Being an independent contractor comes with some great advantages:
- Self-employed workers often charge more per hour than an employee in a similar position. This can enable you to earn more money than you would as an employee.
- Self-employment allows you to claim any valid expense needed to operate your business. These may include any at-home business expenses (such as telephone, internet, and other utilities), business use of vehicle costs, meals, purchase of equipment, and even entertainment, in accordance with the Canada Revenue Agency’s (CRA) guidelines.
- Your clients will benefit as well. Since you will not be on payroll, they will not have to deduct taxes, make EI and CPP contributions, pay statutory holiday pay or follow employment standards legislation.
- Ability to direct your own work, choosing when and how you work.
Disadvantages:
- Job security: There is almost no job security in contract work. The temporary nature of a contract means that employment can be sporadic, scarce, and precarious. As an independent contractor, you can be terminated at any time by the company that contracted you, without any form of severance pay. If this happens, you cannot collect EI because you do not pay into it.
- Work conditions: The threat of such easy dismissal and lack of financial protection can leave self-employed workers hesitant to raise complaints that might be valid workplace grievances, as traditional employees would.
- Some employers exploit the low level of protections that are afforded to these workers, hoping to avoid compliance with legal employment standards that full-time employees would have. This could result in poor working conditions.
- Benefits: Because the work is contracted, companies you work with do not have to provide the same assurances that full-time employees receive. As an independent contractor, you do not receive benefits, sick pay, or statutory pay, unless these have been negotiated (this is why independent contractor hourly rates are usually higher than employee rates).
- Liability: Independent contractors have very thin legal safeguards compared with traditional employees when it comes to issues of liability. As an independent contractor, you can be held personally liable for mistakes or accidents that occur while working. If something goes wrong, you may find yourself the target of a lawsuit, rather than the company you hold the contract with. It is possible to get insurance to protect against this, but it can be costly.
- Stress and Health: Though every type of employment can be stressful, contract work often means uncertain schedules, scattered demands, spans of unemployment, uneven cash flow, and very little in terms of social insurance such as pensions and benefits.
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