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Introduction

This document provides information on what the Canada Revenue Agency (CRA) looks at when determining whether a real estate agent is an employee or a self-employed worker.

Employer responsibilities

All employers are required by law to deduct Canada Pension Plan (CPP) contributions and employment insurance (EI) premiums from most amounts they pay to their employees. Employers must remit these amounts to the CRA along with their share of CPP contributions and EI premiums. More information on employer responsibilities and obligations can be found through our Payroll menu page.

How to determine if a real estate agent is an employee or a self-employed worker

To determine if a person is an employee or a self-employed worker, the CRA looks at the factual working relationship between the worker and the payer. This document provides information on facts related to real estate agents and offers indicators that can help you determine whether a real estate agent is an employee or a self-employed worker.

For general information about determining whether a worker is an employee or is a self-employed worker, see Guide RC4110 - Employee or Self-employed?

Factors that may prove to be inconclusive

There are certain factors that apply to real estate agents, whether they are employees or self-employed individuals. These factors are not determinative of the employment status of a real estate agent for the purposes of the CPP and the Employment Insurance Act (EIA).

Regulated activities

The activities related to real estate are regulated by a variety of acts that aim to protect buyers, sellers, real estate agents and real estate brokers. The following are examples of some of the requirements and obligations found in these acts:

  • The real estate agent must be registered as a salesperson of a registered real estate broker and trade only on behalf of that broker.
  • The real estate agent must remit any money received from a sale to the real estate broker.
  • The real estate agent must submit offers to the broker.
  • The real estate agent must present offers/counter offers using only current approved forms of a contract.
  • The real estate agent must hold up-to-date professional accreditation.
  • The real estate agent must adhere to a professional code of conduct/ethics and the broker can enforce/ensure adherence.

When considering these facts, you must remember that these requirements and obligations apply to both employees and self-employed workers. As a result, if it is established that the facts collected clearly reflect the requirements and obligations set out in the legislation, then these facts are considered to be neutral (because they apply to both employees and self-employed workers).

Commission rate set by an administrative policy

In some situations, the broker, through an administrative policy, will establish a rate of commissions for all real estate agents (regardless of whether the agents are employees or self-employed). In this situation, the fact that the broker determines the rate is inconclusive in itself.

Is the real estate agent self-employed?

Generally, a self-employed worker is someone who agrees to produce a given result but who is not subject to the direction or control of the person to whom he or she provides a service. The self-employed worker is free to act as he or she pleases.

The following are some indicators that can be used to help determine whether a real estate agent is a self-employed worker. Keep in mind that this list is not exhaustive and not all of the following indicators may be present in every situation. Please remember that all facts pertaining to the working relationship need to be considered.

  • The real estate agent is required to periodically pay a fixed amount to the broker for administrative fees for services provided by the broker. These services can include the following: reception service, a desk in the office, the use of office facilities and conference rooms, the use of fax machines, transaction processing, in-house accounting and payroll services, secretarial services including word processing, etc.
  • The real estate agent controls and establishes the rate of commission.
  • The real estate agent is not subject to sales quotas (e.g., minimum listing requirements or dollar volume of sales).
  • Normally the real estate agent provides the following work tools and assumes the costs associated with these tools: automobile, camera, computer, cellular phone, personal marketing aids, etc.
  • The real estate agent is required to pay expenses associated with his or her activities, including car insurance premiums and repairs, professional liability insurance premiums and real estate association membership fees.
  • The real estate agent is free to hire staff.
  • The real estate agent covers the cost of his or her own advertisement or contributes to the cost of advertising the listings.

Is the real estate agent an employee?

Generally, an employee is someone who is hired to perform specific duties under the direction and control of the party who hired him or her. Under the terms and conditions of employment, a worker is not normally in a position to make a profit or incur a loss. An employee is not perceived as operating his or her own business, but rather as being an integral part of the payer's business.

The following are some indicators that can be used to help determine whether a real estate agent is an employee. Keep in mind that this list is not exhaustive and not all of the following indicators may be present in every situation. Please remember that all facts pertaining to the working relationship need to be considered.

  • The real estate agent is not required to pay any fee or amount to cover administrative costs for services provided by the broker. These services can include the following: reception service, a desk in the office, the use of office facilities and conference rooms, the use of fax machines, transaction processing, in-house accounting and payroll services, secretarial services including word processing, etc.
  • The broker retains a percentage of the agent's sales to cover the administrative costs and only requires payment for these services when there is a sale.
  • The broker determines the commission rate. (Please note that this indicator is not applicable in situations where the commission rate is set by an administrative policy).
  • The broker requires the real estate agent to perform specific tasks, such as answering telephone calls during a specific period at the broker's office.
  • The real estate agent is subject to sales quotas (e.g., minimum listing requirements or dollar volume of sales).
  • The real estate agent must account to the broker for his or her activities on a daily or weekly basis (e.g., report on objectives, holiday reports, and work schedules; all of which have been requested by the real estate broker).
  • The real estate worker cannot hire any helpers or staff to help perform the work.
  • The broker covers the cost of advertising the listings.

Requesting a ruling

If a worker or payer is not sure of the worker's employment status, either party can request a ruling by the CRA to have the status determined. More information on the ruling process is available in How to obtain a ruling for Canada Pension Plan and Employment Insurance purposes.

For more information

To get more information call 1-800-959-5525.

Date modified:
https://www.canada.ca/en/revenue-agency/services/tax/canada-pension-plan-cpp-employment-insurance-ei-rulings/cpp-ei-explained/real-estate-agents.html