An example of when it may be preferable to use a contractor is for specialized, time limited services such as bookkeeping.

If a worker is found to be an employee rather than a contractor, the non-profit could:

• Owe wages for sick pay, vacation pay, overtime, parental leave, or severance
• Owe contributions to CPP/EI for both the employee and employer portions going back 6 years
• Owe income tax deductions
• Owe workers’ compensation premiums
• Potentially face increased future premiums, legal costs, and penalties
• Potentially face damages if the worker is found to be an employee who was wrongfully dismissed

Intended to create means whether it was meant to be an employer-employee or business relationship.

Financial dependence means the worker relies largely on your non-profit as a principal, if not sole, source of income. Contractors often have more than one source of income i.e. more than one client.

Setting the amount and date of regular, continuous payments (bi-weekly  for example) is an example of your non-profit deciding when and how to pay for the work.

Financial risk/reward means who stands to win or lose as a result of the work done.

Providing office space and a computer for the work points to an employee relationship.

Dictating hours and location where the work is performed is exercising control over the worker.

The factors used by the Canada Revenue Agency (“CRA”) to determine if a worker is an employee or a contractor are: control, ownership of tools and equipment, financial risk/reward, dependence, and intention of the parties.

The distinction is important for the tax and benefit implications and for the availability of employment standards protections. Getting it wrong is problematic.

For example, if a worker is found to be an employee rather than a contractor, your non-profit may be liable for unpaid overtime.