Professional Contractor Solutions Inc. (PCSI) is a professional services provider, whose unique model significantly reduces the risk of contractors being reclassified as a Personal Services Business (PSB) by the CRA and/or as “dependent” on the organization with whom they are engaged. The unique PCSI model helps alleviate the tax, severance and legal exposure for all involved. PCSI offers the only CRA compliant solution available and thereby providing the opportunity for both parties to significantly mitigate risk and preserve the contractor model in Canada. The unique PCSI Solution is available to Canadian contractors and companies operating in Canada.
PCSI also provides independent contractors a “one-stop” shop for all their additional administrative services allowing them to operate their business more efficiently and more securely. However, it is important to clarify that PCSI is not a 3rd party recruitment agency.
Our core mission revolves around maintaining the contractor model in Canada and striving to make our unique risk mitigating solution available to every contractor and organization across Canada.
What is Happening to the Contractor Model in Canada?
Independent Contractors (IC’s) have been an integral part of the Canadian economy for decades. The employment relationships as well as the circumstances and factors related to traditional work models and definitions have shifted significantly over the past 2 decades across Canada. Over the last decade, the Canadian courts have created a massive potential severance liability for companies that utilize independent contractors by deeming many of these resources to be “dependent contractors”.
Canada Revenue Agency
Over the past few years Canada Revenue Agency has introduced significant changes to the business criteria and classifications that directly impact independent contractors, exposing them to tremendous financial risk upon assessment. And most recently in 2016, CRA added 700 more tax auditors (making a total of 1000) to specifically target PSBs.
Worker’s Compensation eligibility decisions have also started to shift. First, we observed Worksafe BC refuse coverage to “Independent Contractors” stating they viewed them as a Personal Services Business (PSB), and shortly after Ontario, Alberta and Saskatchewan Workers’ Compensation Boards followed.
Ontario Bill 148 – Proposes Significant Changes
In 2015, the Ontario government set about improving the protection of its people in a drastically shifting work world with a mandate to recommend changes to its Employment Standards Act and Labour Relations Act.
Specifically, Ontario’s Bill 148 addresses the misclassification of independent contractors. The proposed employment standards’ changes to Bill 148 include a prohibition against employers misclassifying employees as independent contractors not entitled to employment standards protections and the responsibility falls on the employer to prove the individual isn’t an employee. That’s right. The burden of proof will now fall on the employer. These changes would come into effect immediately on the Bill receiving royal assent.
There is also a provision outlined that would proactively enforce the legislation to identify and rectify misclassification. The proposed legislation would make the employer liable for the financial costs of misclassification.
The Ontario government’s clear emphasis on enforcement includes a plan to hire 175 more employment standards officers, by 2021. Translation? Increased scrutiny of employers. A requirement will be set to complete all employment standards cases within 90 days of filing and inspecting one in 10 Ontario workplaces.
Alberta Bill 17 – Reclassified Contractors
The new legislation in Alberta, under Bill 17, will become law effective January 1, 2018. The definition of “employee” in the Labour Relations Code will be broadened to include “dependent contractors”, that is: contractors who are in a position of economic dependence on their principals (whether or not the contractor furnishes his or her own tools, equipment, etc.). Note that this particular change came into effect on September 1, 2017.
This amendment clarifies the intention contained in the rest of the Bill to include dependent contractors under the Labour Relations Code. The original intent was to allow independent contractors, deemed to being “dependent” on the employer (in essence an employee of that organization) to unionize and collectively bargain in the future.
Protecting the Contractor Model in Canada
In Canada, we have the common law and corporate structures, that when followed, provide a compliant model of doing business, small or large. Decades have passed with certain precedence’s that have allowed for a happy medium between growing one’s business and maintaining an entrepreneurial spirit here in Canada. However, if companies and contractors continue to disregard their own protection and not seize the opportunity to work together, the contractor model as we know it will be slowly squeezed from the Canadian marketplace. Effects of the destruction of the contractor model can already be observed in the US and the UK.
By learning the lessons from other countries, we still have the opportunity to protect the contractor model in Canada. To do so, employers and independent contractors must work together.
What are the Risks?
PCSI has designed a unique solution that is intended to address these specific concerns. Using PCSI Certified contractors helps protect employers from having their independent contractors deemed as “dependent” by the Canadian courts. Becoming PCSI Certified is important for the contractor moving forward from the day they join the partnership. It is in the contractor’s best interest to avoid a reclassification that can carry with it a tax reassessment of as much as $25,000 per year or greater.
Dispelling Common Misconceptions About Risk Mitigation Tactics
Unfortunately, there are several common misconceptions of how employers and contractors believe they are mitigating their risk in relation to the dependent contractor and PSB issue when in fact they are still very much at risk.
How is the PCSI Solution Different?
There are four primary distinctions between the PCSI Solution and some of the more familiar yet less reliable “risk mitigation tactics” that employers may have used in the past:
- Current Case Law supports our protection offered to employers and independent contractors.
- We offer a unique model to independent contractors that significantly mitigates financial risk for both contractors and employers.
- The PCSI Solution is CRA Compliant.
- The PCSI Solution was vetted over 18 months by former CRA Auditors, legal, tax accountants, and HR experts.