WHY COMPANIES HIRE INCORPORATED INDEPENDENT CONTRACTORS
To schedule an appointment, contact our law firm at 403-400-4092 or Chris@NeufeldLegal.com
Although there are legitimate benefits from incorporating the business that you undertake as an independent contractor, the reason that a hiring company wishes to engage an incorporated independent contractor are not altruistic, but driven by the company's own self-interests. Hiring companies are primarily focused upon self-serving objectives when they establish that the work is to be undertaken as an incorporated independent contractor and will only proceed under that particular business arrangement.
Among the reasons for which hiring companies will oftentimes insist on their work arrangements being with an incorporated independent contractors:
A. Reduced Payroll Costs and Administration
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Avoids employer's contributory share to government remittances for Canada Pension Plan (CPP) and Employment Insurance (EI).
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Eliminates responsibility for withholding income tax at the source (source deductions).
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Avoids statutory payment obligations under employment standards legislation, including vacation pay, holiday pay, overtime pay, and termination pay-in-lieu of notice.
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Avoids common law employment payment of severance pay (working notice).
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Eliminates for standard employment arrangements, including paid sick days, employee benefits (like health/dental insurance), and other incentive payment arrangements.
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Payroll process is simpler, as the company simply pays an invoice from the contractor's corporation (though they must file a T4A slip for payments over a certain threshold).
B. Flexibility and Specialized Expertise
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Allows for the hiring of specialists for a specific project or time period without the commitment of a permanent, full-time employee.
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Contractors often bring a high level of expertise in a niche field and require less training.
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Contractors are generally easier and faster to terminate a contract relationship than to terminate an employee, reducing potential legal costs associated with severance / termination notice.
C. Business-to-Business Relationship
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Hiring an incorporated independent contractor means engaging in a business-to-business relationship, which further reinforces that the worker is an independent business, not an employee.
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Companies, especially government agencies or larger organizations, will oftentimes require independent contractors to be incorporated for liability and administrative reasons.
So when the particular work assignment requires your engagement as an incorporated independent contractor, there are specific requirements and considerations that should be dealt with. And even though it may appear as a relatively straightforward process, there are important considerations that should be addressed when incorporating as an independent contractor, both specific to the incorporation itself and the interconnected business arrangements that are being undertaken [also consider the proposed independent contractor agreement]. And those interconnected business and legal considerations tend to be specific to the individual business circumstances of the independent contractor, which can benefit from drawing upon the legal insights and strategic perspective of a corporate business lawyer, with over 25+ years of legal experience working with businesses from New York City to Toronto, Ontario, and now in Calgary, Alberta.
For an experienced business lawyer capable of provide you with such legal support and strategic direction, contact our law firm at Chris@NeufeldLegal.com or 403-400-4092 to schedule a confidential initial consultation.
