Physician payroll: clinic staff, locums, and family on the MPC done right

Clinic staff: a small payroll with no room for improvisation

Most MPCs employ two to five people — a receptionist, a nurse or clinical assistant, sometimes a part-time billing clerk — and small payrolls fail on process, not complexity. The fixed sequence: an RP payroll account under the MPC's business number, a cloud platform such as Wagepoint or QuickBooks Online Payroll to withhold CPP, EI, and income tax, remittances to CRA by the 15th of the month after payday (quarterly once you qualify as a small remitter), T4s by the last day of February, and an ROE within days of any interruption in employment.

Cost-sharing clinics add the wrinkle worth settling up front: every staff member needs exactly one employer of record. If the group shares a receptionist, one physician runs that payroll and recharges the others their portion — the recharges are expense recoveries between physicians, not wages, and they must never generate a second set of slips.

Locum payments are fees, not wages

A locum physician is almost always self-employed, so nothing about a locum belongs in your payroll module. The mechanics depend on the arrangement. Where the locum bills OHIP under their own billing number and pays you an overhead percentage, your books show overhead income and no payment to the locum at all. Where you collect and split, the locum's share is a fee for services: a T4A with box 048 if you pay them personally, an ordinary invoice if they bill through their own MPC.

Watch the drift. A locum who has covered the same three days a week for eighteen months, on your schedule, your staff, and your equipment, starts to resemble an employee under CRA's control-and-risk tests — and reclassification means retroactive CPP and EI for both shares. US-trained locums, and your own US telehealth moonlighting, raise residency and treaty questions we take up in our physician cross-border guide.

Family on the MPC payroll, done right

Salary for real work is the reliable way to move practice income to a spouse or adult child; dividends usually are not. Ontario lets family members hold non-voting MPC shares, but TOSI taxes their dividends at the top marginal rate unless an exception applies — and the excluded-shares exception is expressly unavailable to professional corporations, leaving the excluded-business test, which wants roughly 20 hours a week of genuine involvement this year or in any five earlier years.

Wages face a different, friendlier test: reasonableness. Pay your spouse what you would pay a stranger for the same billing-reconciliation, scheduling, or bookkeeping work, run it through payroll with withholding and a T4, and keep the evidence. The contrast in practice:

Your own pay: salary, dividends, and what the calendar demands

Salary from the MPC is deductible, creates RRSP room, and builds CPP — with the CPP2 second earnings ceiling adding an employer-side band — at the cost of running yourself through the same remittance cycle as your staff. Dividends skip all of that and arrive on a T5, but build no RRSP room and no CPP. Physicians have no employer pension waiting elsewhere, which makes the RRSP room worth more than most owners assume.

There is no standing answer. The blend depends on cash needs, retained-earnings goals, and whether a vehicle like an individual pension plan enters the picture later. We model the split annually as part of advisory work, then set payroll to match — the plan drives the pay runs, never the reverse.

Source: CRA — Income sprinkling (tax on split income).