Paying drivers: employees, contractors and "Driver Inc."

For most carriers, driver pay is the largest cost after fuel. It's also where a small mistake can turn into a large bill: unpaid overtime, missed source deductions, or drivers who turn out to be employees after all.

This article is part of our guide to the financial side of running a trucking company.

Step 1: Know which rules apply to you

Labour rules for trucking depend on where your trucks go, not where you're based.

An Edmonton carrier with even regular runs into Saskatchewan or BC is usually federally regulated. That affects overtime, vacation, holidays, termination notice and record-keeping, all of which differ from the Alberta rules many owners know.

Step 2: Get overtime right

Truck drivers have their own overtime thresholds under both systems:

Overtime is paid at time and a half.

Mileage pay and overtime

Paying by the kilometre or by the trip doesn't remove the overtime obligation. You need to track hours worked as well as kilometres, and make sure that when hours go over the threshold, the driver is paid at least the overtime they're owed. ELD records make hours easy to prove, for you and for the driver.

Example: a long week

Jason, a highway driver for a federally regulated Acheson carrier, is paid $0.62 per km. One week he drives 4,100 km and works 68 hours (driving plus loading, waiting and paperwork).

His mileage pay is 4,100 × $0.62 = $2,542. The 8 hours over 60 have to be paid at time and a half. How that's calculated against mileage pay needs care, and the method should be written into your pay policy and set up in payroll, not worked out by hand each week. This is one of the areas we review first when we take on a carrier's payroll.

Step 3: Employee or contractor?

This is the big one.

What "Driver Inc." is

"Driver Inc." describes drivers who work like employees (one carrier, the carrier's truck, the carrier's dispatch and schedule) but are paid as incorporated contractors. The carrier skips source deductions, CPP and EI, vacation pay and overtime. The driver's corporation often claims tax deductions it isn't entitled to.

It can look cheaper on paper. Federal enforcement has made it one of the riskiest things a carrier can do.

What's changed

• Since June 2024, the Canada Labour Code presumes a worker is an employee unless the employer can prove otherwise.
• The federal Labour Program has been inspecting trucking companies, ordering back-payments, issuing penalties and publicly naming employers that misclassify workers.
• The CRA and Employment and Social Development Canada (ESDC) now share information on misclassification. The 2025 federal budget added funding for CRA enforcement.
• From the 2025 tax year, the CRA enforces penalties on trucking businesses that don't report payments over $500 to incorporated contractors on a T4A slip (box 048). The moratorium that had held those penalties back was lifted in December 2025.

How to tell the difference

The label in your contract isn't what decides it. The CRA and the Labour Program look at the real working relationship:

A genuine owner-operator with their own tractor, insurance and authority, choosing their own loads, can be a contractor. A driver who uses your truck under your dispatch generally is not, incorporated or not.

What it costs to get wrong

If a "contractor" is found to be an employee, the carrier can owe the employer and employee shares of CPP and EI it should have deducted, plus penalties and interest, for several years. Under the Labour Code there's back-pay for overtime, vacation and holidays as well. The driver's corporation faces its own problems; see personal services businesses.

Step 4: Run driver payroll properly

What an employee driver actually costs

On top of gross pay, the employer pays its own share of CPP and EI. Using the 2026 rates:

Example: weekly cost of an employee driver

Gross pay of $1,800 a week:

The employer's extra cost is about 8% of gross pay, or roughly $7,500 a year for this driver, plus vacation pay and income tax withholding (which comes out of the driver's pay). CPP and EI stop for the rest of the year once the yearly maximums are reached.

Per-diem and allowances

Many carriers pay drivers a meal or travel allowance. Whether it's taxable depends on whether it's reasonable and tied to actual travel. Set it up as a written policy and run it through payroll correctly. If you get it wrong, the whole allowance can become taxable income for the driver, with deductions owing. Drivers can also claim meals themselves; see meals on the road.

Year-end slips

• T4 for every employee
• T4A for payments over $500 to incorporated contractors in trucking (box 048)
• Records of Employment (ROEs) when a driver leaves

The bottom line

Driver pay done right protects you from the most expensive surprises in trucking. If you'd like us to run your payroll, review how your drivers are set up, or sort out T4As before the CRA asks, see our payroll service.