Driver Inc.
It all begins with an idea.
The End of Driver Inc. – A Welcome Change That’s Costing Carriers Like Us
By P&B Transport
For years, P&B Transport – like many responsible trucking companies – has preferred to employ our drivers through standard payroll. We believe in doing things the right way: paying our fair share of taxes, contributing to CPP and EI, and ensuring our drivers are protected under employment standards. But like many others in this industry, we were forced into a difficult corner by a broken system and government inaction.
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A Broken Playing Field
When the Driver Inc. model began to spread across the trucking industry, it created an uneven playing field. Carriers using this model – where drivers set up personal corporations and are paid without tax deductions – could undercut competitors by avoiding payroll costs and skipping out on employer obligations. Meanwhile, companies like ours who tried to stick to the rules found ourselves losing contracts, struggling to compete, and facing increasing pressure to adapt or be left behind.
Eventually, to survive, we had no choice but to pay some of our drivers using the Driver Inc. structure – not because we believed in it, but because the government failed to act.
Government Finally Steps In – But at a Cost
Now, after years of lobbying by the Canadian Trucking Alliance and repeated warnings about tax abuse, the CRA and ESDC have finally stepped up. The rules around Driver Inc. have been clarified, and incorporated drivers operating company vehicles will now be treated as Personal Service Businesses (PSBs) – losing access to small business tax deductions and facing stricter rules. This is the right move, and frankly, it's long overdue.
But while we welcome this long-awaited enforcement, it comes with a heavy price for carriers like us.
The Transition is Expensive – and Fast
Switching drivers back to payroll isn’t as simple as flipping a switch. It's a costly and time-consuming process. As we bring drivers back on payroll:
We’re now responsible for employer contributions to CPP and EI again.
We face rising administrative and accounting costs to restructure our systems.
Some drivers, used to the higher take-home pay of the Driver Inc. model, are resisting the change, creating staffing challenges.
And because the shift is happening quickly, we're dealing with these added costs without support or a grace period from the government.
We’re not asking for sympathy – we’re asking for fairness. Carriers who followed the rules from the beginning should be recognized. Those who were forced into the Driver Inc. model to survive deserve a proper transition period and support. Instead, we’re all being hit with higher costs and tighter margins.
Moving Forward – But Let’s Learn From This
P&B Transport is committed to doing things the right way. We’re fully transitioning the drivers that chose the Driver inc. model back to payroll, ensuring our drivers have proper protections and that we’re aligned with CRA and ESDC guidelines. But we also believe this situation should serve as a wake-up call.
The government’s delay in enforcing its own rules allowed a flawed model to spread and become “normal” – even though it was anything but. Now that it’s finally being shut down, the burden of correcting course is falling too heavily on the backs of responsible carriers.
It’s time for the government to step up – not just with enforcement, but with support. Help carriers transition. Provide clear guidance. Recognize the companies that played by the rules.
Let’s clean up the industry – together.
– The P&B Transport Team
CRA & ESDC Clear Up Rules on Driver Inc. for Trucking Industry
The Canada Revenue Agency (CRA) and Employment and Social Development Canada (ESDC) have cleared up how they’re going to handle the “Driver Inc.” model, especially when it comes to taxes and employment rules for truck drivers using company-owned vehicles.
Driver Inc. is when truck drivers who don’t own or lease their own trucks set themselves up as incorporated businesses and get paid without any tax deductions. This setup can lead to tax dodging if it's not done properly.
In info shared with the Canadian Trucking Alliance (CTA) — and now posted on CRA’s website — the CRA makes it clear: even though Canadians are allowed to incorporate, there are limits. If a driver is incorporated but basically works like an employee (for example, only works for one company and doesn’t own any trucks or equipment), they’ll be treated as a Personal Service Business (PSB). That means they’ll face different tax rules and won’t get the same tax breaks as real businesses.
CRA Breaks Down the Tax Rules for Personal Service Businesses (PSBs)
The CRA explained a few key points to the Canadian Trucking Alliance (CTA) about how taxes work for Personal Service Businesses (PSBs) — which is what some incorporated drivers may be considered under the Driver Inc. model.
Here’s what they said:
PSBs don’t get the same tax breaks as regular small businesses. For example, they can't claim the small business deduction or general corporate tax rate cuts.
They also can’t write off a lot of common business expenses like office supplies, meals, or a cell phone.
PSBs have to pay a higher tax rate — around 33% when you combine federal and provincial taxes.
If one business pays another incorporated driver (a PSB), that payment still has to be reported to the CRA. But the paying company doesn’t have to deduct payroll taxes from it.
However, if a PSB has employees and pays them wages or salaries, it must withhold and remit income tax, CPP, and sometimes EI, just like any other employer.