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How to Ensure Independent Contractor Compliance

Posted by Stacey Duggan

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Dec 7, 2016 9:00:00 AM

How-to-Ensure-Independent-Contractor-Compliance.jpgComplying with current Canadian employment laws is an absolute must for any staffing business. In order to ensure independent contractor compliance, staffing agencies need to know the difference between independent contractors and employees when it comes to employee control, ownership of tools, financial risk, and subcontracting work. On top of being able to differentiate the two types of workers, staffing agencies must accurately and thoroughly follow administrative and regulatory protocol to ensure no preventable mistakes occur. 

According to an American study, 43% of the workforce says they would be interested in pursuing non-traditional work arrangements, and more than 2.6 million workers are already working under the flexibility offered by the independent contractor system. Regulatory agencies have noticed these changes in hiring trends, and hiring managers are looking to take advantage of the freedom that come with more temporary and flexible employment arrangements. 

Making a classification mistake can lead to lengthy negotiations, worker dissatisfaction, and even large lawsuits. You also put your entire company’s reputation at stake when you break Canadian labour laws, intentionally or not. Fortunately, you can ensure independent contractor compliance by understanding how misclassification mistakes occur, adjusting your practices accordingly, and even outsourcing your workload to a back office solutions provider.

Misclassification Mistakes

Does your staffing agency know the difference between an independent contractor and an employee? Is there a chance you might have misclassified someone who is an independent contractor as an employee (or vice versa)? Misclassification happens when workers are labelled incorrectly as either independent contractors or employees, and can end in serious consequences. 

As far as the difference in working style goes, independent contractors do not have someone overseeing their work; they can work for the general public; they can work for competing businesses; and they can accept or refuse the work offered by the business. As you can imagine, employees typically do not have this type of independence and choice over their workloads.

How Do I Avoid Misclassification?

Misclassification happens when staffing agencies either don’t know how to effectively differentiate between independent contractors and employees, or when clerical mistakes happen and they unintentionally misclassify employees. Regardless of intent, staffing agencies are held accountable to misclassification mistakes. 

You can avoid misclassification by making sure your staff is educated about the differences in workers as well as the consequences of independent contractor misclassification. Independent contractors are responsible for supplying their own tools and supplies, and paying insurance out of their own pocket. Independent contractors are expected to manage their wages to cover the costs that typically might be paid by an employer. That’s why misclassification can be so severe: when a mistake is made, it can cost the worker a lot of money, and end up in an unpleasant lawsuit. 

Misclassification mistakes can happen just like any other administrative mistakes, only this time the stakes are much higher. While all companies must comply with the rules of the Canada Revenue Agency (CRA), the staffing industry in particular is subject to close inspection when it comes to classification.

Outsource Your Worker Classification Needs

Staffing firms must be well versed in wage law, WSIB, privacy legislation, termination notice rules, insurances, liabilities, pension plans, benefits plans, anti-discrimination laws, and taxes. If this seems like a lot, it certainly can be, especially for smaller, up-and-coming agencies where employees are kept busy helping your business grow. 

Outsourcing your worker classification to a back office solutions provider ensures that all mistakes can be avoided, even if you think you know everything about independent contractor compliance. Companies big and small can benefit from the extra help, and in addition to taking care of independent contractor compliance, there are a host of other benefits to partnering with a back office solutions provider.

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Topics: Worker Classification

Stacey Duggan

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