Contract staffing firms have it made right now, as workforce flexibility is desired by both clients and candidates. But before you can see steady growth as the go-to source for contract staffing, you must ensure payroll compliance is up to par. If you’re not careful, you could find your firm stuck in a pattern of “one step forward two steps back” with the CRA.
A good example of what can trip up your compliance is statutory holiday pay. Independent contractors are governed according to a different set of rules than employees are when it comes to public holidays, and Canada has quite a few of them. And with different holidays recognized in different provinces, you’ll want to be sure you have the rules straight before you’re blindsided.
Check out our roundup of what contract staffing firms must know about statutory holiday pay.
Proper Classification Determines Holiday Pay
First off, you need to be aware of the fact that independent contractors, being self-employed, aren’t paid statutory holiday pay. An independent contractor can work holiday pay into their pricing for their contracts, but their clients don’t have to pay because they aren’t on their payroll. This situation can turn murky fast, however, if you’ve misclassified your independent contractor.
Make sure you use CRA’s four-point test (control, ownership of tools, business risk, and integration of activities) to make sure you’re dealing with independent contractors, not employees. According to the CRA, independent contractors might still be considered employees even if they’ve agreed to contracts, submit invoices, and use their own tools. If you fail the four-point test, then the onus is on your firm to pay them any statutory holiday pay earned.
Misclassification, whether willful or accidental, comes with legal consequences, in addition to liability to pay holiday wages. But what exactly would you have to pay your contractors if they did prove to be misclassified?
Qualifications for Typical Statutory Holiday Pay
For an employee, public holiday wages are based on their regular wages earned plus vacation pay, payable within four weeks before the workweek in which the public holiday occurred. This amount divided by 20 is the employee’s entitlement. An employee must meet certain qualifications to earn this entitlement, however.
To qualify for stat pay, an employee must follow the “Last and First Rule.” The rule states an employee must complete their last shift scheduled before and after a public holiday. If the employee fails to do work one of these days or both, they don’t qualify for stat pay.
Two notable exceptions to this rule include when an employer agreed to let an employee take the day off prior to the public holiday and when employees worked their scheduled shifts before and after a public holiday but were on vacation, leave, or laid off. In some cases, an employee will be entitled even if they fail to work the first or last day before the holiday but have a proven reason for the time off.
Avoid Compliance Woes with a Back Office Solutions Provider
What you need to keep in mind regarding all the above is that if your independent contractors are misclassified and you fail to pay their statutory holiday pay, that amounts to wage theft. Your contract staffing firm’s reputation is at stake. Your resources could inevitable dwindle due to any fines imposed by the Ministry of Labour or CRA.
Your contract staffing firm has major potential to unlock a lucrative revenue stream in Canada’s ongoing gig economy. Your potential growth may be stunted, however, if you fail to properly classify your workers. Consider engaging compliance experts who have decades of experience in keeping pace with Canadian business legislation. You’ll be saving your business’ reputation and ensuring your skilled contractors are served fairly!