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CFO services |Best Practices For Hiring Employees
Several things that business owners should take into consideration when they are hiring in their business, includes how to hire employees correctly, how to hire independent contractors correctly, and what the downfall of making those mistakes could be said CFO services. Unfortunately business owners who are not aware of these best practices when they start hiring in their business, often get crushed financially by retroactive payroll remittances, including penalties and interest charges because the contractors they have hired have been deemed employees by the CRA. This is an extremely easy issue to completely avoid, and if business owners have made this error, they should know that itís an extremely easy one to fix.
The why should business owners make that fix says CFO services. Many business owners have made this error in their business and believe itís no issue because they havenít had an issue with it yet. The mentality that is not a problem because it hasnít been a problem at is a troubling one just because someone hasnít been caught doesnít mean itís not a problem. The longer this problem is continued in a business, the higher the penalties are going to be once CRA catches the error. Most businesses have enough of a tough time creating positive cash flow in their business, perpetuating a mistake that can be financially devastating, doesnít seem to make a lot of sense.
If business owners are aware of what the penalties could be for this error says CFO service, maybe they wouldnít make this mistake in their business. The way that they will get assessed by the CRA if there contractors are actually deemed employees, is that every payroll remittance that was missed for every contractor they have that has been deemed an employee, for the entire length of their employment plus interest plus penalties. Of course this risk is increased the longer a business has been in operation, and by the number of employees that business owner has. But this error has the potential to cost the business owner tens of thousands of dollars.
With such a huge risk on the line to their business says CFO services, every business who is making this mistake should make an effort to completely eliminate that risk. The good news is, that the solution is extremely easy and effective. What the business owner needs to do, is either switch contractors who should be deemed employees to employees and start deducting payroll remittances from their checks immediately. If it is an independent contractor they would like to keep as a contractor says CFO service, all the business owner has to do is ask that contractor if they will incorporate themselves. Once that is done, the risk to the business is completely mitigated. In order to get here before that contractor to handle, a business owner can wait until that contractor was due for a pay raise, in order to offset the cost of the corporation.
Business owners often seek professional help after they have been assessed by the CRA says CFO services. If there contractors have been deemed employees, they have to pay retroactive payroll remittances as well as penalties and interest charges. This can be financially devastating businesses, which is unfortunate because it is a completely avoidable and fixable problem.
Often business owners donít believe that it is a huge problem, because theyíve been doing it for a long time and have never had a problem yet. The problem with this thought process is, is just because they have had a problem with it yet, doesnít mean a problem is coming. The longer they operate without fixing this error, the higher their penalties are going to be with CRA when they do find out Says CFO services. Another reason why some business owners donít to make efforts to fix this, is they believe that they will be able to convince CRA to make the decision the business owner wants to, but this is actually rarely the case.
The audit process is not going to go the way the business owners think, what will happen is the auditor will not only talk to the business owner, but they will talk to the employees, contractors and even the accountant to for the business, and ask several questions to determine if those contractors should be deemed employees. We will look at only the facts, and once theyíve made their decision, the business owner wonít get an opportunity to appeal. Theyíll simply get mailed the assessment which will hit them with a huge amount to pay back to CRA.
There are different reasons CRA uses to determine if a contractor is in fact employee, the single most important determining factor, is does that contractor have risk of profit and loss in the business. CRA auditor will ask them questions such as do they get paid no matter what, did they have to buy or use their own equipment, to be halved their own bills or by their own materials? If there is risk to that contractor, CRA is more likely to determine that they are in fact a contractor.
The second most important factor whether CRA determines whether or not a contractor is an employee or not is how much control that business owner has over the employee. Questions like can they set their own hours says CFO services, as well as can they have other clients, can they hire their own replacement or does the business will require that the person to do that specific job? The more control a business owner has over that contractor will more likely them as employee says CFO service.
Even though this is a huge problem, it is an extremely easy fix says CFO service. Switching contractors to employees can be done very simply and easily by ensuring that they have the the proper deductions taken off their check, for contractors that should be considered contractors, asking them to become incorporated can instantly eliminate the risk from the business.