If you're hiring people to help with your business, it's important to know if they're employees or self-employed. Here's how to decide a worker's employment status in the province of Quebec.
Employee or self-employed, why you need to know
If you're an employer, you have obligations beyond providing wages. You must also:
- Deduct employment insurance benefits
- Deduct Canada Pension Plan contributions
- Calculate and deduct income tax from remunerations
- Remit these deductions to the CRA.
Furthermore, you can face stiff penalties if you don't handle these obligations for employees. The CRA could impose penalties and interest, as well as force you to pay both the employer's share and employee's share of contributions.
The three-step approach to employment status in Quebec
Quebec has specific rules for determining if a worker is an employee or a self-employed contractor. Thus, the CRA has developed a three-step approach for clarification. This is similar to how you determine a worker's employment status throughout Canada but has some regional-specific quirks.
Step 1: What's the intent of the working arrangement?
This step determines what was the intent of the working agreement. Its purpose is to define the working relationship and determine if the parties entered into:
- A contract of service: A relationship between employers and employees
- A contract for services: A business relationship.
Accordingly, the intent can be written into a contract or hiring papers, but it doesn't always have to be.
Step 2: Does it meet the civil code definitions?
The CRA examines the working relationship to see if it matches up with the Civil Code of Quebec. In particular, the agency will look at the definitions of "contract of employment" and "business contract." The CRA will consider the following factors for these definitions:
- Remuneration
- Carrying out the work
- Relationship of subordination.
Step 3: Does the intent match the situation?
The CRA judges if the initial intent of the working agreement matches the facts on the ground. It also checks to see if the working relationship is consistent with the definitions in the Civil Code of Quebec.
When is a worker an employee?
There are some indications that a worker is an employee. Typically, you set these workers' schedules, provide the tools they need to work, control their absences and can impose disciplinary actions. The worker has to do the work themselves and can even have a non-competition clause in their contract.
When is a worker not an employee?
Self-employed workers and independent contractors operate differently than employees. You typically can't set these workers' schedules or their absences. Generally, self-employed workers and contractors provide their own tools, can subcontract the work if they wanted to and can refuse work from the payer.
