Hire Contractors in Canada

Did you know that Canada has the most highly-educated workforce in the entire world?

Yes, you heard that right! As much as 58% of Canadians have post-secondary education. In fact, universities, colleges, and other educational institutions in Canada are known worldwide for producing a highly educated and globally competitive workforce that contributes to the country’s economic growth. 

But how does this affect hiring contractors? A well-educated workforce translates to higher profits, more vigorous growth, and enhanced productivity for your business. 

While the benefits of hiring contractors in Canada are clear, onboarding and paying them on time is not always easy. 

In this article, we will explore the various ways to hire contractors in Canada (AOR or direct hiring), their associated challenges, and how you can navigate them successfully!

How to Hire a Contractor in Canada

There are two main ways of hiring contractors in this country. You can either,

• Hire Directly: This means you will be solely in charge of the entire hiring process. It includes understanding the specific requirements of your projects, sourcing candidates accordingly from platforms such as LinkedIn or Glassdoor, drafting compliant contracts, managing the payroll process, and onboarding them.

• Hiring via AOR: The other option is to seek the services of contractor management software or an agency of record.
  • They will handle all the administrative hurdles on your behalf and, most importantly, ensure 100% compliance so that you can better focus on the other vital issues of your business. 

Hiring Contractors Through Skuad AOR

• Skuad’s AOR solutions streamline the entire contractor onboarding process, which includes payment, invoicing, compliance, and more.
• It is a unified platform that enables you to draft locally compliant contracts under Canada's labor laws. With Skuad’s multi-currency payroll management system, you can pay your Canadian contractors accurately and on time. 
• The platform also has an in-built IP protection that guarantees the safety of your company’s IP under Canadian laws.

How to Pay an Independent Contractor in Canada

One of the most commonly asked questions when hiring contractors is: Can you pay an independent contractor a salary? Simply put, the answer is no. 

Unlike in an employment relationship, a contractor is not entitled to a monthly salary or other statutory benefits such as paid leaves and holidays. Instead, you must pay them based on the industry standard charges for your demanding work. 

There are two main ways of paying independent contractors in Canada. 

The first method entails paying directly, through,

• Cheque or international money order: This is inconvenient since it involves a lot of physical paperwork.
• Bank transfer: You may be charged a small fee.
• Wire transfer: Although faster, it is a very costly option for most businesses with budgetary constraints
• International payment platforms: PayPal, WorldPay, or Wise. 

Paying an independent contractor in Canada directly can get extremely complicated, especially if you do not know how to handle taxes or how many contractors you wish to hire. 

To avoid such risks, companies seek the services of contractor management software or an AOR, such as Skuad. With this platform’s automated solutions, you can simplify the entire payment process. It features numerous capabilities, such as,

• Runs global payroll in 100+ currencies.
• Automates contractor invoice creation and
• Consolidates all your payroll needs under one single roof.

Hiring Contractors Directly vs Hiring Contractors via Skuad

If you are still confused about how to hire a contractor in Canada, then here is a detailed comparison between the two main methods that we just discussed previously.

Cost of Hiring Contractors in Canada

Truthfully, there is no fixed cost to hiring contractors in Canada. The price can vary depending on some factors, such as the industry, the type of work you are demanding, or even the experience level of the contractors. 

For example, suppose you are looking to hire a contractor with a specific skill set and many years of experience for your project. In that case, they will likely charge you far more than someone who has just started their career in freelancing and possesses generic skills.

Similarly, the cost of hiring a contractor in Canada will vary depending on the industry. For example, the average salary of a care worker in Canada is currently set at $23.44 per hour. On the other hand, an individual in the IT industry earns around $39.70 per hour.

Challenges of Hiring Contractors in Canada

Let’s look at some of the most common obstacles you will likely encounter when hiring contractors in Canada.

1. Understanding the Labor Laws of Canada

Canada has strict labor regulations that can often be difficult for businesses to navigate or understand. 

For example, the Labor Standards is the primary law that guides the employee-employer relationship; however, it does not apply to contractors in Canada. Instead, specific parameters laid down by the Supreme Court of Canada decide whether an individual is an employee or a contractor. 

They include, 

• If the worker is getting compensated for their work correctly.
• The level of authority the payer has over how the work is getting done.
• Whether the worker uses their own set of tools and equipment to complete the work.
• If the worker can subcontract with another company or hire another worker to complete the services.
• If the worker works only for the payer or has multiple clients.

