Employee Versus Contractor: Part 3

Part 3: What are the Impacts to the Payer?

Here we are specifically going to explore why a payer may intentionally want to pay a worker in a specific way. Usually, a payer would prefer to pay their workers as if they were independent contractors. Why is this?

• The payer does not need to calculate, withhold, or remit CPP, EI or taxes
• The payer does not need to pay the employer portion of CPP or EI
• While the payer may end up paying GST, those funds are only temporarily spent until the payer files their own GST return (provided they are eligible to claim GST amounts paid in their GST returns)
• The payer does not need to worry about labour laws, such as tracking overtime or statutory holidays

Generally, it is cheaper for a payer to pay an independent contractor than it is for them to pay an employee. The savings of hiring a contractor often come with drawbacks, such as the fact that the contractor:

• Can choose to hire their own sub-contractors
• May decide, within the terms of the contract, how to accomplish the tasks
• Develops their own efficiencies which benefits them, not the payer

It is when payers attempt to obtain the financial benefits of a contractor while removing the inherent negatives that problems are caused. Remember: it is not what we want, nor even the contract we sign, that determines what we are. We need to look at all the facts (as detailed in Part 1).

In Part 4 (our final part of this series), we’ll look at what happens when an employee decides to incorporate, as well as why they may try to do so.