Employee or Independent Contractor: Which One is Right for Your Business?

Notre équipe
Dec 25, 2025
3 min read

It is the classic dilemma for any growing business: your order book is filling up, and you can no longer do it all alone. Then comes the big question: should you hire an employee or contract a self-employed worker (freelancer/consultant)?

Beyond a simple management choice, this decision has major tax and legal implications for your business in Quebec. Here is what you need to know to make the right call.

1. The Fundamental Difference: The Subordination Link

In the eyes of Revenu Québec and the Canada Revenue Agency (CRA), it is not the title you give the person that matters, but the reality of the working relationship. Everything rests on a key concept: subordination.

The Employee: There is a link of subordination. You (the employer) decide "where, when, and how" the work is done. You provide the tools, set the schedule, and supervise the methods.
The Independent Contractor: There is no link of subordination. They are their own boss. You are their client. They commit to delivering a result, but they choose their methods, their workplace, and often their schedule.

2. Hiring an Employee: Stability and Control

Choosing to hire means investing in your company’s structure.

The Pros:

Total Control: You direct daily tasks and priorities.
Loyalty and Culture: An employee integrates into your team, adopts your values, and develops expertise specific to your business.
Availability: They are there during agreed-upon hours, exclusively (or nearly so) for you.

The Cons (and Costs):

Payroll Taxes: In addition to the salary, you must pay employer contributions (QPP, QPIP, EI, CNESST, HSF). This generally adds between 10% and 15% to the gross salary cost.
Administration: You must manage payroll, source deductions (DAS), tax slips (T4/Relevé 1), and comply with labor standards (vacation, public holidays, notice of termination).

3. Paying a Contractor: Flexibility and Simplicity

The self-employed worker (or subcontractor) is often the preferred solution for specific or temporary needs.

The Pros:

Administrative Simplicity: No source deductions, no payroll taxes, no vacation pay. They send you an invoice, you pay it. Done.
Variable Cost: You pay for the work performed. If business slows down, you aren't stuck with a fixed salary.
Immediate Expertise: Often an expert in their field, they are operational immediately without training.

The Cons:

Higher Hourly Rate: Since they cover their own taxes and risks, their hourly rate will be significantly higher than that of an employee.
Less Availability: They have other clients. You are not always their number one priority.
Intellectual Property: Ensure the contract clearly states that what they create belongs to you.

The Trap to Avoid: The "Disguised Employee"

This is the most critical point in taxation. If you hire a self-employed worker but treat them like an employee (e.g., you impose a fixed schedule, they work in your office with your computers, they have no other clients), the tax authorities could reclassify them as a disguised employee.

The consequences are heavy: You could be forced to retroactively pay all missed payroll taxes (both employer and employee portions), plus interest and penalties.

How to Protect Yourself?

To justify a self-employed status, the relationship must meet certain criteria (often tested in court):

Control: Do they have control over their work?
Tools: Do they provide their own equipment?
Profit/Loss: Do they have a chance of profit and a risk of financial loss?
Integration: are they external to the business or integrated like a staff member?

The Verdict

Choose an Employee if you need a continuous presence, want to train the person for the long term, and need to control the work process.
Choose an Independent Contractor if the need is temporary, project-based, or requires highly specialized expertise you cannot afford full-time.

Need help understanding your obligations as an employer or structuring your contracts? Proper bookkeeping and sound advice are essential to avoid unpleasant surprises at tax time.