Cash isn't the problem. Skipping the paperwork that has to go with it, is.
Short answer
Yes, cash is a legal way to pay wages in Ontario — the Employment Standards Act names it alongside cheque and direct deposit as a permitted method. What isn't optional, regardless of how someone is paid, is giving a wage statement for every pay period and keeping the records the Income Tax Act requires. "Cash under the table" is a problem because those two things get skipped, not because of the cash itself.
Ontario's ESA guide lists the permitted methods without ranking them: "an employer may pay wages, including vacation pay, by either: cash, cheque, direct deposit, which includes Interac e-Transfer." But every pay period, regardless of method, the same guide requires a wage statement covering "the pay period for which the wages are being paid; the wage rate… the gross amount of wages and… how the gross wages were calculated; the amount and purpose of each deduction… the net amount of wages," delivered "in writing; or provided by e-mail if the employee has access to some means of making a paper copy." A cash payment with no statement behind it is the ESA violation — not the cash.
Under the Income Tax Act, "every person carrying on business… shall keep records and books of account… at the person's place of business or residence in Canada," retained for "the expiration of six years from the end of the last taxation year" they relate to — a duty that attaches to the payment, not to the method it was made by. And where the day labourer is genuinely being engaged as a subcontractor whose business income comes primarily from construction activities, the payments feed into the T5018 reporting obligation covered in T5018 or T4A — a question about whether the arrangement is properly structured at all, which cash payment tends to obscure rather than resolve. Paying in cash without a wage statement or without tracking the payment for tax reporting is where "day labourer" work most often turns into a compliance problem, and it's the record-keeping that closes that gap, not the payment method.
There's also a classification question sitting underneath the payment method: whether the person is an employee being paid a day rate, or a genuine subcontractor invoicing for the day. Get that wrong and the paperwork gap widens — an employee paid cash with no wage statement is an ESA problem on top of the record-keeping one, while a true subcontractor still needs to be tracked toward the reporting threshold discussed in T5018 or T4A. "We paid cash, no paperwork" answers neither question, which is exactly why it's the pattern that draws scrutiny.
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