Working with subcontractors: how to do it right
- Feb 27
- 3 min read
Hiring subcontractors can be a beautiful thing.
For coaches, therapists, and other health professionals running a clinic, subcontractors often mean:
A VA who keeps things moving
A marketing specialist
Another practitioner
An IT professional
A bookkeeper
It feels strategic and flexible. You get expertise without the payroll hustle. And it is. But only if the structure underneath it is solid.
Here are the key things to know when working with subcontractors in Ontario to avoid stress at year-end.
Clean setup now = calm year-end later
Most stress around subcontractors doesn't happen when you hire them. It happens at year-end: when your accountant asks questions, when totals don’t match, when invoices are missing or when someone forgot to charge HST.
Setting them up right is not complicated, but it does require:
Clear agreements
Accurate compensation reports
Proper invoicing
Separate payments
Let's dive in.
Be clear on: employee or subcontractor?
This is a big one.
The Canada Revenue Agency does not care what you call someone. They care about the reality of the relationship.
They typically look at:
Who sets their hours
Who tells them how to work
Who provides tools and equipment
Who takes the financial risk
Whether the person can work for other clients or not
If it walks like an employee and quacks like an employee… calling them a contractor won’t protect you.
Getting this wrong can mean retroactive CPP and EI payments, penalties and/or interest. Not fun!
Have a written agreement
Even if you’re friends. Especially if you’re friends.
A subcontractor agreement should clearly outline:
Scope of work
Payment terms
Confidentiality
Termination terms
This protects both sides and prevents awkward “but I thought…” conversations later.
Templates for agreements can be easily found online. Search for "subcontractor agreement" or "engagement letter".
Use compensation reports
For clinics where subcontractors are paid based on a percentage split, a simple monthly compensation report is invaluable. Most clinic software platforms, like Jane, make it very easy to generate this type of report.
It should clearly show:
Services provided
Revenue collected
The agreed split
HST treatment if applicable
Final payout
This report should tie directly to the subcontractor’s invoice and the actual payment made.
Invoice requirements matter
Your subcontractor should invoice you properly.
Gone are the days of invoices with vague descriptions, random rounded payments or messages like "Just e-transfer me".
That’s not a structured business relationship. That’s vibes.
And vibes are very hard to reconcile at year-end 😏
At minimum, invoices should include:
Legal name (or legal name o/a business name)
Address
GST/HST number (if registered)
Invoice date
Unique invoice number
Description of services
Amount charged
HST clearly shown if applicable
If they are incorporated, you’ll often see “Inc.” in the name. If they’re a sole proprietor, you may see “John Smith o/a Smith Consulting". Whether they are incorporated or not is important information to know for tax documents like T4A's.
🚩 Small tip for subcontractors: always send your invoice as a PDF rather than a Word document. PDFs are harder to edit and help protect the integrity of the document. Simply print your Word document to PDF and you're good to go.
Separate payments clearly
If you pay two different people, make two different payments.
It might feel easier to lump amounts together when they share a bank account, or have agreed to forward payments to each other, but from a compliance perspective, clean separation is always better.
Clear payee. Clear audit trail.
→ Happy CRA. Happy you 😉
Final thoughts
Subcontractors are not "just another expense". They often represent a core operational function and/or a significant cost.
If you are building a professional service business, work with people who operate like one.
If unsure on what to do, ask your bookkeeper or accountant. They'd be happy to help!
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Hi, I'm Katrien. With Second Banana Bookkeeping & Advisory, I help coaches, therapists and other health professionals translate their numbers so they feel supported to make smart, calm business decisions.
