BIA Employee or Contractor?
In any environment various solutions give varying results, some producing different advantages or benefits depending on the approach taken.
Today, let’s look at what may be best for a BIA in terms of staffing. Various titles are used in BIAs. Most common are ‘Coordinator’, ‘Executive Director’ or ‘General Manager’.
Titles do not play a role in this dissertation. Any staffer can be a contractor, regardless of what title is given. In fact, titles have little meaning in the BIA industry. I’ve encountered coordinators who are paid $25 per hour and executive directors who are paid $15 per hour. Any employer can be generous with titles – it costs nothing. It’s the job requirements that play the greater role in defining what a staffer actually is; whether entry-level office assistant or an office manager with others working under his/her authority.
Let’s first define the respective roles and then consider what advantages each role brings.
The following criteria are check-marks to be used in defining an Employee…
The BIA provides you with
a site (office) wherein you report for work on a regularly-scheduled timetable.
the furniture, phone, fax, computer, printer and other facilities used in the performance of your duties.
The BIA (Board or Hiring Committee) determines
your remuneration per hour.
how and where you complete your work.
what deadlines apply towards assignments.
when to suspend, dismiss, train, re-locate, promote, assign break times, vacations, bonuses.
severance and notice requirements for dismissal.
A Contractor is defined as someone who
owns his/her own site (office) from which he/she provides services.
owns all facilities required, including office equipment, software, paper, ink supplies, etc.
operates a bona fide stand-alone business which provides services to other clients.
may sub-contract some or all of the tasks assigned.
has invested funds to create his/her business and promotes his/her services to other clients.
operates under a time-limited contract.
provides time-log billing for work performed.
can be dismissed without notice unless the dismissal process is stipulated in the contract.
may choose to work off-site and during off-hours.
If a BIA wanted the advantages of hiring a contractor, some of the steps needed would include…
requiring the contractor/staffer to register a company, an HST account and an off-site office location and equipment.
requiring the contractor/staffer to ‘rent an on-site office’ if they do not have an off-site location.
requiring the contractor/staffer to purchase all office equipment and supplies.
requiring the contractor/staffer to provide detailed invoicing as per contract.
requiring all parties to sign a formal contract without restricting hourly work and location and permitting the contractor to serve additional clients. The contract cannot control the contractor exclusively, except for brief pre-defined periods.
Problems and Complications
Unfortunately, problems arise when one side or both sides skip due diligence and approach the hiring in a sloppy manner. I opine that the BIA is guilty of this 95% of the time – it’s the BIA which is hiring and setting the rules and conditions. It’s the BIA which must perform its task professionally. But we all know the BIA Boards are comprised of laypeople and volunteers who sometimes approach their duties casually.
“The best way to avoid drowning is to stay out of the water”
The best solution is to do the job correctly at the start, instead of screwing up and hiring lawyers.
This article is posted to provide some guidance on the choices and approaches available. Bear in mind some important details…
When both sides agree as to the status of staff, (either contractor or employee), the Canada Revenue Agency (CRA) will not get involved and make any ruling. That’s because the CRA will either collect its deductions from the BIA (employer) or the contractor at tax filing time.
It’s only when there is conflict that the CRA gets involved – and that usually occurs if the parting is not amicable. That’s when the problems occur and which can be avoided by foresight. If the parties have no quarrel, CRA involvement is minimal or unlikely.
However, if the parties do not disconnect amicably and the BIA had been negligent in its hiring process (without clearly defining the relationship as employee or contractor), complications ensue.
Negligent arrangements enable a staffer to demand severance and holiday pay by claiming employee status. And if the CRA gets involved, the BIA is liable to rulings that define the staffer as an employee. That’s because many BIA hirings are a hybrid employee/contractor arrangement (unclear as to whether the staff is an employee or a contractor).
When the CRA reviews the matter using the criteria described above as yardsticks, it will invariably decide the staffer was an employee and entitled to severance. This is the CRA’s default ruling. This is where the hybrid factors cloud the actual definition and cause the CRA to rule against the employer.
Such a ruling kicks in some serious costs. The BIA will be burdened with paying both portions of the uncollected statutory deductions; its own and the employee’s share. Also charged will be additional penalties for non-collection as well as interest on the late payments. In summary, sloppiness in hiring can result in costly mistakes.
The solution is to avoid a hybrid arrangement – to clearly define the hiring by carefully implementing the criteria listed above. That way, even if the termination of a staffer is hostile, a CRA involvement will not generate problems.
Such a ruling was applied to the City of Toronto in the early 2000’s and the City had to pony up thousands of dollars (which included penalties and interest) for its casual negligence.
For further commentary on this, read article on ‘What’s Best for a BIA? Part II’ Click here.