Business owners may be tempted when they are hiring staff for the first time in their business to hire everyone as a contractor rather than an employee says Edmonton bookkeeping. Employees carry a different set of liability, as well as they have a requirement to have source deductions withheld from their paycheck, and remitted to Canada revenue agency. Any business owners, especially when they are new need to understand that it is not necessarily the simple, and they could be putting themselves at risk if they think it is this easy. Therefore, business owners should understand the difference between employees and contractors, so that they can avoid getting penalized.
Ultimately, the biggest differences in how employees and contractors get paid is employees work for us at wage that a business owner decides on. And contractors dictate to business owners how much it is going to cost them to complete a job. Edmonton bookkeeping says that employees will have source that actions withheld from their paychecks. This means, an employer must withhold income taxes, CPP and EI. In addition to that, when an entrepreneur remits those source that actions to Canada revenue agency, they have to pay that in addition to the employer portion of CPP and EI.
Contractors on the other hand, do not have to have any source deductions withheld from their pay, and they submit an invoice for the entrepreneur to pay from. However, Edmonton bookkeeping says that a contractor must then pay Canada revenue agency the source deductions themselves, when they finish their tax return. If the contractor does not pay their source adduction, it could trigger an investigation by Canada revenue agency.
Canada revenue agency will be looking to see if an entrepreneur should have hired them as an employee, or contractor. If the investigation reveals that they should have hired them as an employee, the business owner will then be on the hook for paying all the source deductions that are owed. However, if the investigation reveals that that worker was in fact contractor, business owner does not have to worry.
One thing that some business owners have said, according to Edmonton bookkeeping is that they have hired employees and pay them as contractors for several years and they have never had a problem. They tend to think that if they have been able to get away with it, they should be able to get away with it. However, business owners should be cautioned that if they have not been caught by Canada revenue agency, that just increases their risk. Because not only will entrepreneurs have to pay source deductions, but they need to pay the source adduction stating back to the first day that the contractor started working with them. Therefore, the longer an employer has done this, they more than eventually have to pay once their costs.
In order to help business owners avoid making mistakes when they hire people, is helping them understand the difference between an employee and a contractor. By understanding this, business owners can avoid making the mistakes that will end up financially burdening their business. By doing this, they can ensure that there using their money the most effective way possible, to grow their business.
Edmonton Bookkeeping | How Do Employees And Contractors Get Paid Differently
Business owners should understand the difference between employees and contractors when they first start hiring people for their business says Edmonton bookkeeping. The reason why, is so that they can ensure that they are withholding the correct amount of source deductions and remitting them on behalf of their employee to Canada revenue agency. Therefore, even before business owners are ready to hire staff, they should understand what the differences are between the two so they can avoid making mistakes.
Ultimately, Edmonton bookkeeping says that the difference between the two boils down to how much control the business owner has over each worker says Edmonton bookkeeping. The more control they have, the more likely that worker will be deemed an employee. For example, when an entrepreneur hires an employee, they dictate the rate of pay that they will be paying them, ensure that they have a set schedule that they must adhere to. And in return, business owners will have to shoulder the liability, owning the equipment that the worker uses, paying all the bills, buying all the supplies and materials. Also, employees will have no liability when they come to work of being able to profit or lose money, they simply show up, and to do the work that they are told, and take home a paycheck.
Contractors on the other hand have a considerably higher amount of freedom. They will tell a business owner how much they will do a specific job for, and issue an invoice when that job is pleaded to the business owner. They also will be able to do the job when they want, showing up to the jobsite when they want, and leaving when they want as well. They can even higher a staff to work on the job for them if they like. But because of that freedom, Edmonton bookkeeping says that they have their own set of risks. They must buy their own supplies and materials, pay their own bills, and own their own tools. Because of all this, they have the ability to either profit from the job or lose money.
When entrepreneurs are hiring staff for the first time in their business, they should be very crystal-clear about what type of worker they are hiring, and they may even choose to create an employment contract, so that if Canada revenue agency has any questions, a business owner should build to provide the employment contract that can help rural in the business owner’s favour.
Very important that business owners are aware of these differences early on in their business, and before they have hired their first staff member. However, business owners should understand that if they have already made this mistake, they can fix it quite easily, either by asking contractors to become incorporated, or to let them know that they are going to be hired on a staff, that they will start getting source deductions filled from their paychecks. By doing this, business owners can immediately reduce their liability.