Key Differences Between Employees and Contractors
What is the difference between an Employee and a Contractor?
Unlike contractors, employees are entitled to certain statutory (legal) benefits and minimum standards. These benefits and standards are outlined under both the statute (written law) and the common law (precedents from prior court cases). For example, employers must ensure that employees are paid at least the legal minimum wage and receive the minimum vacation entitlements. Employers are also required to deduct income tax, employment insurance, pension plan deductions, workplace insurance, etc.
Contractors, on the other hand, are not entitled to such benefits and minimum standards. The relationship between the employer and the contractor is governed by the contractor agreement.
The determination of whether a staff member should be considered an employee or a contractor is difficult to make and requires careful legal consideration. Consultation with a lawyer is typically recommended.
Generally, to determine whether a staff member should be considered an employee or contractor, you must look at the following factors (among others):
- Explicit Naming of Relationship
- Ownership of Tools
- Length of Relationship