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Memorial University of Newfoundland

  Memorial University of Newfoundland

Determination of Employee or Independent Contractor Status

Approval Date: 2015-09-10

Effective Date: 2015-09-10

Review Date: 2019-09-10

Authority:

Vice-President (Administration and Finance) through the Director of Human Resources

Purpose

To provide guidance on determining the status of an individual who, or a business entity which provides services to Memorial University of Newfoundland and to ensure compliance with statutory regulations.

Scope

Individuals and business entities who receive payment from Memorial University of Newfoundland for services they provide.

Definitions

Business Entity — A corporation, partnership, or sole proprietorship.

Business Income — Payments made to an independent contractor. Business income is not subject to any deductions at source. Income is reported on a T4A form. HST may be applicable and is calculated and paid based on the payment amount.

Campus Human Resources Designate — Senior administrator at each campus who has authority in certain human resources policy decisions. The policy Authority assigns, in writing, the Campus Human Resources Designate.

Corporation — A legal entity incorporated within the laws of federal or provincial jurisdiction. The corporation is usually identified by an operating name followed by the words "limited", "corporation", or "incorporated".

CRA — Canada Revenue Agency. A department of the Government of Canada responsible for overseeing tax legislation related to employee and independent contractor status.

Employee — An individual who performs services for an employer under a contract of services.

Employment Income — Payments made under an employee/employer relationship. Employment income is subject to income tax deduction at source, as well as deductions for Canada Pension Plan (CPP) and Employment Insurance (EI) and Worker's Compensation (WC). Income is reported on a T4 form.

Independent Contractor — A business entity or individual providing services under a contract for services.

Partnership — A partnership is an association or relationship between two or more individuals who join together to carry on a trade or business.

Sole Proprietorship — An unincorporated business that is owned by one person and can operate as an individual or as a registered unincorporated business.

Unincorporated Business — Does not have limited liability and is not recognized as a separate legal entity by CRA and the Income Tax Act.

Unit Head — For the purposes of this policy, unit head is the term used to mean Deans, Department Heads, Division Heads, Heads of Schools, Directors, Executive Directors, the University Librarian, the University Registrar, Associate Vice-Presidents and Vice-Presidents, as applicable.

University — Memorial University of Newfoundland.

Policy

The University classifies relationships as employment or independent contractor. Determination of the proper classification of a relationship for payment purposes must be consistent with CRA guidelines, which can be viewed at: RC4110-Employee or Self-Employed. The Campus Human Resources Designate has the authority to determine an individual’s status. This authority may be delegated.

Where a relationship is deemed to be one of employee and employer, the hiring of individuals is conducted in accordance with University policies, procedures and collective agreements (where applicable) and the payment is classified as employment income. The Department of Human Resources withholds, at source, all applicable Federal and Provincial taxes and contributions. Where an employee is eligible to participate in the University’s pension and benefit programs, the University withholds directly from the employee’s remuneration any premiums which the employee is responsible to pay.

Where a relationship is deemed to be one of independent contractor, payment(s) is classified as business income and a contract for services must be prepared. Such individuals are not covered by any of Memorial’s benefit programs. Required income taxes and CPP, EI, Worker’s Compensation, liability insurance, medical and life insurance and any other employment benefits are the full responsibility of the independent contractor. Individual contractors may be required to provide proof of liability insurance and worker’s compensation coverage prior to commencement of work.

The University does not retroactively change the status of an individual from employee to independent contractor or vice versa for any reason other than an assessment from the CRA. All non-remitted amounts assessed including income taxes, CPP, and EI premiums, as well as any fines, penalties or retroactive changes are the responsibility of the hiring unit and the employee as required by the relevant statute.

Adjudication Process

If an individual receiving payment disagrees with the University’s assessment of his/her status, the individual may request a ruling from CRA to have his/her status determined. Refer to the CRA website, Request for a Ruling as to the Status of a Worker under the Canada Pension Plan or Employment Insurance Act. Payment(s) will be made in accordance with the University’s determination until the ruling is received from CRA.

Related Documents

Independent Contractor - Standard Agreement
Freelance Agreement
Request for a Ruling as to the Status of a Worker under the Canada Pension Plan or Employment Insurance Act, CRA
Summary Chart  of Tax Treatment of Various Services Provided to Memorial University
Assessment of Status Form

Procedures

For inquiries related to this policy:

Department of Human Resources, 709-864-2434

Sponsor: Vice-President (Administration & Finance)

Category: People Resources


Procedure for Determining Employee vs. Independent Contractor Status

Approval Date: 2015-09-10

Responsible Unit: Department of Human Resources

  1. Once the identification of the need for work to be performed is made, the responsible individual within the unit (for faculties and schools, this would be a senior administrative officer; for non-academic units, this would be the administrative manager or unit head) is consulted for determining the type of work needed and the development of a description of the job duties.

  2. The responsible individual within the unit determines the initial status of the relationship. To make this assessment, they may refer to:

    a. The Summary Chart of Tax Treatment to determine if the current situation is outlined in the examples listed.

    b. If the current situation is not outlined in the Summary Chart of Tax Treatment and there is the potential that the relationship is independent contractor, the unit must complete the Assessment of Status form.

  3. The responsible individual then consults with its Human Resources Advisor or Manager if applicable (Grenfell, Medicine, and Marine Institute) to review and discuss the work to be performed based on their assessment.

  4. The Campus Human Resources Designate makes the final decision as to the status of the relationship.

  5. If it is deemed that an employee/employer relationship exists, the responsible individual within the unit consults with its Human Resources Advisor, or Manager, and proceeds based on hiring processes.

  6. If it is determined that an independent contractor relationship exists, the unit must complete the “Independent Contractor Agreement” or “Freelance Agreement” as applicable. The contract Administration Policy should be consulted for appropriate signing authority.

    a. If no changes are required to the Independent Contractor Agreement, the unit completes the form and forwards the signed contract to Financial and Administrative Services for payment. A copy of the Assessment of Status form, a copy of the invoice for payment and the direct pay form must accompany the Independent Contractor Agreement. 

    b. If changes are requested to the Independent Contractor Agreement, the unit recommends required changes and takes the appropriate action (either i or ii below):

i. If the changes are related to Liability insurance, the responsible individual within the unit forwards the recommended revisions to the Office of the Chief Risk Officer for advice. When advice is provided and the necessary changes have been made to the agreement, the signed revised contract along with confirmation from the Office of the Chief Risk Officer is sent to Financial and Administrative Services for payment. A copy of the approved Assessment of Status Form, a copy of the invoice for payment and the direct pay form must also accompany the revised Independent Contractor Agreement form.

ii. If the changes are related to other clauses, the responsible individual within the unit forwards the recommended revisions to the Office of the General Counsel for advice. When advice is provided and the necessary changes have been made to the agreement, the signed revised contract along with confirmation from the Office of the General Counsel is sent to Financial and Administrative Services for payment. A copy of the approved Assessment of Status Form, a copy of the invoice for payment and the direct pay form must accompany the revised Independent Contractor Agreement form.

A condensed version of this procedure can also be viewed in a procedural Flow Chart.