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Subject:Re: Contracting and Temp Agencies From:"John Fleming" <johnf -at- ecn -dot- ab -dot- ca> To:"TECHWR-L" <techwr-l -at- lists -dot- raycomm -dot- com> Date:Thu, 3 May 2001 13:24:41 -0600
Canada Customs and Revenue Agency has a similar interpretation of what
is an employer / employee relationship and what is a company /
contractor relationship
Up here they have a set of guidelines or tests that they use to gauge
whether an employer / employee or a company / contractor relationship
exists. The IRS has, I believe a similar list they use.
The tests cover things like degree of control, risk of loss, ownership
of tools, and reliance of the contractor / employee on a single source
of income.
Generally, contractors exercise a high degree of control over where,
when and how work gets done. Employees do not. Contractors run the
risk of not getting paid, or not getting paid enough to cover business
expenses. Employees do not. Contractors supply their own
tools--computers, software, office equipment, etc. Employees do not.
Contractors will have a number of clients, each providing some of the
contractor's income. And loss of any one client would not necessarily
jeopardize the financial security. Employees generally rely on one,
perhaps two or three, employees for income, and loss of employment
could place the employee under a significant amount of financial
hardship.
Now CCRA uses these tests as guidelines, not absolutes. They keep in
mind things that are normal for an industry and field. I suspect IRS
probably does the same thing.
My understanding is the whole idea of these tests came out back when
mass downsizings were popular. And companies got into the habit of
"firing" employees and "contracting" them back. The former employee
would work regular office hours at the company, using the same desk,
same telephone, same secretary, same photocopier, etc. The only
differences were that employers didn't have to pay as many benefits,
and the former employee got to do all the paperwork and do all the tax
deductions.
> From the employer's point-of-view it goes beyond just insurance. It
also has
> to do with the IRS interpretation of who is a contract employee or a
real
> employee of a firm (due benefits etc).
> Even if you incorporated your business, purchased insurance and made
it look
> like you were a temp agency, it still may not work if you were the
only
> employee available for hire. I'm not a lawyer but hope this helps.
--
John Fleming
Technical Writer
Edmonton, Alberta
email: johnf -at- ecn -dot- ab -dot- ca
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