If I pay an independent contractor in Ontario, do I still have to deduct CPP and EI?

Generally, you do not withhold CPP or EI from payments to a true independent contractor — those obligations apply only to employees. The problem is that the label you use does not control how CRA will classify the relationship. CRA and courts look at the actual working arrangement: does the worker control how the work is done? Do they own their tools? Can they profit or suffer a loss? Do they work for multiple clients?

If CRA later decides the "contractor" was actually an employee, you as the payer will owe the back CPP and EI — both the employee's and employer's share — plus penalties and interest. That risk falls entirely on you, not on the worker. This is one of the most common payroll disputes CRA audits.

Before treating someone as a contractor, consider requesting a CRA ruling using Form CPT1. The ruling tells you how CRA sees the relationship before you have a problem. Ontario's Employment Standards Act also has its own test for employee status, which affects vacation pay, termination notice, and other entitlements beyond tax.