Employee vs Contractor

Question 1

What are the criteria distinguishing Employee vs Contractor?

Answer 1

1) Control
2) Ownership of Tools
3) Chance of profit / loss
4) Integration
5) Specific Results
6) Intent

Control
- time and place and how to carry out work
Chances of P&L
- EE: can only get more $$ via OT
- Contractor: increase profit by working more efficiently or harder. bears risk of loss
Integration
- how dependent are they on the organization?
a) how much proportionate income derived from organization
b) is individual free to work for other entities
Specific Results
- EE may or may not deliver results
- Contractor hired to deliver results, with no guarantee of ongoing work
Intent
- contract states EE-ER relationship or business relationship-

Question 2

What are the difference between Employee vs Contractor in terms of:

• types of income earned
• deductions
• CPP Premiums
• EI
• Withholding income tax
• GST
• Employment tax credit
• Record Keeping
• tax filing deadline

Answer 2

Types of Income

• EE: earns employment income
• Contractor: earns business income

Deductions

• EE: limited deductions available
• Contractor: more expenses are tax deductible - generally expenses incurred to earn business income

CPP Premiums

• EE: require to pay 50% of premiums
• Contractor: require to pay 100% of premiums

EI

• EE: can collect EI
• Contractor: Can only collect EI if paying for insurance and under very specific circumstances

Withholding Tax

• EE: held at source
• Contractor: must pay quarterly tax instalment

GST

• EE: not required
• Contractor: required if Revenue > $30K

Employment Tax Credit

• EE: eligible for these tax credits
• Contractor: not eligible

Record Keeping

• EE: not required - ER provides T4
• Contractor: Statement of Rev & Expenses required

Tax Filing Deadline

• EE: April 30
• Contractor: June 15, but taxes owing must be paid by April 30