I’m often asked whether it’s better for the company to work with people as employees or as independent contractors (also called contractors or consultants – the differences are of style, not meaning). Consulting is common in the technology business in Canada, particularly during any recession, and as businesses staff up it’s an important question to ask.
Like most everything else, the answer is “it depends”. If you need occasional help, or a discrete task performed, using the services of an independent contractor can make a lot of sense – there’s no fussing with payroll, there are no employment benefits, existing teams are not disrupted, and there is often very little overhead involved. But the employment relationship is generally better suited for situations involving more permanence, and the law reflects this in a variety of ways. Here’s a summary, then, of legal considerations you should take into account when making this decision.
(Finish reading this post on Hyndman | Law).
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Good post, Rob.
I don’t know if you wrote that after seeing the discussion I started on Mark’s post, but I would refer your readers to it for a more philosophical perspective on this, as well as additional practical information (e.g. work-for-hire considerations): http://www.startupcfo.ca/2009/11/top-finance-mistakes.html
Thanks for the comment, Greg!
Rob,
Employers face the similar issues in the States. The IRS has a list of 20 criteria that should be met in order to be Ïndependent Contractor. So if you hire a Ïndependent the employer should due to due diligence to avoid being responsible for back taxes if IRS determines they should have been a an employee.
An excellent article outlining the difference between the two roles. I found it especially interesting the difference between hiring an employee vs a contractor with implications to SRED. This article http://www.startupcfo.ca/2009/11/top-finance-mistakes.html is excellent.\
Keep up the good work
Hey there, since my old post has come up a couple of times, here is a new link to it. The old link does not work anymore
http://www.startupcfo.ca/?p=409
Thanks, Mark – much appreciated.