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Intention of work contract

One of the most important factors to consider when determining if you’re an employee or self-employed is the intention of your work contract. Is the intent to enter into a contract of service (employer-employee relationship) or to enter into a contract for services (business relationship)? The language used in the employment offer will usually determine this.

Level of control

The level of control the employer has over the work provided is also an important factor. Here are some indicators that will determine you’re an employee:

• The relation is one of subordination. The payer will control how and when the work is carried out.
• The payer chooses and controls the method and amount of pay.
• The payer decides what jobs the worker will do.
• You require permission to work for other payers.

Indicators you are self-employed can be:

• You do not have anyone overseeing your activities.
• You’re usually free to work when and for whom you choose.
• You can accept or refuse work from the payer.
• Your relationship with the payer does not present a degree of continuity, loyalty, security, subordination, or integration.

To better understand this concept of control, picture when you hire a professional for their services, such as a plumber. You do not control the price he/she will charge, the time of the appointment, nor do you oversee the work they will perform. In this case, the plumber is truly independent from you, the payer, and hence self-employed.

Tools and equipment

A strong indicator that you’re employed is who provides the tools and equipment for your job. If the payer supplies the tools and equipment, that’s a strong indicator you’re an employee. If you are providing the tools and equipment for a work project and are responsible for the costs to maintain it, you would be leaning towards being self-employed.

Financial risk

If as a worker you don’t have to bear any financial risk by paying for operating expenses such as rent, equipment, insurance, etc. to perform your work tasks you are likely to be considered an employee since your employer is paying for those expenses.

If you are responsible to pay for such operating expenses out of your pocket to perform your work tasks, you will be considered as self-employed because you are bearing the financial risks of such expenses, like a business. In certain instances, you would still be considered an employee even with those expenses (employment expenses). However, these expenses would not place you at risk of incurring a loss because it is unlikely that the expenses would be greater than your salary.

Opportunity for profit

As an employee you would not have the chance of a profit and risk of a loss even if your salary is contingent on variable payments such as commissions or bonuses. This increase in income is not normally viewed as a profit, as it is not the excess of proceeds over expenses.

As a self-employed individual, you would have the chance of a profit or a loss because you have the ability to seek out contracts on your own. You can set your price for your services and seek out more than one payer. You also control the expenses you incur to maximize your net earnings and increase your profit.

Consider all factors as an aggregate

The factors above are set out by the federal government to help you determine whether you are employed or self-employed. You must consider all these factors in aggregate, meaning that not one factor will necessarily determine whether you are employed or self-employed. Consider all the factors above and then see on the aggregate what type of worker you are.

The federal government has provided a detailed guide on this question which you can view by following this link.