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Trucking payroll: Driver Inc., per-kilometre pay, and staying off CRA's radar
If a driver hauls your freight, in your truck, under your dispatch and your operating authority, they are an employee — no matter what their numbered company invoices say. CRA and ESDC have made the Driver Inc. model a named enforcement priority, and the reassessments land on the carrier and the driver at the same time. We run payroll for Ontario fleets and owner-operators so per-kilometre pay reconciles to hours, WSIB is settled before the first load, and cross-border miles stay a fuel-tax question instead of a payroll one.
By the AnalytIQ Accounting team · Last reviewed: August 12, 2026
Driver Inc. is a named enforcement target, not a grey area
Paying a driver's corporation instead of the driver does not change what the relationship is. CRA applies the tests in RC4110 — control, ownership of tools, chance of profit, risk of loss — and a driver with no truck of their own, running your loads on your schedule, fails those tests as a contractor whether or not they incorporated first. Both CRA and ESDC have said publicly that Driver Inc. arrangements in trucking are a compliance priority.
The damage runs in both directions. The carrier is reassessed for the employer and employee shares of CPP and EI going back years, plus penalties and interest. The driver's corporation is taxed as a personal services business: no small business deduction, a combined rate around 44.5% in Ontario, and nearly every deduction denied except salary actually paid out. Carriers that cross provincial or international lines face a third front — they are federally regulated, and the Canada Labour Code now prohibits misclassification outright, with the onus on the employer to prove a worker is not an employee. An owner-operator who genuinely owns the tractor and books their own revenue is a different story, and incorporating that business properly is covered in our trucking incorporation work.
Per-kilometre pay is fine — until no one can tie it to hours
Mileage pay is legal, but every rule underneath it is written in hours. A cross-border or interprovincial carrier follows the Canada Labour Code: overtime after 60 hours a week for highway drivers, after 45 for city drivers, and after 40 for dispatch and dock staff — three thresholds inside one terminal. A local-only Ontario carrier follows the ESA instead, with overtime after 44 hours. Either way, drivers paid by the kilometre or by percentage of revenue still need hour records, and your ELD data already is one — we make sure payroll can produce it when an inspector asks.
Vacation pay is the other quiet liability. It accrues on total wages — mileage pay, safety bonuses, fuel bonuses — at 4%, rising to 6% after five years and 8% after ten under the Code. Fleets that pay a flat per-km rate and never accrue vacation on the bonuses discover the shortfall all at once, usually inside a Labour Program inspection.
One fleet, four pay arrangements
Most small fleets run several arrangements side by side, and each one gets different paperwork:
| Who drives for you | How payroll treats them |
|---|---|
| Highway driver paid per kilometre | T4; CPP, EI and tax withheld on mileage and bonuses; overtime after 60 hours |
| City pickup-and-delivery driver, hourly | T4; overtime after 45 hours under the Code (44 if provincially regulated) |
| Owner-operator with their own tractor | Contract payments, T4A box 048; no source deductions; WSIB unless they hold independent operator status |
| Incorporated driver in your truck | Driver Inc. — reclassification and PSB exposure; move to T4 payroll |
| You, the fleet owner | Salary through payroll or dividends — modelled annually, not defaulted |
WSIB treats owner-operators as your workers by default
In Ontario trucking, an owner-operator you contract is presumed to be your worker for WSIB purposes unless WSIB has determined they qualify as an independent operator. That determination should exist before the first load, because the alternative is discovered in an audit: retroactive premiums on everything you paid them, at trucking rate-class premiums that are among the higher ones on the schedule. We keep the status paperwork with the carrier file, and when you broker freight to another carrier, we make sure a clearance is on record so their premium debt cannot become yours.
Cross-border miles: payroll stays Canadian, meals do not follow normal rules
A Canadian-resident driver employed by a Canadian carrier stays on Canadian payroll for US runs — the treaty keeps their employment income taxable in Canada, and no US withholding applies because you have no US employer presence. What changes is the expense side. Long-haul drivers claim meals on form TL2 at 80% rather than the usual 50%, using the simplified or detailed method, and your logbooks and ELD records are the evidence. If you pay per-diem meal allowances instead, they must be reasonable to stay off the T4.
We run fleet payrolls on Wagepoint or QuickBooks Online Payroll, remit by the 15th, and file ROEs promptly when drivers move on — turnover is a fact of this industry. The rest of the border file — IFTA and IRP, treaty positions, protective 1120-F filings — lives in our cross-border tax work for truckers, and payroll is built to feed it.
Source: CRA — Form TL2, Claim for Meals and Lodging Expenses.
Common questions.
My drivers all invoice me through their own corporations. Am I protected?
No. CRA looks at the working relationship, not the invoice — drivers in your trucks under your dispatch are employees, and the reassessment hits both shares of CPP and EI plus penalties. Incorporation without a truck usually makes it worse, because the driver's corporation is taxed as a personal services business.
Is per-kilometre pay legal?
Yes, provided it converts to at least minimum wage and overtime when measured against actual hours. Federally regulated highway drivers earn overtime after 60 hours a week, so you need hour records — your ELD data — behind every mileage-based pay run.
Do I withhold US tax when a driver spends half the month stateside?
Generally no. A Canadian-resident driver employed by a Canadian carrier stays on Canadian payroll, and the treaty keeps that employment income taxable in Canada. Track duty days anyway — the pattern matters if you ever open a US terminal.
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