Understanding this distinction between employees and independent contractors in Canada is especially important to avoid the risk of misclassification of workers. 

However, it can be challenging to manage without solid contractor management software. 

2. Tax and Benefit Implications of Independent Contractors

Unlike in an employment relationship, independent contractors in Canada must track, file, and pay their contributions or benefits. While this does ease some of the burden from your shoulders as an employer, there are other specific provisions that you need to be aware of. 

For example, self-employed individuals or independent contractors in Canada may be eligible for certain benefits under the Special Employment Insurance (EI) program. They include,

• Maternity benefits
• Parental benefits
• EI Sickness benefits
• Family caregiver benefits 
• Compassionate care benefits

In addition, if you ever decide to hire contractors in Canada, you must issue a T4A slip. You must make a copy of this form and provide it to the worker. 

Understanding these various provisions is fundamental to ensuring a compliant international payment process. However, it can sometimes get complicated, especially if hiring multiple contractors simultaneously. 

3. Tackling the Labor Shortage

There were almost a million job vacancies recorded in the first quarter of 2023 in Canada. This can be attributed to several factors, such as an aging population, declining birth rates, and a dramatic shift to remote working. 

While the Canadian government has implemented several measures to tackle this challenge, such as facilitating remote work and attracting immigrant workers, businesses struggle to find suitable candidates for their daily operations.

How to Convert a Contractor into an Employee in Canada

Converting a contractor into an employee or switching from 1099 to W2 is straightforward and involves the following steps.

• Research about the employment laws in Canada

Carefully review and understand the provisions set forth by the labor laws of Canada. For example, this country's employees must work 40 hours a week. Understanding these regulations will help you to avoid legal penalties.

• Negotiate the salary and benefits with the contractor

Communicate all the details related to the switch to your contractor. This includes discussing the salary, their entitled benefits, and the hours they are supposed to work, among other necessary information. 

• Draft a proper contract

Issue a compliant employment contract in writing outlining all the roles and responsibilities of the contractor-turned-employee and yours as their employer. 

• Begin with the onboarding process

Once the contract has been signed, you can begin the onboarding process. This includes seeking the necessary documents, running a thorough background check, and adding them to the organization’s payroll system.

Hire Contractors in Canada with Skuad

Skuad has been the ultimate global employment partner for multiple businesses worldwide. It is an integrated platform with unique capabilities that streamline contractors' onboarding process. 

With the help of Skuad, you can always stay up-to-date with Canada's latest labor and tax regulations and ensure easy compliance. 

Additionally, Skuad’s robust payroll solutions enable you to manage payments in over 100+ currencies and guarantee that all your contractors get paid on time and accurately. 

‍Reach out to us today, and take your hiring journey to the next level with Skuad!

FAQs

Q1: Can I hire a contractor in Canada?

Ans: Yes, you can hire contractors in Canada. It can be done in two main ways. You can hire a contractor in Canada directly or partner up with contractor management software or an AOR such as Skuad that will help you with the hiring process, ensuring compliance and reducing the risks of legal issues. 

Q2: How do I pay a Canadian contractor from the US?

Ans: One of the most cost-effective ways of paying an independent contractor in Canada is by leveraging Skuad’s AOR platform. It enables you to handle payroll in multiple currencies easily, so you no longer have to juggle various banking partners. Additionally, Skuad automates the entire invoicing process, allowing you to make accurate payments with just a few clicks.

Q3: Does Canada have a 1099 equivalent?

Ans: There are currently no provisions for the 1099 form in Canada. Instead, when hiring contractors from this country, you can request a completed W-8BEN form from them. 

Q4: How does Skuad help hire and pay independent contractors in Canada?

Ans: Skuad’s unified platform takes care of all contractor onboarding tasks, including compliance, payment, invoicing, and more. For example, with its multi-currency payroll and expense management system, you can navigate international payments seamlessly. Furthermore, Skuad has an in-house team of legal professionals to help you reduce the risk of misclassification of independent workers.

Q5: What is the difference between an employee and an independent contractor in Canada?

Ans: Unlike in an employment relationship, independent contractors in Canada are not covered under the regulations laid down by the Labor Standards (the primary Canadian labor law). This means that they are not legally bound to work for only one employer at a time and can instead partner with multiple clients. Additionally, independent contractors are not entitled to certain statutory benefits such as monthly salary or gratuity and only receive fees based on the work performed.