Independent Contractors vs. Employees
Should I hire my staff as Independent contractors (IC’s)? Or Employees? What’s the real difference? Okay, here’s the lowdown on this very common issue people ask me surrounding employment.
There is a very real difference between IC’s and employees, and a lot has to do with taxes, benefits, autonomy and intellectual property (IP). As an IC, you are hired for a specific service, you must pay your own taxes and the employer does not deduct any taxes, pensions or any statutory benefits. In Canada, an IC retains all of their intellectual property unless there is a contract to the contrary. This is not the case in the United States, so be careful if you are using US templates! This is especially useful information for artists and creatives. Artistic freelancers are often unaware of this, and they assume that if they are commissioned for a work then the payor owns all of the IP. No, they don’t. You have simply granted them a license for a particular use (unless the contract says otherwise). However, the opposite is true for employees. If you are employed then your employer owns all of your IP.
You cannot simply call your staff contractors, when they perform all the duties of an employee and vice versa. The government has certain classifications and if you have misclassified your workers, you will face penalties from The Canada Revenue Agency as well as other potential statuary consequences. There are no clear-cut categories, but I have worked with Collage, a very innovative HR platform, to create a useful infographic detailing some of the common features for proper classification. Check out the infographic below, and get in touch with AWE if you are unsure of your worker status or how to draft a contract in order to properly comply with a desired classification.
A detailed interview and some other great information is in the full Collage blog post, so be sure to check it out if you’re a freelancer or thinking of hiring and can’t decide if you need an IC agreement or an employee agreement!
If you have any questions about ICs or employment agreements or for more information get in touch with AWE Legal at firstname.lastname@example.org
*This is not legal advice and is intended for general legal education and principles. For case-specific advice contact AWE Legal or other legal counsel.