If you need to extend your current operating capabilities for a determined period of time, Canada-based independent contractors can help support your company’s goals.
Working with independent contractors in Canada
As a diverse workforce offering industry specializations, Canada-based contractors can help your company finish certain projects. It’s essential to understand the legal status of independent contractors before you retain their services.
Keep in mind that the province of Quebec has slightly different employment laws from the rest of the country, even though the general divisions between employees and independent contractors are the same. For case-specific details about retaining the services of Quebec-based independent contractors, consult local counsel.
Differences between an employee and an independent contractor
Employees are legally subject to your company’s supervision, control, and rules. In contrast, independent contractors should remain independent from your company and not subject to employee-like discipline or direction (i.e. surveillance, discipline, or time management). Independent contractors operate under a contract for services as a business relationship, and they are not entitled to the benefits of an employee.
Penalties for contractor or employee misclassification
Identifying employees versus contractors is critical in terms of protecting your company from potential risks and liabilities. If you incorrectly classify employees as contractors, your company could be subject to costly lawsuits, notably, in cases of termination of the contract. You may also need to pay for social security contributions and provide retroactive compensation for benefits that would have been owed.
How to retain the services of independent contractors for your company
As you begin using the services of independent contractors to work for your company, keep the following principles in mind.
1. Select candidates strategically
Target specific skill sets and professional experiences. Independent contractors typically have CVs of relevant projects they’ve completed in the past. Throughout screening, interviewing, and contract negotiations, remember that you are building a business-to-business relationship.
2. Create a written contract
The best way to ensure all parties agree on service terms and conditions is to create a written contract. Negotiate with contractors as needed and decide on guidelines to help you navigate your professional relationship more smoothly.
’ll want to cover these terms in your contract:
- Pay rates and timing of payments
- Nondisclosure agreements (NDAs), if applicable
- Length of the contract
- Services the contractor will provide
- Termination and extension conditions
3. Know how to work with independent contractors
An important step in engaging the services of independent contractors is understanding how to work with them. Independent contractors should not receive the level of control or supervision that employees do – they are generally free to perform the work according to their own schedule and methods.
Paying Canadian independent contractors
Unlike employees, contractors are not on your company’s payroll. You can compensate them via a bank, digital wallet, or payment transfer service that works internationally. Each option has its own complications and advantages, so you may need to determine the most secure and reliable choice on a case-by-case basis.
Since there is no employment relationship, you should not provide independent contractors benefits, and all payments should be made in gross as it will be the contractor’s responsibility to deal with taxes and deductions.
Terminating or extending Canadian independent contractor agreements
Contracts typically end by expiry after the contractor has completed a project or service duration. However, it is wise to make provisions for terminating or extending the contract based on overall satisfaction or other unique situations.
Turn to G-P when hiring independent contractors in Canada.
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Contact us to learn more.