Introduction

This article provides information on what the Canada Revenue Agency (CRA) looks at when determining whether the employment of a barber or a hairdresser is pensionable or insurable, or both, under the Canada Pension Plan (CPP) and the Employment Insurance Act (EIA).

Employer responsibilities

By law all employers have to deduct CPP contributions and employment insurance (EI) premiums from most amounts they pay to their employees. Employers have to send the deducted amounts along with their share of CPP contributions and EI premiums to the CRA.

More information on employer responsibilities and obligations is available on our Payroll page.

For more information on barbers and hairdressers, go to Chapter 7 of Guide T4001, Employers’ Guide - Payroll Deductions and Remittances.

For information on how to report and file information slips, go to Guide RC4120, Employers' Guide - Filing the T4 Slip and Summary.

Note: Under the Insurable Earnings and Collection of Premiums Regulations (IECPR), the owner or operator of a barbering or hairdressing establishment is considered to be the employer of the individual whose employment in connection with the establishment is included in insurable employment under the Employment Insurance Regulations (EIR). For more details see the section of this article titled EI premiums.

Employee or self-employed worker?

General information about whether a worker is an employee or is self-employed is available in Guide RC4110, Employee or Self-employed

Employees and self-employed workers have different responsibilities, benefits, and entitlements. It is important for employees and self-employed workers, as well as for their employers and payers, to be aware of the differences. For more information, see Responsibilities, benefits, and entitlements for employees and self-employed workers.

Is the barber or hairdresser an employee?

Generally, an employee is someone who is hired to do specific duties under the direction and control of the party who hired them. Under the terms and conditions of employment, an employee is not normally in a position to make a profit or have a loss. An employee is not considered to be operating their own business, but rather as being a part of the payer’s business.

The following list gives indicators that you can use in determining whether a barber or hairdresser is an employee. This list is not exhaustive and you may not have all of the following indicators in every situation. You have to consider all the facts related to each working relationship.

Indicators of an employer - employee relationship

• The payer determines and controls the method and amount of pay.
• The payer is the one who holds the business licence to operate the establishment.
• The payer determines the worker’s working hours and days.
• Walk-in clients normally belong to the payer
• The payer determines which worker sees which client
• The payer normally supplies the necessary tools and equipment and is responsible for repairs and maintenance.
• The worker normally does not have to rent or lease any equipment needed to perform their services.
• The revenue generated within the establishment normally belongs to the payer.

Pensionable and insurable employment?

If it is determined that a barber or hairdresser is an employee, hired under a contract of service, the employment would be considered pensionable and insurable. The employer would be responsible for deducting and sending to the CRA both the employee’s and employer’s share of the CPP contributions and EI premiums.

Is the barber or hairdresser self-employed?

A self-employed worker carries on their own business. In this relationship, the self-employed worker is not under the direction or control of the payer. The self-employed worker is free to act as they please when it comes to how the work is done and how to fulfill the obligations of their contract.

The following list gives indicators that you can use in determining whether a barber or hairdresser is self-employed. This list is not exhaustive and you may not have all of the indicators in every situation. You have to consider all the facts related to each working relationship.

Indicators that a worker is self-employed

• The worker can accept or refuse clients.
• The worker rents or leases space, a chair or both (chair renter).
• The worker determines their work schedule.
• The worker collects and keeps all revenue from services performed.
• The worker establishes the price of services offered.
• The worker keeps their exclusive client list and controls how the clients are served and whether someone else can perform a service for their client.
• The worker displays products in the establishment, sells them to their clients and keeps the proceeds from the sales.
• The worker can hire replacements or may even hire workers to help perform the services offered and is responsible for paying their remuneration.
• The worker advertises and actively markets their services.

Pensionable and insurable employment?

CPP contributions

If it is determined that the barber or hairdresser was employed under a contract for services they would be considered to be self-employed. The barber or hairdresser would be responsible for paying their own CPP contributions when they file their income tax and benefit return.

EI premiums

Under the IECPR, the owner or operator of the barbering or hairdressing establishment is considered the employer of an individual whose employment is related to the establishment. This employment is included in insurable employment under the EIR. This is the case even if the individual is not employed under a contract of service and is considered self-employed. The employment is considered insurable employment under the EIR if the three following conditions are met:

• The worker is in the occupation of a barber or a hairdresser.
• The barber or hairdresser provides services normally provided in a barbering or hairdressing establishment.
• The barber or hairdresser is not the owner or operator of the establishment.

Example of employment that meets the three conditions:

• The barber or hairdresser is not an employee (not employed under a contract of service).
• The barber or hairdresser enters into an agreement with the owner or operator of a barbering or hairdressing establishment as a “chair renter”.
• The “chair renter” pays the owner or operator of the establishment a fixed amount each month for the exclusive use of a chair and access to the sinks and stationary hair dryers.
• The “chair renter” supplies their own combs, brushes, scissors, and other small hand instruments, as well as products used in the performing of their service.
• The “chair renter” has their own customers and makes their own appointments
• The “chair renter” is normally seen as running their own business and considered self-employed.

In this example the “chair renter” meets the conditions of the EIR as stated above, and is considered employed in insurable employment

The owner or operator of the establishment is deemed to be the employer and is responsible for paying the employee’s and the employer’s share of the EI premiums.

Insurable earnings and insurable hours of a barber or hairdresser under the three conditions of the EIR

Insurable earnings

There are two ways to determine the insurable earnings for a week, depending on whether the barber or hairdresser’s actual weekly earnings and expenses are known:

1. If the owner or operator of the establishment knows how much the barber or hairdresser earned in a pay period as well as the amount of the expenses incurred in generating the earnings, the amount of the barber or hairdresser’s insurable earnings will be the total net revenue for the pay period up to the maximum annual insurable earnings.

2. If the owner or operator of the establishment does not know how much the barber or hairdresser earned and/or the amount of the expenses incurred in generating those earnings, the amount of the barber or hairdresser’s insurable earnings for each week during that employment is deemed by the IECPR to be the lesser of:

• the number of days worked in that week multiplied by 1/390 of the maximum of the yearly insurable earnings; and

• 1/78 of the maximum yearly insurable earnings.

Insurable hours

The EIR states how to determine the hours of insurable employment. For detailed information see Insurable hours.

How to request a ruling

If a barber, hairdresser or payer is unsure of the worker’s employment status; either party can request a ruling to have the status determined. More information on the ruling process is available in How to get a CPP/EI ruling.

For information on the possible implications of a CPP/EI ruling, go to Have you received a CPP/EI ruling?

For more information

To get more information, call the CRA’s business enquiries line at 1-800-959-5525.

Legislative references

• Paragraphs 5(1)(a), 5(1)(d), 5(4)(c) Employment Insurance Act
• Subsection 5(2) Employment Insurance Act
• Paragraph 6(d) Employment Insurance Regulations
• Sections 9.1 to 11 Employment Insurance Regulations
• Sections 2 and 8 Insurable Earnings and Collection of Premiums Regulations
• Paragraph 6(1)(a) Canada Pension Plan