Types of employees hired during economic recovery
Many believe that the amount of temporary work rises dramatically during an economic downturn because employers are reluctant to hire permanent employees at full salary. Companies believe they save on hiring people for temporary work as they typically pay temporary workers substantially less than permanent workers and do not usually provide them with benefits. In light of the economic recovery in Canada, we recently asked HRinfodesk readers what class/type of worker their organization has focused its hiring recently.
According to poll results, the majority of respondents (60.34%) are hiring full-time permanent workers. Many have commented in the following line by saying that they are focusing on full-time permanent workers because their company is in a growth cycle at the moment and full-time employees have a vested interest in the success of the company.
While employees who perform temporary work can help keep a business running smoothly, temporary workers are usually less motivated and sometimes lack the initiative of permanent employees, especially if there is no chance for the temporary worker to land a job with the company.
The hiring of full-time permanent employees is a good sign and we hope the trend continues.
However, we did receive some comments from employers wanting definitions on the different types of workers and employer obligations under the law towards these types of workers.
So here is what we have to say briefly on the topic.
Types of employees
- Full-time employees are those hired for an indefinite period (permanent), who normally works the full weekly hours set by the employer (usually 40 hours a week) and who are paid a competitive wage. Full-time employees are usually provided with competitive benefits beyond those legislated.
- Part-time employees work less than full-time employees and are hired for an indefinite time. Generally, they work fewer than 25 hours per week (this is not set in law but a best business and payroll practice). Part-time employees are generally not provided with benefits beyond those legislated unless the employer creates a policy with more beneficial thresholds. They are paid a competitive wage and may be given some of the discretionary benefits afforded to full-time employees, but on a reduced or pro-rated basis.
- Temporary employees (not hired through a temporary help agency) work for a definite period of time, either full-time or part-time. They are told, in advance, the period of employment, entitlements to employer-provided benefits, and under what conditions employment may be terminated. Jobs that require a limited time frame for completion of a specific work project, or a replacement employee during maternity and/or parental leave are considered temporary jobs. Temporary employees are generally not provided with benefits beyond those legislated unless the employer creates a policy with more beneficial thresholds. In that case, they may be given some of the discretionary benefits afforded to full-time employees, but on a pro-rated basis.
- Term-contract employees or contract employees have a written employment contract for a fixed term. Upon expiry of the contract, it is understood that the relationship between the parties has ended, with no notice period required. Should the parties wish to continue the relationship, they should enter new negotiations which will be stipulated in a new agreement. It is further understood that this fixed-term employment contract is implemented for the sole reason of the nature of the position or specific work project described in the agreement. They are generally not provided with benefits beyond those legislated unless the employer creates a policy with more beneficial thresholds. In that case, they may be given some of the discretionary benefits afforded to full-time employees, but on a pro-rated basis.
- Assignment employees (Ontario)/temporary employees of temporary help agencies are persons employed by temporary help agencies for the purpose of being assigned to perform work on a temporary basis for clients of the agency. "Assignment employees" is the legal name of what are commonly known as temporary or elect-to-work employees (but not the type of temporary worker outlined above) in Ontario. They are generally not provided with benefits beyond those legislated unless the employer creates a policy with more beneficial thresholds. In that case, they may be given some of the discretionary benefits afforded to full-time employees, but on a pro-rated basis.
- Seasonal employees are a category of temporary employees who perform jobs with a predetermined start and end date attributable to seasonal factors. As such, seasonal employees do not work year-round and are generally subject to recall on an annual basis. They typically perform work that, because of its nature or factors peculiar to the industry in which the work is performed, is available at approximately the same time or times every year, for only part(s) of the year. For example, seasonal workers are typically employed in the fishing, agriculture, forestry and construction industries. They are paid at least minimum wage or the base rate applicable to the particular service or industry. Seasonal employees are generally not provided with benefits beyond those legislated unless the employer creates a policy with more beneficial thresholds. In that case, seasonal employees may be given some of the discretionary benefits afforded to full-time employees, but on a pro-rated basis.
- Casual employees are a special category of temporary employees who work intermittently, as they choose, when the opportunity is offered. Casual workers, such as clerks, are typically employed by the retailing and service sectors where short work assignments may be offered on a "fill in" basis. Discretionary benefits are seldom provided beyond those legislated unless the employer creates a policy with more beneficial thresholds. In that case, casual employees may be given some of the discretionary benefits afforded to full-time employees, but on a pro-rated basis.
Thus, all of the above types of employees are considered employees and are covered under the Employment/Labour Standards legislation of your jurisdiction. They all enjoy the same rights and protection under the law unless they are exempt because of their industry sector or profession. Specifically, this means that you must pay these employees at least minimum wage for the work they perform and provide these employees with termination notice or pay in lieu of notice as well as severance pay (if applicable) when you decide to end the employment relationship. You must pay them vacation and public holiday pay and allow them to take statutory leaves, among other things.
