When considering how best to scale your business, one thing to consider is the possibility of hiring freelancers instead of full-time team members, for some positions. While it’s best to bring in salaried workers to be responsible for certain ongoing tasks associated with your company, it doesn’t always make sense to do so for all the jobs you need done. If you’re contemplating hiring some freelance professionals, one significant benefit is that it makes managing taxation and payroll a lot easier. Here are some considerations to keep in mind.
It’s easier to deal with the taxes when you hire freelancers.
One of the biggest headaches for business owners to deal with is keeping up with the ins and outs of tax law and requirements. When you are paying a freelancer, this becomes less onerous. You don’t need to worry about collecting a lot of information on a freelance worker, as you would with a full-time employee, nor do you need to send freelancers T4 slips by the end of the fiscal year. This makes completing your tax forms simpler and less work.
Hiring freelancers makes payroll a lot simpler.
Keeping up with payroll can be especially complicated for busy managers and entrepreneurs to stay on top of. But when you hire a freelance expert to work for you, payroll gets a lot easier, as you don’t need to worry about adding taxable benefits, or making payroll deductions for such things as income taxes, insurance premiums, or deduct pension plan contributions. Nor do you need to worry about getting any of these amounts right, based on EI rates and maximums. Instead, you simply contract for a certain rate and remuneration and pay them what they are owed after they send you an invoice.
Additional ways to access tax benefits.
Are you operating as a freelancer? If you are trying to keep your accounts as simple as possible, while also saving money, consider other ways to access tax advantages. Since the tax rate on corporations is lower than that on persons, in Canada, it might be helpful for you to consider incorporating your business. This will not only save you money on taxes; it will also provide you with added business protection.
Additional benefits to hiring freelancers.
When hiring freelance workers, you enjoy greater flexibility.So, if your company is going through a phase of growth and development, you may not yet have the data or resources you need to make certain long-term decisions. Nevertheless, you still need to keep up with ongoing projects, as well as ordinary administrative duties relating to marketing and accounts. When you hire a freelancer to help you in these areas, you aren’t locked into a long-term commitment. You can take your time and decide whether this is a role that you need filled full-time, and what you are looking for in a potential hire. Plus, you can choose from a vast number of professionals not only in Canada but internationally. Especially if you need someone with a specialized proficiency for a one-time project, you may be able to bring in some top-tier talent, if you look at the many different freelancers offering their service via job boards and freelance marketplace sites.
Make sure you are classifying your workers correctly.
This advice about freelancers does come with a caveat: it’s important to be quite clear on who qualifies as a freelancer or independent contractor, so you don’t classify them inaccurately on payroll or in your accounting. Independent contractors typically use their own tools, don’t take tax deductions from their pay, and are not under direct supervision regarding how, when, and where work is completed. Additionally, work relationships with independent contractors can be terminated with no notice, unless otherwise specified in their contract. Do be as accurate as possible when determining the status of your hire, or you could get hit with severe penalties for categorizing an employee as a freelancer.
Sometimes you need an expert overseeing or managing a project only for a limited time. Or you simply don’t have the budget for a full-time hire yet. Whatever the case, the added tax advantages of hiring a freelance worker make it a good decision in many circumstances. For entrepreneurs in search of additional tools and resources for rising to new challenges, sign up for the Career Constructors newsletter.
