Self-employed is a broad title that encompasses contractors, freelancers, and gig workers. According to an RBC report, 13% of Canadians are self-employed. However, for those who hire occasional workers and even those who dub themselves as “self-employed,” the waters are murky, at best. In this article, we will explore the world of contract employees and answer some common questions.

Definition of contractor

A contractor/freelancer/gig worker is a person who is hired by a company to do specific jobs that pertain to that company and its sector. These are non-permanent workers, usually hired on a temporary, project-by-project basis. They are sometimes experts in their field, and their obligation to the company they are doing the project for is to complete the task at an agreed-upon time, at an agreed-upon price.

Some examples of services freelancers may offer are administrative work, writing, social media coordination, photography, etc. Gig workers often service online platforms such as Crowdsource and Uber Eats.

Advantages of hiring a contractor

  • Hiring contractors can be cost-effective. The hiring company pays a contractor for the project or job assigned at an agreed-upon deadline and price. Contractors often do not bill for overtime and are often not entitled to employee benefits (i.e. health care) and paid vacation time.
  • Employers can hire a contractor without committing to a full-time, permanent employee. Once the contract term or task or project is finished, employers may be free to end the agreement, extend the contract, or hire the contractor as a full-time employee.
  • Some organizations take steps to temporarily supplement their organization’s existing inventory of skills with contract workers who are specialists in a needed field. For example, if specific social media accounts need to be brought up to date, hiring a social media specialist on contract can help get the job done faster and more effectively than perhaps asking a full-time employee marketing manager who doesn’t have the requisite skills to complete this task.
  • Contractors typically require less training. They are experts in their field and highly experienced in the area for which you hired them. When contractors have the skills in place and are self-sufficient problem solvers, they can often reduce costs associated with completing specific tasks.
  • Self-employed temporary workers are responsible for remitting their own taxes at the end of the year and are eligible to claim their own workspace, tools, and other deductions.

Disadvantages of hiring a contractor

Misclassification can be a risk of contract or freelance work. It’s important for company leaders to outline a clear distinction of worker status and if necessary, work with legal counsel to define these distinctions in contracts and other required documents for independent workers.

Finding the best fit in a contractor

Here is a list of factors to consider when looking for a contractor who is a good fit for your organization:

  • Experience and expertise: Look for contractors who have a proven track record of managing successful projects similar to the ones you need assistance with. Experienced contractors will have the industry knowledge, insights, and skills to ensure your project is completed smoothly.
  • References: Client testimonials and references will give you a good idea of the contractor’s reliability and professionalism. You can request to review a portfolio and ask for references.
  • Flexibility: Projects may evolve and include additional work at any given time. Contractors must have the ability to adapt to changes and offer solutions to overcome any hurdles.

Tips for those who hire contractors

  1. Do your homework and ask for work samples:
    Ask industry peers for recommendations or consider reputable agencies or online platforms where contractors and freelancers advertise their services. Look for skills that align with the requirements you have defined. And ask to see an example of their work. It should be current and relevant to your business and the type of project you want completed.
  2. Draw up and sign a contract:
    Include names and contact information for both parties, agreed-upon payment amount and terms, and a nondisclosure agreement (NDA) if sensitive information sharing will be involved.
  3. Clarify particulars:
    Where they prefer to work, what hours they keep, how they prefer to communicate, how they prefer to be paid (cheque, direct deposit, etc.) and who will cover any incidental expenses.

Frequently asked questions

When do you need to consider a contract worker?

Consider a contract worker when a specific project needs to be completed and current employees don’t have the skills or time to take it on. For example, you may need to update product descriptions and pricing on your website. In this case, hiring an experienced and knowledgeable freelance digital copy editor may be a great solution.

What should you look for in a contract worker?

Any contract worker who can make a decent living working for themselves is an expert in their field. Be it writing, web design, photography, or forensic accounting. As a business owner or manager, look for experience and concrete work examples, such as a portfolio or project references for work done for reputable companies in your sector.

What should be outlined before a contractor begins a job?

What the job entails, the duration, and payment particulars. Also, where and when the work will be done, if there are any additional costs such as materials on top of the agreed-upon fee for the project, an NDA signed if necessary, and termination clause. All of these should be put in writing and signed by the party hiring the contract worker, by the worker, and if necessary, a witness or a legal representative.

How is a contractor paid?

A contractor is paid by the project, duration they are needed, or even by the word in the case of some freelance writers. It is important to lay out the project and payment terms and have it in writing and signed before the contract worker begins. They can be paid by cheque, direct deposit, or e-transfer, depending on what is agreed upon. Often, deductions are not made for taxes since the contract worker is responsible for paying their own taxes.

The right payroll application can help ensure contract workers are paid correctly, efficiently, and on time.

Learn More

If you looking for an affordable way to automate the process of recruiting a contractor and managing their payroll, you may benefit from ADP’s solutions. Talk to us about your challenges, and we’ll walk you through the solutions we offer — including how companies like yours use them. Call 866-622-8153 start a quote.

This guide is intended to be used as a starting point in analyzing what is a contractor and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.