Overview
Whether a sub-contractor can be included in a Health Spending Account (HSA) depends on how they work with a company.
Sub-contractors aren’t always considered employees, and sometimes the difference isn’t obvious.
This article discusses the basics and explains when a sub-contractor may qualify for an HSA.
The details
When a sub-contractor may be eligible
If a sub-contractor is working with an employment contract with a company, they may be treated like an employee for benefit purposes.
This typically means that a company has a working relationship with someone where they’re treated like an employee. This means things like setting their hours, directing how their work is done, and paying them through payroll. Even if they’re called a ‘sub-contrator’ their setup is functioning more like an employee relationship.
In these cases, a company may be able to include them as a Member on an HSA Plan.
When a sub-contractor is not eligible
If a sub-contractor is independently contracted and running their own business (for example, as a sole proprietor), they usually aren’t eligible for an HSA through the company.
Generally, this means that they operate independently. They’ll set their own hours, provide services to multiple clients and invoice a company for their work. Even if they work closely with a company, this is a business-to-business relationship and not an employee-employer relationship.
In this situation:
- They aren’t considered an employee
- They can't be added to a Plan
- They’d need to explore their own benefit options
Why this matters
HSAs are employer-sponsored benefits. That means qualifying for a Plan depends on the working relationship, not just the work being done.
Because every setup is a little different, it’s not always clear which category someone falls into...and that matter when it comes to adding someone to a Plan and understanding tax implications.
Anything else?
If you’re not sure how a sub-contractor should be classified, it’s best to check before adding them to a Plan.
If you need help talking through a specific situation, just reach out to hello@blendable.ca - we’re happy to help 😊