Hiring Research Assistants
Go here for information on hiring a student research assistant.
Research Assistants may be employed as part of your research, and will be included as part of your budgeting. TRU has specific rates for assistants hired as employees, but that granting agencies may deem such rates excessive when stipulated in an application. If you have any questions about how to address this issue, consult the Office of Research Services.
Employee or Independent Contractor
The determination of whether an individual is an employee or independent contractor depends upon whether or not an "employer-employee" relationship exists between the payer and the payee. Normally an employee is subject to the direct supervision of their employer who controls the manner in which tasks are performed. An independent contractor works independently to achieve a specified result.
To access the Canada Customs and Revenue Agency website for help in determining "employer-employee relationship" go to http://www.ccra-adrc.gc.ca/tax/business/topics-index/e-gen-e.html
There are a number of considerations when evaluating whether an individual is an employee or an independent contractor for income tax purposes, and the courts over the years have developed key tests to assist in determining this.
Four of the most significant tests are:
1. Control test
This test deals with the ability of the company or institution to control the actions of the individual. The distinction to be made is whether a contract between the individual and the University is a contract for service or a contract of service. Revenue Canada's IT 525 states that:
"A contract of service generally exists if the [University] has the right to control the amount, the nature, and the management of the work to be done and the manner of doing it. A contract for services exists when a person is engaged to achieve a defined objective and is given all the freedom required to attain the desired result."
In addition to this is the ability, where possible, of the contractor to control the place of work and the ability to delegate items to others.
The University specifies the courses (and curriculum) to be taught, as well as the times and locations of these courses. In addition to this degree of control is the integration of the courses into the business of the University, and the requirement to co-ordinate all efforts toward the objective of education, according to the standards and policies established for the institution. These factors preclude entering an independent contractor relationship. On the other hand, where these elements do not exist, there is an inference of employment. The extent to which the individual uses the property of the employer (i.e. classroom, learning resource materials, audio-visual equipment, tools, etc.) in the course of the contract is also considered.
2. Economic reality test
This test deals with the economic practices of the individual. If the individual has ultimate responsibility for the profit or loss of the contract, then this test would indicate a self-employed situation. Where there is financial risk, opportunity to profit or possibility of loss and responsibility for costs, it is inferred that the taxpayer is an independent contractor.
3. Specific results test
This test deals with the nature of the service provided. If an individual is contracted to achieve a certain objective or result, then the service provided would indicate that the individual is an independent contractor. If, however, the contract were for personal services with no specific objective, the contract would resemble one for employment. In other words, this test looks to whether the alleged employee is required to make their services available on an ongoing basis, or whether services are made available to achieve a specified result.
4. Integration test
This test deals with the individual's degree of involvement in the organization. This test presupposes that if the services provided by an individual are integral to the organization, then their involvement is one of employee. If the services can be viewed as part of a separate business of the individual who provides the services, the individual may then be viewed as an independent contractor. The courts have tended to downplay this test, however, on the basis that businesses can be mutually dependent on each other without a "master-servant" relationship.
No one factor determines whether an individual is an employee or an individual contractor. Revenue Canada and the courts look to the facts in each situation when assessing. The following "Test on Employment Status," may also assist with the determination of whether an individual is an employee or an independent contractor.
