It’s crucial to know whether your workers are employees or independent contractors. Big dollars may be at stake in the form of Federal and provincial assessed penalties resulting from mis-classification. The validity of your company’s pension plan may also be at stake.
A periodic review of the status of your workers to see if they are properly classified is critical, but the process isn’t easy due to the complexity of the issue. The Canada Revenue Agency has published a guide called “Employee or Self-Employed?”, which contains an extensive analysis to determine whether there is an employer – employee relationship or a business relationship.
The four factors which are considered are:
- Control of the worker;
- Ownership of the tools;
- Chance of profit/risk of loss an;
There is no litmus test for exactly how many factors must be satisfied, nor are the factors uniformly applied.