Making the Right Decision

UBC hires people for a variety of positions to do a wide range of jobs.  Sometimes there is confusion around whether the individual hired for a task can be paid as an independent contractor rather than as an employee.  This decision is not up to the department or the individual worker – it depends on the nature of the worker’s job and his or her relationship to the University. 

It is important to get the classification right. Whether a worker is considered an independent contractor or an employee will have significant impact for an assessment of taxes, benefits, requirements under collective agreements or labour standard laws, vicarious liability, indemnity clauses, insurance coverage, and ownership of intellectual property.

There are a number of tools on this web page to help make the right decision, starting with an overview of the legal tests used by the courts for employee or independent contractor.  Use the flowchart, checklist, and scenarios to help establish the correct classification.  If you are unsure, please contact Human Resources or Faculty Relations for advice. See CRA website for Employee or Self-Employed guide.

Making the Wrong Decision

The decision of whether a worker is an employee or an independent contractor should be made before the work has begun.  If the Department incorrectly classifies an employment relationship and pays the worker as an independent contractor, both the University and the worker are at risk of a reassessment from the Canada Revenue Agency (CRA).  The University will be liable for costs of payroll taxes, Worksafe BC , unremitted Employment Insurance and Canada Pension Plans premiums, penalties and interest.  The worker may be liable for claiming incorrect business deductions. 

The Department will be billed for these costs.

If the University is unclear with regard to the degree of independence normally held by a worker, the relationship should be set up as one of employer/employee.

Payment

Employees are paid through Payroll. Independent contractors are paid through Requisitions for Payment. Independent contractors (over $3,500) are paid by processing a Purchase Requisition to Supply Management, who processes a Purchase Order and formal Letter of Agreement outlining the Terms and Conditions of the work including insurance and liability.  Please consult the Finance Website for compensation details. 

Advertising

If the worker is determined to be an employee, the job must be posted in accordance with the University’s advertising guidelines.  If the worker is determined to be an independent contractor, the job does not need to be posted.

Audit

The University, as the employer, is responsible for final determination of the worker’s status.  From time to time, the University may audit the work relationship classifications in place to determine whether a worker is appropriately retained as an employee or an independent contractor.

Further Information

Contact Finance, Human Resources or Faculty Relations for further information from UBC.  For external assistance, consult the Canada Revenue Agency's Employee or Self Employed? booklet.  Individual workers can also request an employee/independent contractor ruling from CRA.