|follows instructions on how to work||works without detailed directions on procedure
|trained on how job should be done
||uses own experience, expertise to do job
|works within campus environment
||works alone - not part of campus "team effort"
|hired to work as an individual, based on skills, talent, and potential
||hired to provide service many times, regardless of who actually does work
|has indefinite employment status
||hired for a set time period only
|works under set hours
||sets own hours
|works for one employer at a time
||can work for several employers at a time
|works mainly on-site; employer-directed off-site
||can work either on-site or off-site, without employer direction
|works in employer-established order to allow for supervision
||works any way desired to provide required service or product
|reports on work efforts as part of supervision
||reports only as agreed upon
|compensated regularly, at specified time periods
||paid on per-job basis in a lump sum
|has work-related expenses paid by employer
||pays own expenses out of expected compensation
|has tools and supplies provided by employer
||provides own tools and supplies
|does not own or control work site
||may own or control work site
|generally does not work on profit / loss basis||generally works on profit / loss basis|
|gives employer exclusive effort||works for many contractors at once|
|cannot offer efforts to general public||markets services to anyone who wants them|
|can be fired at employer's discretion (subject to employment agreement)||can be fired only if work falls short of expectations|
|can end employment at any time||responsible for completing job as agreed upon|
Source: NACUBO Business Officer, August 1992
Contracting with Professional Partnerships and Proprietors:
Where a partnership is carrying on a separate business and the University contracts to have the partnership present a course, this should be a contract for services and there should be no withholding taxes. If the University contracted with a particular partnership employee or individual partner to teach a course, it is likely that individual would be a University employee. Where a contract is with a proprietor to teach a course, the proprietor would likely be viewed as an employee of the University unless the course could be taught by the proprietor's organization, i.e. by one or more of the company's employees.
Where a corporation or professional partnership is being contracted to provide part-time teaching services to the University, this should be a contract for services. Where the contract is with a proprietorship whether or not it will be a contract of or for services will depend upon whether the contract is with the proprietor or with the proprietor's organization.
For example, the University might contract with an accountant who is a sole proprietor to teach an accounting course. If the contract was, in effect, a contract with the accountant either because that person explicitly was required to teach the course, or implicitly because the accountant had no employees capable and acceptable as teachers, or because of an implicit agreement that the accountant would be the teacher, then this would likely constitute an employee relationship with the accountant.
However, if the University contracted with the accountant that his or her organization, which included other acceptable professionals, would teach the course, and the course was taught by the accountant and other employees as members of the organization, then this should be a contract for services.
Essentially, the difference is whether you are contracting with an individual or an organization. When contracting with an organization, it should be permissible to specify that a particular employee of the organization will be the teacher. You would look to the organization for performance of the teaching contract and not to its specified employee.
As well, you would pay the organization and not pay the employee: you would have no contract with and thus no control over the specified employee. (An employer making payments to an employee is obligated to deduct amounts at source under the Income Tax Act, the Unemployment Insurance Act and the Canada Pension Plan.)
An independent contractor must structure their situation so as to minimize the risks. Points to consider in structuring an independent contractor's contract for service are:
- A written contract should always be used.
- Any equipment used should be the property of the contractor. Expenses should not be reimbursed but incorporated into the contract price. It may be advisable to have the contractor obtain letterhead and business cards to give legitimacy to an independent contractor argument.
- Compliance with the Goods and Services Tax will be necessary.
- The individual should invoice the University for services provided, on a regular basis but not at payroll periods.
- The University should avoid controlling "what, how and when" in the agreement.
Even with all the above measures, it may not be possible to be an independent contractor. A degree of independence should also exist to begin with. For example, a long-term employee or an employee in management may have a difficult time arguing that they are an independent contractor.
If an outside individual was contracted to prepare a course, and the individual worked on their own time, at their office, to prepare a completed product for which you would pay a fixed amount, the individual would be an independent contractor. There is no control of the conduct of the individual's duties or of where or at what time the duties are performed - you look only to the finished product. The individual is at a degree of financial risk. Presumably, a portion of the work could be sub-contracted, and, provided you received that for which you contracted, you would be satisfied.
When guest lecturers or seminar leaders are paid by the University to lecture or conduct short seminars, this does not constitute an employment situation. You are contracting with respect to only the single activity -there is no ongoing relationship with the individual payee, and it is presumed that the seminar or lecture would be the property of the presenter. The timing of the presentation would be mutually agreed rather than at your control, and there would be no control of the manner of the delivery of the seminar.
Professional Service Agreement
Professional Service Agreements (PSAs) are used when TRU agrees to pay an individual or an organization to deliver instruction for services that aren't covered under a PTIC or honoraria, and they should only be used after determination that the individual or organization is an "independent contractor."
Please note that hours worked are irrelevant; payment is made on either a daily or lump sum basis. Expenses, such as travel, can be included in this amount. Inclusion of hours worked alludes to the existence of an employer-employee relationship, in which case another form of payment must be used.
