Employment Standards – Employee or Subcontract?

Employment Standards – Employee or Subcontract?

In British Columbia, the Employment Standards Act clearly outlines what qualifies as an employee and what qualifies as a subcontractor.

So many businesses are doing their best to reduce costs – especially the cost of labour. With wages, vacation pay, the employer’s portion of CPP and EI, plus payments to WCB (WorkSafeBC in British Columbia), these items can often make the difference in winning or losing a contract, purchase order, exclusive deal or even just making financial ends meet. I have heard businesses just say to their hirees, “you are a subcontractor and are responsible for your own deductions,” without considering that the hiree is, in fact, an employee. Much must be considered when designating individuals as a subcontractor.

This is what Employment Standards expects when you hire a subcontractor:

#1) Issue of Control – do you, as the employer, have control over the individual’s time, or does the individual be allowed to come and go as they please? Does the individual hired have control over his/her quality of work exclusively? Who controls breaks and time off?

#2) Ownership of Tools – did you, as the employer, provide tools to the individual to complete his or her task or does he or she have his/her own tools?

#3) Chance for Profit – does the individual hired have a chance to make a profit on the project or job?

#4) Risk of Loss – does the individual stand a chance of financial loss for costing out a job that may cost more than what they quoted for it?

#5) Payment – is the individual paid at regular intervals or is he/she paid out when they have an opportunity to invoice it out?

Anything less than what is outlined here, your hiree is considered an employee.

This is a very misunderstood part of business. Here at Seianna Financial Services, we employ both employees and subcontractors, titled “Independent Contractors”. When a new Independent Contractor is introduced to the company, they are hired as employees first so that I have control over their training for bookkeeping and/or tax preparation. Once their training period ends, they are set up in their own office, most often a home-based business, and are paid commissions on all invoiced items that have been paid. Seianna Financial Services meets all five regulatory requirements for subcontractors. Thankfully head office and the Independent Contractors have an excellent working relationship and high degree of trust so we function well together.

For a factsheet (for British Columbia) on this segment, please copy and paste this link: http://www.labour.gov.bc.ca/esb/facshts/pdfs/employee-or-contractor.pdf

For provincial or state jurisdictional regulations outside British Columbia, please consult your proper provincial or state government authority on this subject.

Seianna Financial Services is “Serious About Your Business”. Go to our bookkeeping page and check out our prices, service guarantee and to contacts to find an office most convenient for you. We can do bookkeeping for clients in every province and territory except Quebec.

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