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Independent Contracts

For Employers

Hiring an independent contractor in BC has become an attractive proposition for businesses in 2023. Over the past year alone, the number of Canadians who are working as independent contractors has more than doubled. This type of work is becoming a very attractive option for both employers and individuals in the labor force.

As a business, it is important to know that independent contractors are not the same as the employees you hire. While engaging independent contractors has its benefits, there are important distinctions to this relationship and unless care is taken to ensure that the day-to-day relationship is maintained as a true independent contract, there can be risk that an employment relationship is being created. However, with the right approach and contractual agreements in place, you can deal with such risk.

Independent Contractors vs Employees

It’s important to understand the key differences between independent contractors and employees. Independent contractors are not considered employees, and they do not have the same rights or benefits. A few other examples of key differences include:

  • Independent contractors are responsible for their own taxes, while employees have taxes, employment insurance and potential other deductions made from their pay.
  • Independent contractors are not entitled to overtime pay, while employees are.
  • Independent contractors are not entitled to health insurance, retirement plans, or other employee benefits.
  • Independent contractors are responsible for their own WCB whereas employers need to cover WCB for their employees

Benefits for Businesses

As an employer in BC, engaging an independent contractor can provide the following benefits to your business:

Save Money

One of the biggest benefits of engaging an independent contractor in BC is the potential cost savings. You won’t be responsible for their benefits or taxes, and you won’t need to provide them with a workspace or equipment. This can save you a significant amount of money over hiring a full-time employee.

Less Extensive Commitment Necessary

Another advantage of hiring an independent contractor is that you don’t need to commit to a long-term employment relationship. You can hire them for a specific project or task, and then end the contract when the work is done. This gives you more flexibility and can help you save money in the long run.

Don’t need to pay benefits

As an independent contractor is not considered an employee, you are not required to provide them with benefits such as health insurance, vacation pay or sick leave. This results in savings on costly health plans, simpler employment contracts and reduced workload on your HR department.

You Don’t Pay Severance

While you will have some amount of notice for the company and contractor to terminate the contract, independent contractors do not have an entitlement to severance. Therefore, this is a very attractive feature of an independent contract.

Get Top Quality Talent

Since a contractor’s fees are only subject to GST and/or PST as opposed to hefty income tax, CPP and EI, you can offer competitive hourly rates. By working with independent contractors, you can access top-quality talent on an as-needed basis, without having to pay a full-time salary.

Independent Contractor Agreement BC

Engaging independent contractors comes with its own unique set of risks. There is uncertainty on both sides. Independent contractors can choose to leave and then you’re left without that talent. By incorporating detailed clauses, you can mitigate certain risks while drafting an independent contractor agreement. Some of the most important things to consider include:

Payment Terms

Make sure that your agreement clearly outlines the payment terms, including the hourly rate, the payment schedule, and any other relevant details.

Confidentiality

Since contractors might not always feel a deep connection to the company, they might not feel to keep company secrets. Having a well-crafted confidentiality clause is a great way to protect company information and intellectual property. This can help ensure that your contractor does not share confidential company information with third parties.

Project Deadlines

Clearly define the project deadlines and deliverables in your agreement, to avoid any confusion or misunderstandings down the line.

Termination Clause

A termination clause should be included in the contract to outline the conditions under which either party can terminate the agreement, such as breach of contract or failure to complete the work. These are generally much shorter and less onerous than severance clauses. 

IP and Who Owns It 

If the contractor will be creating intellectual property (IP) for the company, ownership rights should be clearly defined in the contract. This can prevent legal disputes over ownership down the line.

New Workforce Environment

With the rise of remote work, independent contractors have become an even more attractive option for businesses. Engaging independent contractors allows businesses to access talent from all over the world, without the need for a physical office space. As a result, businesses can save money on office space and other expenses associated with maintaining a physical workplace.

Consultants

Consultants are typically hired to provide specialized knowledge or expertise in a particular area. They are often brought in to help with strategic planning, business development, or other high-level tasks. Consultants are usually paid on a project basis and are not considered employees of the business.

Freelancers

Freelancers are self-employed individuals who work on a project basis. They are often hired to perform creative or technical tasks, such as writing, graphic design, or programming. Freelancers are not considered employees of the business and are responsible for their own taxes and benefits.

Independent Contracts and the Law

When hiring independent contractors, it’s important to understand the legal implications for your business. While they don’t have the same rights and benefits as full-time staff, they do have certain protections under the law. It’s important to ensure that you are complying with the relevant legislation in British Columbia. At this point in time, laws and regulations surrounding independent contractors in BC are not well defined and generally arise under the common law (the judgments from the courts) and the contract law principles. However, efforts are being made to canvass whether independent contractors should be afforded minimum protections under employment standards legislation. For these reasons, it’s always a good idea to have an employment lawyer in BC help you craft your independent contractor agreements. This will protect you from potential legal battles with contractors, help protect sensitive company IP and information, and ensure you comply with up to date legal requirements.

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