What is the difference between an employee and an independent
contractor, and why does it matter?
In employment law, the determination of employee or contractor
status determines which laws protect and govern the worker in question.
Therefore, this determination of status is crucial.
If a person is an employee, s/he:
-
is afforded employment protection under both the common law and
employment legislation, which covers things like minimum wage,
holidays, overtime, termination, and notice
-
(if applicable) is covered by workers’ compensation legislation
without having to pay premiums himself/herself
-
generally has an exclusive, and sometimes long-term, relationship
with the payer
-
will have income tax, Canada Pension Plan, and Employment Insurance
payments deducted from his/her pay cheque and remitted on his/her
behalf (rather than having to remit them himself/herself)
-
may have employer-paid benefits such as health care, sick leave,
pension plan, professional development, parking, and gym membership
-
cannot claim tax benefits, for example, deductions for work-related
expenses
If a person is a contractor, s/he:
- is
considered self-employed and therefore is not covered by most
employment protection under both the common law and employment
legislation
-
may have to arrange and pay for his/her own work-related accident
compensation
-
is free to provide his/her services to other organizations
-
does not have statutory deductions applied to his/her pay and
must provide his/her own tax, Canada Pension Plan, and Employment
Insurance payments to the government, as well as paying for his/her
own additional benefits
-
can claim most reasonable business expenses as deductions on his/her
yearly income tax returns
WARNING:
The contents of these FAQs are intended as general legal information
only.
If
you have a personal problem, please consult a lawyer.
May
2008 |
