When you’re a small-business just starting up, or when you’ve been working by yourself for a while and decided you need some more help, putting people on payroll can be a lot of work. Dealing with deducting income tax, CPP and EI to the government, sick leave, pension plan can make any small-business owner see why a contractor can be a big help; but in most places having an employee calling them a contractor is not allowed. Here, a few tips to tell whether or not you can have this person as a contractor or have to do payroll.
1. They work for multiple companies.
2. The tools they use are their own, the computer, space, supplies is all theirs. Their business card says their company name on it.
3. Time limit, its easier to have the government decide you have a contractor if the contract is less than a year.
4. Integration, how integral to your work is this contractor?
None of these rules are clear either way, you just have to think clearly about this and use a little common sense. If you have questions you should consult your accounting. Below is some more ideas from NACUBO
Test on Employment Status
trained on how job should be done
uses own experience, expertise to do job
works within campus environment
works alone - not part of campus “team effort”
hired to work as an individual, based on skills, talent, and potential
hired to provide service many times, regardless of who actually does work
has indefinite employment status
hired for a set time period only
works under set hours
sets own hours
works for one employer at a time
can work for several employers at a time
works mainly on-site; employer-directed off-site
can work either on-site or off-site, without employer direction
works in employer-established order to allow for supervision
works any way desired to provide required service or product
reports on work efforts as part of supervision
reports only as agreed upon
compensated regularly, at specified time periods
paid on per-job basis in a lump sum
has work-related expenses paid by employer
pays own expenses out of expected compensation
has tools and supplies provided by employer
provides own tools and supplies
does not own or control work site
may own or control work site
generally does not work on profit / loss basisgenerally works on profit / loss basisgives employer exclusive effortworks for many contractors at oncecannot offer efforts to general publicmarkets services to anyone who wants themcan be fired at employer’s discretion (subject to employment agreement)can be fired only if work falls short of expectationscan end employment at any timeresponsible for completing job as agreed upon
Source: NACUBO Business Officer, August 1992