A "Goods and Services Tax Information" sheet should be completed by the contractor and attached to the PSA before it is sent to Finance
Completing the PSA Form
Keeping in mind that PSAs contain language that protect the institution from liability, please try to ensure that the contractors have signed off and that the contracts reach the Finance Division before the scheduled event takes place.
- The PSA form is found on the Finance website under "Forms". Submit two copies of the signed PSAs to Purchasing for processing.
- Please ensure that the names on the contract and invoice match, i.e. don't contract with an individual if a company will be sending the invoice.
- Normally, a professional fees code should be used, with the exception of tutoring or curriculum development projects. Please don't use a code that pertains to conventional instruction.
- Please ensure that the contractor and Dean, Director, or VP has signed the PSA before it is submitted in duplicate to Purchasing for approval and processing.
- Remind the contractor that they must submit an invoice for payment. Invoices should be sent to the respective contract manager, so he/she can indicate, in writing and with a signature, that the work has been performed to their satisfaction and authorizing payment. A cheque will be issued within 30 days from the date the invoice.
Part-Time Faculty - PTIC
Part-time Instructional Contracts (PTICs) are used for part-time temporary positions. PTICs are initiated at the coordinator/chairperson level and are signed by the Dean, Director of Human Resources and the instructor. They specify hours to be worked and rate of pay.
Completed PTICs contain:
- personal information, i.e. name, current permanent address, SIN
- course information - name, location, start and completion dates, and total scheduled hours
- instructional hourly or unit rates as established by the chairperson or program coordinator, and based on the instructor's qualifications and the established pay grid. See your supervisor for a copy of your pay grid.
- the labour code where contract costs are charged
- the minimum enrolment to establish the course
- a statement regarding course cancellation if the minimum is not met.
Once the instructor and Dean have signed the PTIC, it is forwarded to the Human Resources office for approval. Copies are then distributed as noted on the bottom of the PTIC. PTICs and timesheets received after deadline dates will be processed the following month. If an employee on a PTIC is eligible for additional remuneration as a result of a statutory holiday, this will automatically be calculated and paid as soon as possible.
The majority of honoraria payments are stipends under $500 to non-employees, and are normally single occurrence types of items, i.e. guest lecturer fees, modeling fees, invigilation fees, and other small amounts paid to non-employees for casual labour.
Larger payments may be for such items as animal hospital practicum fees, feeding and care of animals, and medical director stipends.
The above two types of honoraria are processed through the Accounts Payable system. These types of payments are considered "other income" for income tax purposes, and T4A forms are provided at the end of each taxation year per income tax regulations.
The honoraria form may also be used to facilitate extra payments to employees, for stipends outside their normal payroll. These types of honoraria are processed through the Payroll system, and normal deductions apply. These payments are thus included in the employee's T4 for the taxation year.
- Name of person/organization to be paid
- Home address/mailing address
- SIN - must be submitted for all payments to individuals to enable preparation of a T4A form
- Present position - if applicable
- Dates of proposed visit to TRU
- Proposed contribution to University - explanation of what payment is for
- Expenses - are broken down into two categories: travel and honoraria:
- Travel expenses require original receipts, or mileage/per diem rates apply. Honoraria amounts do not require receipts.
- Travel expenses should be charged against the applicable "190" travel account code. Honoraria expenses should be charged against the applicable "145" honoraria Account code.
- NOTE: While honoraria payments are considered taxable income for T4A purposes, travel and living expenses are considered non-taxable.
- Approvals/Recommended - Chairperson under $100, Dean/Director over $500
When completed, the honoraria requisition should be forwarded to the Finance Division.
Timing of Cheque - Honoraria Requisitions
Cheques are produced weekly, i.e. honoraria requisitions should be received in the Finance Division by Tuesday, in order for cheques to make our weekly cheque run on Thursday each week. Please take this timing into consideration when cheques are required so that sufficient time is allowed for processing. Please bring any emergent items to the attention of the Accounting Manager, with appropriate explanation, and we will process as soon as possible.