Do you know the importance of knowing it? If CRA (Canada Revenue Agency) comes to audit your company and finds that temporary or contract workers have to be treated as employees, your company should provide all the required source deductions (WSIB, CPP, EI, and EHT) for both employees and employers’ portion with interest and late penalties. The major difference for the employer between an employee and a contract worker (self-employed) is the cost incurred by the employer in terms of benefits and taxes.
CRA has published RC4110 based on a number of factors to help employers analyze the performance and status of the person working for them. The foremost factor is the province in which, the contract has been formed. For example, the factors will be considered in other provinces.
Evaluation of an Employee’s Status not in Quebec
The question that arises here is: whether the person is actually a contract worker or is enrolled as an employee in the company. The relationship between the payer and the worker is based on the following two steps:
Step 01: What is the purpose/aim of the working arrangement?
This question will throw light on the fact that if parties have entered into the service contract (employer-employee relationship) or the contract for services (i.e. business relationship). Payers and workers are free to set their affairs according to the suitability of positions; though, a contract worker needs to make sure that the chosen status should reflect the actual conditions of their working relationship.
Step 02: Ask questions to verify the intent of the parties and the working relationship
Here are 7 most important questions a contract worker should ask in the verification process:
- What is the level of control over the activities of workers?
- Does a worker provide the equipment and tools?
- Is there any possibility for a contract worker to hire assistants or sub-contract the work?
- What is the degree of financial risk a contract worker takes?
- What is the degree of management and investment responsibility for a worker?
- How much can a worker earn? Or, how much profit does he/she can earn?
- Relevant factors, like written contracts
MSM Group works on the principles described by the Canada Revenue job Agency to find the answers to these questions.