercises this right." A clinic owner who never once told an associate how to treat a patient can still fail this factor if the agreement, the policies and the practical setup mean they could have.
Why clinics fail these tests more easily than other businesses
Think about what a typical Ontario clinic supplies to its associates. The treatment room. The tables, the modalities, the linens. The practice management and booking software. The reception staff who schedule the appointments. The patient list. The fee schedule the patients are quoted. The hours the building is open. The insurance billing under the clinic's provider setup.
Work down the six factors with that list in mind. Tools, equipment, investment and management all belong to the clinic. Financial risk is close to zero, because the associate carries no premises, equipment or staff cost. Opportunity for profit is limited to seeing more patients at a rate the clinic sets, which looks a lot like piece work. Control is arguable at best when the clinic owns the schedule and the patient relationship.
None of that means the parties were dishonest. Two people can genuinely intend an associate arrangement and build something that behaves exactly like employment, because the clinic model naturally centralises everything an independent business would otherwise own.
The three structures that actually exist
| Employee | Contractor | Space renter | |
|---|---|---|---|
| Who bills the patient | Clinic | Clinic | Practitioner |
| Clinic revenue | Full patient fee | Full patient fee | Rent only |
| Payment to practitioner | Wage or salary | Invoice from the practitioner | None |
| Source deductions | CPP, EI, income tax, T4 | None | None |
| Who sets the fee | Clinic | Usually clinic | Practitioner |
| Clinic's cost | Wages plus employer CPP and EI | Contractor fees | None |
The first two are straightforward once you have picked one. Employee means a payroll account, source deductions remitted on schedule, a T4 in February, and the rest of the Employment Standards Act obligations. Contractor means the practitioner invoices the clinic, carries their own insurance and gets no T4, with the six factors above actually supporting the label.
The third one is the structure people claim and almost nobody implements. A practitioner renting space and billing patients directly is running their own practice inside your building. For that to survive scrutiny, essentially all of the following has to be true.
- The practitioner has a written licence or lease for identified space, at a stated rent, with a term, and pays it whether or not the room was busy.
- Patients are billed by the practitioner in the practitioner's own name, with the practitioner's own receipts and their own registration and provider numbers.
- Patient payments go to the practitioner's account. Money does not flow through the clinic's merchant account and get remitted net.
- The practitioner sets their own fees and their own hours.
- The practitioner carries their own professional liability insurance and their own business insurance.
- If the practitioner uses the clinic's booking software, reception or billing, those are separately identified services being charged for, not thrown in with the room.
- Records and privacy arrangements are agreed between the practitioner and the clinic in a way that fits their college obligations, which is a question for their regulator rather than for us.
The single most common failure is the money. If the clinic collects the patient's payment and pays the practitioner a percentage, the clinic supplied the service to the patient and the arrangement is not a rental, whatever the paperwork says.
HST follows the structure, and each one is different
Wages are outside GST/HST entirely. Nothing to charge, nothing to claim.
A contractor practitioner charges HST on their invoices to the clinic to the extent the services they supply are taxable. A registered massage therapist working as a contractor is supplying a taxable service at the Ontario rate of 13% and, once past the small supplier threshold, which is $30,000 of worldwide taxable supplies for 2026 measured over four consecutive calendar quarters or in a single quarter, has to register and charge it. A physiotherapist or chiropractor supplying exempt health services charges nothing on those services. Where the clinic resells the taxable services to patients with HST, the tax on the contractor's invoice is a recoverable input tax credit.
Rent is the one that surprises people. GST/HST memorandum 19-4-1 states that "a lease, licence or similar arrangement in respect of commercial real property is a taxable supply unless specifically exempted." Licensing a treatment room is a commercial supply at 13%, and the fact that the clinic's own patient revenue is exempt changes nothing. Four rooms at $1,100 a month is $52,800 a year of taxable supplies, well over the threshold, so the clinic has to register, charge $143 of HST on each monthly invoice and file returns.
There is a further wrinkle where the clinic keeps a percentage of an associate's billings. CRA's policy statement P-238, written for medical practice organizations, includes a ruling in which a clinic retained 40% of associate billings for the use of the facility, equipment and administrative services. CRA held that the retained amount was "consideration paid by the associates for a taxable supply consisting of the use of the facility and medical equipment and administrative services." Elsewhere in the same policy, a genuine apportionment of the fee for a health care service rendered to a patient carries no tax. The wording of your agreement decides which one you have, so confirm it for your own arrangement rather than assuming.
Once any of this is in place the exempt and taxable pieces have to be tracked separately, so the chart of accounts has to be built for it. We go through that in what a multi-practitioner clinic's books have to track, and the bookkeeping, HST and payroll page covers how we run it month to month.
If it is currently wrong
Start by deciding what the arrangement actually is, using the facts rather than the file. Then pick one of the three structures and rebuild the paperwork, the payment flow and the software to match it. Half-measures are worse than either extreme, because a written rental agreement combined with the clinic collecting all the patient money gives CRA both a document and a contradiction.
Where you want certainty rather than a judgment call, either party can request a CPP/EI ruling. It is free, made by CRA, and requested through My Business Account or on Form CPT1. Note the deadline: RC4110 sets it at June 29 of the year following the year the question relates to.
For prior periods, quantify the exposure before you approach anyone. The number turns on how many practitioners, over how long, at what pay, and it drives every decision that follows. Our clinics hub sets out how we handle the review and the rebuild.
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General information only, current at August 2026. Tax rules change and GST/HST status is fact-specific. Confirm your own position before relying on anything here.