Independent Contractors vs Employees

When hiring the awesome individuals that will help your heart-leading business dreams come true, you may wonder whether you should hire them as employees or as contractors. This is one of the most common and most important agreements you will come across in your business, as there are operational and legal implications that attach to each class.

What’s the difference?

Employees are generally under more of the employer’s control than are contractors: they have set hours, complete work as instructed, use the business’ property to carry out their tasks, and may wear the business logo or uniform. Employees have rights under employment legislation - think maximum hours, statutory holiday pay, or rules around leaves of absence. And since you love and trust your employees, you’ll want to make sure their legal entitlements are respected.

A Contractor is essentially an individual or a group with a specialization who you hire to perform work for your business. They have control over their schedule, freedom to choose how they carry out their work, they use their own materials, and may contract out their services to many different people or businesses at once. Think of a bookkeeper, graphic designer, or an expert in the trades.

Why does it matter?

In short, the distinction between employees and contractors matters because of the tax implications. As a business owner paying an employee, you deduct taxes for them and this is reflected on the employee’s pay stub. But when you pay a contractor, you pay them in full and they are responsible for taking care of their own taxes later.

So, think of employees and contractors as two separate streams. How they each navigate their path is different, their tasks and processes are unique. But they return to the same body of water, the ocean that is your business.

Want to learn more about Independent Contractor and Employee Agreements?

Employee Agreements

Independent Contractor Agreement