They must also be on your payroll and counted as an employee, and you must make the necessary and required deductions at source under the Income Tax Act.
Foreign workers (may also be known as migrant workers) are persons who work in a country other than the one of which they are citizens, without initially intending to settle there and without the benefits of citizenship in the host country. Some are recruited to supplement the workforce of a host country for a limited term or to provide skills on a contractual basis that the host country seeks. Others are recruited directly by a private employer, which may need to certify that it cannot find workers among the country's own citizens. Host countries may also import foreign workers for jobs their citizens refuse to do.
Employment standards, labour relations, occupational health and safety and workplace insurance legislation generally apply equally to resident employees and temporary foreign workers in your jurisdiction.
There are exceptions and special rules that apply to certain occupations/industries that may happen to engage temporary foreign workers (e.g., farm employees, domestic employees, construction employees, film and television employees, professionals, managers and information technology professionals). These exceptions and special rules apply equally to resident employees and temporary foreign workers.
For example, in Ontario, the Employment Protection for Foreign Nationals Act (Live-in Caregivers and Others) expands protections for some of Ontario's most vulnerable workers, foreign national live-in caregivers by:
• Banning fees charged to live-in caregivers by recruiters, either directly or indirectly, or by anyone on behalf of a recruiter
• Preventing employers from recovering, directly or indirectly, recruitment and placement costs from live-in caregivers
• Prohibiting the practice of taking a caregiver's personal documents such as a passport and work permit
• Prohibiting reprisals against caregivers for exercising their rights under the legislation
• Allowing live-in caregivers up to three and a half years to make a complaint under the Employment Standards Act
• Providing live-in caregivers with more information about their rights under the Act and the Employment Standards Act
The EPFNA is in addition to the protections that foreign national live-in caregivers have under the Employment Standards Act as outlined throughout this publication.
Independent contractors or self-employed are not employees; they are more like suppliers and vendors that you retain to perform specific work for a specific period of time. Some common areas of contract work are cleaning, maintenance, sales and other specialized work. These contractors do not appear on your payroll. They usually have their own company, have their offices outside from your premises, make their own schedule, have other clients, provide you with an invoice for the hours and work done and so forth.
Many employers incur liability by erroneously treating a worker as an independent contractor when the worker is actually an employee pursuant to different legislation. "Independent contractors" have been found to be employees under Labour Relations and Employment Standards legislation, as well as under the Income Tax Act, Employment Insurance Act, CPP, etc., as well as applicable collective agreements. Although the legal test concerning whether a worker is an employee will vary from one statute to another, often the issue will turn on the degree of control the employer exercises over the worker's day-to-day activities. The fact the individual was hired and paid by another individual or company is often not determinative. Improperly characterizing an employee as an independent contractor may result in an employer liability for notice, severance, income tax and other deductions. Wrongly treating an "employee" as an "independent contractor" is a common mistake made by many employers-one which can be both expensive and avoided.
How the employer-employee relationship is determined
An employer-employee relationship usually results in payroll taxes for the employer. Such a relationship usually exists if the employer has the right to control and direct the person who performs the job or service(s).
Some of the criteria for determining whether a person is an employee include:
• The extent to which the services rendered are an integral part of the business
• The permanency of the relationship; for example, is the person paid on a per job basis rather than hourly or salary?
• The nature and degree of control by the employer, such as being trusted to perform the work without direct supervision, setting one's own hours, the performance of work off the premises
• The degree of independent initiative and judgment exercised by the person who performs the services
• The degree of open-market competition with others required to secure the contract with the employer
From a tax perspective, the primary tests focus on the degree of control the employer has over the worker.
Control of day-to-day activities is also the primary consideration when determining if the worker is an employee under labour relations legislation, or if the worker is covered by a collective agreement. It is worth noting that some collective agreements specifically prohibit "contracting out."
From a payroll tax perspective, the Canada Revenue Agency (CRA) considers four factors: control, ownership of tools, chance of profits/risk of loss and integration.
Employers should obtain the CRA publication RC4110 titled Employee or Self-Employed? for information about these factors. This publication is available from local CRA District Taxation Offices or on the Internet at CRA's website at http://www.cra-arc.gc.ca/E/pub/tg/rc4110/README.html.
After reviewing the above publication, if employers are unsure of the employer-employee relationship, consider contacting the local CRA, District Taxation Office and requesting the form CPT1, Request for a Ruling as to the Status of a Worker under the Canada Pension Plan and Employment Insurance Act. Complete the CPT1 form and return it to CRA for a ruling.