Is your employment status crystal clear?

Are you an employee or an independent contractor? Your work classification can have significant impacts on payroll, job security and flexibility, and other aspects of your working life. For this reason, it is important to fully understand the differences between these classifications of workers.

Differences between employees and independent contractors

There are key practical differences between most employees and independent contractors. While not exhaustive, some of the consequences of someone being an employee versus an independent contractor include:

• Benefits: Employees often receive benefits like health insurance, paid leave, overtime pay and retirement plans. Independent contractors do not.
• Tax: Employers must withhold income taxes for employees but not for contractors. Independent contractors are typically responsible for making their own tax remittances on services provided.
• Job Security: Employees have certain rights under employment legislation, including to minimum amounts of notice of termination or payment in lieu of notice in the event of a termination of the contract. Contractors are not covered by the same legislative provisions and must negotiate any such notice provisions with the other party.

In the event that a worker has been paid as an independent contractor when the facts and law demonstrate that they really should have been categorized as an employee, employers may face fines, penalties and back payments for taxes and benefits. It’s essential to get this right to avoid legal and financial troubles.

Making the right call

So, how can the parties determine whether a worker should be treated as an employee or independent contractor? Several factors play a role, and it’s not always black and white. However, you can start by assessing these aspects of a job:

• Control and independence: Consider how much control the company has over the worker’s tasks and schedule. More control may suggest an employee relationship.
• Financial arrangements: Look at how the worker is paid. Employees usually receive a salary or hourly wage, while contractors often are paid on a project basis or at an hourly rate within a pre-negotiated budget or retainer.
• Opportunity for profit or loss: Can the worker potentially make a profit or experience a loss based on their own efforts?
• Relationship terms: Check if there is an ongoing relationship or if the work is project-based. Long-term engagements often point to employment.

These are just some of the factors considered. The BC government provides resources and instructions to help businesses determine worker status correctly for the purposes of the Employment Standards Act.

Workers and employers who have questions about classification should not hesitate to seek legal advice about this complex area of the law. Your working relationships matter, and so do your rights and obligations in the workplace.