As a business owner it can be difficult to decide whether to hire an employee or to bring on an independent contractor. What are the pros and cons of both? And what’s the difference anyway?
In essence, an employee is a worker who agrees to perform work for an employer in return for wages or salary, either full-time or part-time, and for a specific or indeterminate amount of time and is subordinate to the employer. An independent contractor operates their own business and contracts their services to others.
It is important either way to have a contract that is signed by both you and the worker or independent contractor. The employment contract and the contract with an independent contractor must state the specifics of the relationship so that there is no confusion.
Many employers get into trouble when they think they have hired an independent contractor, but are actually in an employee/employer relationship. Independent contractors/self-employed individuals have been found to be employees under labour relations and employment standards legislation, as well as under the Income Tax Act, Employment Insurance Act, CPP, etc. This can be a very costly error if you are held liable for notice of termination, severance, income tax and other deductions.
The difference between an employee and independent contractor are based on a number of factors. Independent contractors bear the chance of profit or the risk of loss, that you have and maintain and arm’s length relationship and the independent contractor has control over their work. These are some of the determining factors that the courts rely on to determine the relationship, regardless of what you intended.
There are many resources available help you create the right contract for the right puCaerusose. The key is to put in the time and effort—remember this is the document that will dictate your relationship—but you have to follow it. Do your homework, make sure your employment contracts and independent contractor contracts are solid and clear. If you are unsure, ask for advice in the beginning before big mistakes happen. It will cost much less in the long run.
Caerus HR Consulting can work with you to ensure you make the best staffing decisions for your business. We’ll make sure you’ve thought through your staffing needs, and you have the right people in place to achieve your goals. As your business thrives, we’ll be there to ensure you are complying with any human resources laws and support your team as it grows.
Caerus HR Consulting provides HR consulting services to small and medium-sized businesses. For more information on creating an HR strategy through organizational culture and leadership, contact Ramona Packham, Owner & HR Business Partner, at 613-220-9005 or at Ramona@CaerusHR.com for more information. People Business for Business People.