DIY Management: Five tips for working with freelancers

Uncertain times call for flexible work arrangements. Simon Kent, principal of Kent Employment Law, and Brent Lyon, partner at recruiting company David Aplin Group, discuss the ins and outs of working with an independent contractor

1. Jack, be nimble
Independent contractors can give employers more flexibility, which is especially appealing to project-based businesses, says Lyon. “Having contract employees gives you a little more control over head count. You can more closely track your staffing levels with client needs.” One executive told him, “The big mistake I made was hiring too many full-time employees. I should have made sure more of them were contractors because that’s what ended up sinking the business.”

2. Actions speak louder than words
There can be serious tax ramifications and penalties to getting it wrong, says Kent. “If you have a situation where an employer has 10 people who are calling themselves independent contractors, and CRA comes in and goes, ‘No, they’re actually employees—and you should have been withholding CPP and EI for two years,’ you can be looking at tens of thousands of dollars that you need to pay back.”

3. Watch what you call your “workers”
“The biggest misconception that I hear from anyone involved in this is they’ll say, ‘But the worker has agreed that they’re an independent contractor,’” says Kent. “It’s really not that relevant what the parties thought it was. Just because the employer and the worker want to call the relationship an independent contractor relationship, it doesn’t necessarily mean that it is.”

4. Test the relationship
There are various tests to determine how independent independent contractors truly are: for example, using their own tools, setting their own hours, the ability to subcontract work and the opportunity for profit or loss. “In my experience with this, it’s just almost like a scale,” says Kent. “The more autonomy the person has, the more they’re going to be thought of as an independent contractor.”

5. Reward risk
Independent contractors shoulder more risk than staff and deserve compensation, says Lyon. “Contractors will be paid 25 per cent to 40 per cent more on an hourly basis.” They don’t get benefits and have to pay their own CPP, but they do get tax write-offs not available to employees. “The entire system is rigged in your favour if you have the personality to suit. It just comes down to your appetite for risk and your ability to be a bit of a self-promoter.”