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4 Points to Consider When Moving from Contractors to Payroll

Moving from contracted workers to payroll employees can have both positive and negative impacts on your business' bottom line. The responsibility that you, as a contractor's client or as an employer, carry varies greatly for both. To help you make the decision we've put together the below list of 4 points to consider when moving from contractors to payroll.

 1. Flexibility:

If you take the plunge to hire employees over contractors, you will benefit greatly from your worker's increased flexibility. Typically contracts choose their own work times which can impact your business' output if you have a tight work schedule. Contractors are also entitled to contract with other businesses while working with you which means you might not always be their priority depending on deadlines. Hiring your own payroll staff gives you the ability to choose their work hours to suit your schedule and only yours, ensuring increased productivity and output. That said, while you were able to avoid carrying out payroll duties such as deducting income tax from your contractors or obtaining their SIN, hiring a payroll employee means the responsibility for carrying out these tasks will lie with you the employer.

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2. Benefits:

When switching from contractors to payroll employees, you should ask yourself can you afford to make benefit payments to your employees based on your statutory obligations as an employer. Contractors tend to not participate in any employment insurance programs, employees on the other hand are entitled to vacation pay, benefits and pension contributions paid for by the employer. Furthermore, employers have statutory obligations as regards salary deductions and remittances. The employer is also responsible for notice and severance requirements according to national employment standards. If you don't think your budget can stretch far enough to cover these requirements it might be time to reconsider contract hiring.

3. Risk:

Another massive benefit to hiring an independent contractor is that they are the ones who bear the risk of not making a profit, bad debts, damage to equipment or an excess of operating costs on the projects they are contracted to work on. In an employee-employer relationship, the financial risk is on the employer, not the worker.

4. Training:

Finally, it's also worth considering the employer's responsibility to provide in-house training to employees when deciding on whether to move from contracting to payroll. In most cases, contractors will be fully trained before beginning a project and will even provide the necessary tools for its completion. In an employee-employer situation the employer is responsible for the full training of their employees which again could impact your bottom line.

Learn more about LedgersOnline's bookkeeping services for small businesses:

Contact us to see how our Bookkeeping Services for Small Businesses can help to streamline your financial processes and give you more time to focus on growing


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