Farm Workers: Hiring Family vs Employees vs Contractors
Who works your farm? Learn the tax implications of hiring family, part-time helpers, seasonal workers, and independent contractors.
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Key Takeaways
- Family members must be paid reasonable wages for actual work
- Farm employees generally exempt from EI (but not CPP)
- Seasonal Agricultural Workers Program has specific requirements
- True contractors are rare on farms - most are employees
- Proper documentation protects you in audits
Family Working on the Farm
On most family farms, everyone helps. But how you pay (or don't pay) family has tax implications.
Paying Your Spouse
- Salary is deductible if spouse does real work
- Must be "reasonable" for work performed
- Creates RRSP contribution room for spouse
- Income splitting benefit if you're in higher bracket
- Keep time records and job descriptions
Paying Your Children
- Age-appropriate work only (provincial rules apply)
- Reasonable wage for the work done
- No CPP until age 18
- If employed by parent: Usually EI exempt
- Child pays little/no tax on first $15,000
- Document hours and duties
Income Splitting with Children
- Pay 16-year-old $10,000 for summer work
- Farm deduction: $10,000
- Tax savings at 40% bracket: $4,000
- Child's tax on $10,000: ~$0 (basic personal amount)
- Family tax savings: $4,000
Employees: What's Different for Farms
Farm Employee EI Exemption
Agricultural employees are often EI-exempt:
- Employed in agriculture (farming, horticulture, etc.)
- Paid less than $7,718.55/year, OR
- Employed for less than 7 days in the year
- If exempt: No EI premiums deducted or remitted
- Worker is NOT eligible for EI benefits
CPP Still Applies
Even if EI-exempt, CPP deductions are required for employees aged 18-70 earning over $3,500/year.
Foreign Seasonal Workers
SAWP (Seasonal Agricultural Worker Program)
- Workers from Mexico and Caribbean countries
- Maximum 8 months per season
- Employer-specific work permit
- Must provide approved housing
- Full payroll requirements apply (income tax, CPP)
- EI may apply depending on wages/days
Employer Obligations
- Pay at least prevailing wage rate
- Provide housing at no cost (or regulated cost)
- Arrange and pay for medical insurance
- Pay portion of roundtrip airfare
- Provide same workplace protections as Canadians
Contractors vs Employees on Farms
True Farm Contractors
- Custom combining (owns combine, serves multiple farms)
- Crop spraying service (own equipment, own schedule)
- Trucking company (hauls for multiple farms)
- Veterinary services
- Specialized consultants
NOT Contractors
These are employees, even if you call them contractors:
- Field workers you schedule and supervise
- Equipment operators using YOUR equipment
- Workers with set hours who only work for you
- Anyone you train, supervise, control
Documentation Requirements
- TD1 form for each employee
- Time records (even for family)
- Job descriptions
- Pay records and method of payment
- T4s issued by end of February
- ROE when employment ends
- Workers' Comp coverage
- For contractors: Written contracts, invoices received
Need Help with Farm Payroll?
Tax Punjabi understands agricultural employment rules. We'll ensure you're compliant.
This article is for educational purposes only. Consult a professional for your specific situation.