CFO Services | Hiring Errors To Avoid
There are several mistakes that business owners can make in business, says CFO services. But one error that they should ensure that they avoid when they are hiring people for their business, is making sure that they donít hire contractors that could later be deemed employees. This is a huge error that can be extremely costly to business owners, potentially ending their business.
There are very few errors that are as serious and potentially as easily avoided says CFO services. When business owners are hiring staff for their business, they should be aware of the differences between employees and contractors in order to avoid making the hiring mistake that can back and haunt them later. When business owners are hiring their business they need to understand the difference between contractors and employees. There are several questions they can ask themselves in order to make this determination.
When business owners are hiring contractors their business, the first mistake they can avoid is by ensuring that those independent contractors are incorporated. unincorporated contractors can pose a risk to the business, because there is a high probability that CRA could later come back and redeem those contractors as employees. The most easy way to avoid this is to ensure that all embedded contractors are incorporated. Other factors that business owners can take consideration when our contractor is does that contractor actually have the risk of the profit and loss? If there is a risk that the contractor has, CRA is most likely to determine that contractor is a contractor. The questions that contractor that decision is whoís equipment to be used, do they have to buy their own supplies and materials, to the have to buy their own insurance.
The second most were a question that business owners can ask when they are hiring, is how much control the business owner has over that person. Did they have other clients, can they hire their own replacement, does the business owner require that specific person to do a specific job? The more control a business owner has over that person, the more likely CRA will determine that person is employee.
The great thing about this problem is that as easy as it is to avoid, itís just as easy to fix said CFO services. all that business owners will need has to do is ask that independent contractor if they will incorporated. That contractor may be less enthusiastic to incorporate themselves unless they know they will be compensated, so a best practice would be for business owner to let contractor know that there will be a pay increase for them if they do incorporate. If the business owner would like to have that contractor be viewed as an employee, all they have to do is start taking source deductions of their check, and switch them from being contractors to employees. Once they make those changes in their business, business owners can eliminate completely that risk of being audited by the CRA.
Since owners who have incorrectly hired employees as contractors often donít see the problem with what they are doing says CFO service. Theyíve been doing it for so long, and have never run into a problem so they failed to see that actually is a problem. Just because they havenít been caught yet doesnít mean they wonít be. Business owners can completely eliminate if they either switch those contractors to employees, or ask those independent contractors to incorporate, they can swiftly completely and eliminate that risk for their business.
Business owners should understand how huge an error this is and what penalties they could face when CRA does find out says CFO services. For every contractor that has been deemed employee by the CRA, the business owner has to pay every missed the remittance plus interest plus penalties. That amount that the business owner may be assessed can be financially devastating. Of course that amount increases the more employees a business has in addition to how long that business has been operating.
Once business owners truly understand how huge this problem can be not only for them, but for their business, and how easy it is to fix, thereís no reason why business owners should live with this brisk hangover their business says CFO service. It is completely avoidable in the first place, by ensuring when business owners are hiring people, they ensure that they use the rule of thumb that any time they hire independent contractors, they always make sure that they have their own corporations set up. Therefore all of the risk is passed to them. Businesses who donít ensure that there independent contractors have their own corporations, keep the risk in their business of the CRA considering those contractors employees.
The audit process is fast and very emotionless. The auditorís sole job is to which are what contractors are actual contractors, and which ones are employees who says CFO services. A business owner often thinks theyíll be able to make an impassioned speech to convince CRA to rule the way they want them to, that is never the case. The auditor will gather information, do their own research, and when they have made their decision, the business owner will not get an opportunity to appeal. They will be mailed their assessment and it will hit them with a massive fine.
This is not only a potentially problem, is also one that is completely avoidable as well as completely fixable says CFO services. By business owners being diligent on their first hiring people in their business, as well as business owners fixing any issues that need to be fixed immediately, they can sure that they never have to worry about CRA doing payroll audit and being hit with retroactive payroll remittances penalties and interest charges. There are many things in the business owner can should be worried about, but this fixable and avoidable problem shouldnít be one of them.