Whether you’re looking to do business in Canada or just need to hire the right person for the job, you might be considering working with independent contractors in Canada. A Canadian contractor may have the right experience. They can also help you navigate the Canadian market and conduct business in Canada without needing to set up a permanent establishment.
Before you hire an independent contractor, however, there are some things you should know. These five tips will help you ensure your working relationship with any independent contractor in Canada is as smooth as possible.
1. Make Sure You’re Hiring Independent Contractors
This may sound obvious, but employee misclassification is a problem for many employers inside Canada and outside as well. Employers believe they’re hiring an independent contractor, but the letter of the law states they’ve actually hired an employee.
Generally speaking, employees have different rights than contractors, which can cause problems if you classify someone as a contractor, but the law classifies the same person as an employee.
What’s the difference? Independent contractors usually have more say about the scope of the work and how it’s completed. They may be able to decide what materials are used, for example. They may also work offsite and they supply their own equipment. They may also subcontract the work.
2. You May Have Less Protection
When you hire an employee in Canada, your business will be able to add provisions about intellectual property, non-competition, and more into the contract language. When you hire an independent contractor, you may find you can’t add these protections or you may need to water them down.
Always be sure to check the legal framework in the province you’re operating in.
3. You Are a Client, Not an Employer
Independent contractors work for themselves. In this scenario, your business is a client, not an employer. This benefits you, as you don’t have employer responsibilities towards the contractor.
It does also mean you’ll need to take a step back when it comes to dictating what the contractor does or doesn’t do. They’ll set their schedule, and they’ll often work on their own site, with their own equipment. They may even decide to do business for other clients, including your competitors.
So long as the work is being completed on time and to standard, you don’t have much control.
4. You Pay for What You Get
When you hire an employee, you may need to pay benefits, commissions, bonuses, or any number of other types of compensation. As the employer, you determine these payments. You are also obligated to take payroll deductions and fund vacation for employees.
When you work with independent contractors, you’ll pay for the services or products you receive. There are “extras” you’ll need to pay. Working with independent contractors can thus reduce your overhead and save you a little bit of money.
5. Breaking up Is Easy
If you’re not satisfied with the service a contractor has provided, it’s easy to end the relationship. You’ll need to pay the bill, and then you’re free of the contractor. You’re under no obligation to hire them again. You don’t even need to contact them again.
If the work was truly unsatisfactory, you might even decide to negotiate a discount on the bill. The only way you’ll face a lawsuit is if you fail to pay. This is completely different from the employee relationship, where you may need to pay severance or negotiate a wrongful dismissal suit.
Not sure if hiring a contractor is the right move for you? Talk to a professional employer organization. They can help you navigate the ins and outs of Canadian employment law and help you decide if you need independent contractors, employees, or a mix of both.