The Differences Between Employees and Independent Contractors
While employees and independent contractors can be hired to perform similar jobs, they are classified and treated differently under the law in British Columbia. For example, the Employment Standards Act (ESA) only applies to employees, not independent contractors. Proper classification of all workers hired by a company is crucial for maintaining legal compliance and minimizing liability. To ensure the proper classification of workers, it is important to know the differences between employees and independent contractors. As experts in employment law, the professionals at Linley Welwood have provided some important distinctions between employees and independent contractors. These distinctions will ensure that employers and employees alike understand the rights and the conditions surrounding their respective employment agreements.
An employee is an individual that an employer allows—directly or indirectly—to perform work and receive wages. Employers have control over the direction of an employee and are responsible for outlining their work responsibilities for their employment. The term “employee” refers to all full-time, part-time, temporary, and permanent workers.
Regardless of the number of hours they work, employees:
- Have rights as an employee that are protected under the ESA. This covers elements like minimum wage, holidays, overtime, termination, and notice.
- Typically have an exclusive working relationship with their employer. This means that they cannot be employed with another company in the same industry during their employment.
- Will typically have income tax, Canada Pension Plan, and Employment Insurance payments deducted from their paycheque and remitted on their behalf unless otherwise requested.
- May receive employer-paid benefits such as health care, sick leave, pension plans, professional development, parking, and gym memberships, though this is at the discretion of the employer.
- Cannot claim tax benefits such as deductions for work-related expenses, though employees that work from home may be able to claim some related expenses.
An independent contractor typically operates as an independent business and may perform work for multiple clients at the same time. Most independent contractors submit an invoice for the work they perform and provide their own tools to perform a job. All independent contractors:
- Are considered self-employed and are, therefore, not covered by the ESA.
- May have to arrange and pay for their own work-related accident compensation and sick leave.
- Are free to work for other organizations. Some contractors perform work for multiple companies at the same time, even if the clients work in the same industry.
- Do not have statutory deductions applied to their pay and must provide their own tax, Canada Pension Plan, and Employment Insurance payments to the government.
- Will likely need to pay for their own health benefits.
- Can claim most reasonable business expenses as deductions on their yearly income tax returns (tools, equipment, gas, materials, etc.), though this can vary based on the type of work performed.
To learn more about the differences between employees and independent contractors or for assistance with employment law, reach out to the professionals at Linley Welwood. Our team can be reached through our online contact form and will be happy to answer any questions you may have regarding our services.