Freelancers or Employees? Strategies for Building Your Team Efficiently

As the owner of a small business, you will need to decide whether to bring on full-time employees or source independent contractors.

It is important to determine which type of workers you would like to employ for numerous reasons, but especially when it comes to Revenue Canada. Full-time employees and contractors are both compensated for completing tasks for you, but they are not seen as equal by RC. If RC believes that you are not classifying your workers correctly, they could decide to audit you. The rule of thumb is that an individual is an independent contractor if the employer has the ability to control or direct only the end result of the work and not what is done and how it is done.

If you own a bar and hire two bartenders, for example, they are considered employees. If you bring someone in as required to fix equipment at the bar, they would be an independent contractor—even if you pay them by the hour.

There are advtanges and disadvantages of hiring full-time employees and independent contractors. Most small business owners wish to avoid the added overhead of having numerous employees, but some do not have a choice. It’s best to evaluate your situation and decide what will help make your business financially viable and successful.

Advantages of Full-Time Employees

  • The employees will feel pride in their place in your company. Most people like the security of a job, but they also wish to feel the satisfaction of working with a company that they can call their home.
  • The hourly wage for a full-time employee is often much lower because they have that job security. If you were going to hire out for the same work with a contractor, you can often expect to pay more.
  • You don’t need to look around to find help when your workload goes up. If you are counting on independent contractors and need help fast, your number-one freelancer might be booked—that means it might cost you a great deal more a contractor on short notice.

 

Disadvantages of Full-Time Employees

  • Many full-time employees expect benefits, which are not required, such as healthcare and vacation time. Candidates interviewing for a position will often be speaking with other companies at the same time, so it is important to remain competitive with attractive employee benefits.
  • You’ll need to pay their salaries without exception, even if your business is experiencing a downturn. If you want to cover their paycheques, you’ll need to have a large reserve of money tucked away in your bank account.
  • You’ll have to keep specific payroll paperwork that is required by law. Furthermore, you’ll need to withhold all of your employees’ taxes.
  • You are responsible for the training and professional licensing requirements of your employees. These will vary from province to province.

 

In summary, understanding the differences between independent contractors or freelancers, and a full-time employee, will save you a lot of trouble in the future. Make sure that you set up your business with the kind of workers that you need for true long-term success.

Are you looking for sound legal advice for your organization, business or corporation? Contact KGPC LLP today.

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