Should your dental hygienist be payroll or contractor
Key takeaways
- The CRA uses the RC4110 test of control, tools, profit, and integration to decide employee vs contractor status.
- An in-practice hygienist who works set hours in your clinic with your equipment is almost always an employee, no matter what the agreement says.
- Misclassifying an employee as a contractor can result in back taxes, penalties, and interest for CPP, EI, and source deductions.
- A hygienist who operates their own practice and rents your chair part-time is more likely a genuine contractor.
Why the label does not decide
The agreement you sign with a hygienist does not determine whether they are an employee or a contractor. CRA applies the RC4110 common-law test to the actual working relationship. If the arrangement looks like employment in practice, CRA will treat it as employment regardless of the contract’s title.
For a dental practice, the question is especially important because hygienists working in-clinic during regular hours are usually employees under the test.
The four RC4110 factors
| Factor | Employee indicator | Contractor indicator |
|---|---|---|
| Control | Clinic sets schedule and treatment scope | Hygienist sets own hours and treatment plan |
| Tools | Clinic provides operatory, equipment, supplies | Hygienist provides own instruments |
| Profit / risk | Paid hourly, no financial risk for slow days | Bears risk of uncollected accounts, bills own patients |
| Integration | Works only for your practice | Works at multiple practices |
Why most in-practice hygienists are employees
A hygienist who works regular hours in your clinic, uses your chairs and equipment, has your assistant support, and earns an hourly rate or commission is almost always an employee. Even if the hygienist has their own professional corporation and bills you through it, CRA will look at the substance.
The corporation does not change the analysis. If the hygienist would be your employee working personally, their corporation is likely a personal services business.
Why this matters: if CRA reclassifies a hygienist as an employee, you owe the employer portion of CPP, EI premiums, and source deductions for the entire period, plus interest and possibly penalties. The liability can easily reach five figures for a single reclassified hygienist.
When a contractor designation works
A genuine contractor hygienist:
- Operates their own business, often registered separately
- Rents space or a chair from the clinic rather than being assigned to one
- Sets their own hours of availability
- Uses their own instruments and supplies
- Bills patients directly for their services
- Works at multiple clinics
- Takes the financial risk of uncollected accounts
If most of these are true, the hygienist is likely a genuine contractor and the clinic has no payroll obligations.
What to do if you already have a contractor arrangement
If you have a hygienist you treat as a contractor but the arrangement looks like employment on the RC4110 test, the safest step is to reclassify them as an employee. You can also apply to CRA for a formal ruling through the Canada Revenue Agency’s payroll ruling process to get certainty in advance.
Frequently asked questions
Can a hygienist’s own corporation protect me from payroll obligations?
No. If the substance of the relationship is employment, the hygienist’s corporation does not change CRA’s analysis. The clinic may still owe source deductions.
Does the 20-hour TOSI rule apply to a hygienist’s corporation?
The TOSI rules and the employee-versus-contractor question are separate. A hygienist’s corporation could be a PSB even if the hygienist works part-time.
If I pay a higher rate to a contractor, is that enough?
No. Paying a higher rate as a contractor does not change the legal classification. CRA looks at control, tools, and risk, not the dollar amount.
What is the penalty for misclassification?
CRA can assess the employer portion of CPP and EI, plus source deductions not remitted, plus interest and penalties. In serious cases with intentional avoidance, the penalties are higher.
Can I ask CRA for a ruling in advance?
Yes. You can request a formal payroll ruling from CRA on whether a specific worker is an employee or a contractor. The ruling gives you certainty until the facts change.
Talk to us about your staffing structure at ghumans.ca/accounting-for-dentists.
General information only. Talk to us about your situation.