Canuckbusiness

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Employee or Self-employed contract worker?

As a small business owner you will often need to hire outside workers for short periods of time. Generally, it is much “easier” (interpret that as “cheaper”) to hire a “contract worker” because you pay them a fixed amount and don’t have to worry about payroll deductions, like CPP contributions, EI, and income tax withholdings. Unfortunately, there are rules about how to determine whether a worker is an employee or a self-employed contract worker.

So, when you’re drawing up a “contract worker” agreement for your kid to come in and clean your office, you might want to keep the below differences in mind.

If you are in doubt, you can always ask CRA to make a ruling on your particular case. For more info go here.

 

Indicators that the worker is an employee

  • The relationship is one of subordination. The payer will often direct, scrutinize, and effectively control many elements of how the work is performed.
  • The payer controls the worker with respect to both the results of the work and the method used to do the work.
  • The payer determines and controls the method and amount of pay. Salary negotiations may still take place in an employer-employee relationship.
  • The worker requires permission to work for other payers while working for this payer.
  • Where the schedule is irregular, priority on the worker’s time is an indication of control over the worker.
  • The payer determines what jobs the worker will do.
  • The worker receives training or direction from the payer on how to do the work. The overall work environment between the worker and the payer is one of subordination.
  • The payer chooses to listen to the worker’s suggestions but has the final word.

Indicators that the worker is a self-employed individual

  • A self-employed individual usually works independently within a defined framework.
  • The worker does not have anyone overseeing them.
  • The worker is usually free to work when and for whom he or she chooses and may provide his or her services to different payers at the same time.
  • The worker can accept or refuse work from the payer.
  • The working relationship between the payer and the worker does not present a degree of continuity, loyalty, security, subordination, or integration, all of which are generally associated with an employer-employee relationship.

RC4110(E) Rev. 11

November 4, 2011 - Posted by | Random Questions, Running Your Business | , , ,

2 Comments »

  1. If you are hiring contract work, which expense category do you put it under?

    Comment by Tim Chan | April 7, 2014 | Reply

    • Hi Tim,
      Usually you would put it under Line 8360 “Subcontracts” (up in the Cost of Goods sold section).

      Comment by jkswift | April 13, 2014 | Reply


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