control - more control is generally exercised by an employer over an employee than by a client over a self-employed person

chance of profit/risk of loss - self-employed persons usually have some degree of financial risk, and more opportunity for profit than employees

integration - an employee's job will be an integral part of an employer's business, where the tasks performed by a self-employed person will likely be less integrated with the client's business

tools and equipment - self-employed persons are more likely to be supplying their own tools and equipment, as well as being responsible for their maintenance

Supreme Court of Canada 67112 Ontario Ltd. vs Sagaz Industries Canada Inc., June 2001 - although this is a vicarious liability case, not a tax case, it sets out the above criteria in determining the differences between employee and self-employed person.

Tax Court of Canada Preddie v. the Queen, March 2004 - appellant was working as a tutor.  The Tax Court determined that he was self-employed, not an employee.

Tax Court of Canada Woodland Insurance vs Minister of National Revenue, February 2005 - this is an Employment Insurance and Canada Pension Plan case, where the Court ruled that Woodland Insurance was liable for EI and CPP premiums, because the worker was an employee, not self-employed.

qualify for employment insurance

Canada Pension Plan premiums paid 50% by employer

participation in employee benefits, including:

	vacation pay
	provincial medical plan
	extended health benefits - medical, dental, vision care
	disability insurance
	pension plans
	workers' compensation coverage

higher rate of pay for overtime hours

more difficult to be terminated

severance pay if terminated

no record keeping required

must pay employment insurance premiums - see EI premium rates

very few expenses are tax-deductible - see our article on deductible employment expenses

less control over working conditions and hours

no employment insurance premiums

more expenses are tax-deductible - for example, expense of travelling to and from clients' places of business is tax-deductible

more freedom to choose own working hours

can work for more than one client

in first year of operation, income tax not payable until April 30th following first year end - see choosing a year-end on our Small Business page

opportunity for increased profits

no severance pay if terminated

cannot collect employment insurance

must pay employee and employer portions of Canada Pension Plan contribution - see CPP contribution rates

more record-keeping required

often work longer hours with no extra pay

cost of purchasing and maintaining own equipment

risk of loss

liable if contract obligations not fulfilled, thus liability insurance may be needed

no employee benefits

after first year-end, usually must make income tax installment payments

must register to collect GST, except for small suppliers - see who has to collect GST on our GST page

must register to collect PST in most provinces - see our PST page.

cash management and planning required to ensure funds available for tax remittances

may require services of bookkeeper or accountant for the record-keeping and government reporting