10-06-2026 11:56:40 (GMT +02:00) Pretoria / Cape Town, South Africa

Employers beware: new legislation starting Jan. 1 makes employees out of contractors
30. Dec. 2022 Hamilton Spectator

Contractors will be entitled to statutory holiday pay, minimum wage, and vacation pay, Ed Canning writes.
It is a given that the pandemic had a dramatic impact on the working world for many people. Among those are people who lost their employment and decided to become consultants. They set themselves up as independent contractors, covering their own taxes and simply invoiced their clients on a fee-for-service basis. More than a few of these consultants decided they liked working from home too much, and when the employer demanded a return to the office, they resigned and set up their own consulting businesses.
On Jan. 1, significant changes are coming to the Employment Standards Act which will make many of these people employees overnight. That means they will be entitled to statutory holiday pay, minimum wage, vacation pay and all the other bells and whistles that come with the Employment Standards Act and employee status. Employers will be required to make normal employee deductions and government remittances for these individuals.
These changes do not apply to everyone but do apply to many. They cover “business consultants” and “information technology” consultants. A business consultant is defined as someone who provides advice or services in respect of operations, profitability, management, structure, processes, finances, accounting, procurement, human resources, environmental impacts, marketing, risk management, compliance or strategy.
That definition is broad and it is hard to think of someone it would not cover who works as a consultant. Information technology consultants are defined as people who provide advice or services in respect of IT systems including advice about planning, designing, analyzing, documenting, configuring, developing, testing and installing IT systems.
These fee-for-service consulting arrangements are usually mutually agreed upon and are attractive to both the company and the contractor. Before everyone panics, however, there



 

are some exceptions. If the contractor charges $60 an hour or more, is incorporated, or is set up as a sole proprietor with a registered name and has a written consultancy agreement they do not become employees. They must tick all three boxes. Getting a consultancy agreement is fairly straightforward but getting incorporated takes a little bit more time and effort and usually involves hiring a lawyer. An alternative to being incorporated is that the individual can set up a sole proprietorship and have a business name registered under the Business Names Act. That is probably the cheaper route to go.
I strongly suspect that most consultants charge $60 an hour or more, but if a company is paying less and doesn’t want to jack up the hourly rate, it might as well face the music and make the consultant an employee. Have an employment agreement drafted recognizing their previous services and start making deductions.
For employers, failing to put their house in order can have drastic consequences. Everything goes along swimmingly until it does not. For instance, if a consultant is terminated or gets ill or needs parental leave and wants to collect employment insurance. If they apply, EI Service Canada does an assessment to see if they were in fact an employee. If it is found that they were, it orders the employer to remit the CPP and EI deductions it should have made for the employee plus the portion it should have deducted from the employee. The employer can end up on the hook for the taxes that should have been deducted, although that is not usually the case.
If the employer files a complaint with the Ministry of Labour, it would include unpaid vacation pay and statutory holiday pay going back, likely, two years. For employers, it is simply not worth the sleepless nights waiting for this to happen. Fix it now.
www.samigration.com V.4598

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