Pros and Cons of Self Employed Drivers
Like many industries, transportation companies are always under pressure to save money, and one way to do that is by using self-employed drivers, also known as driver services. When a company contracts a driver, fleets can add or remove vehicles without the associated costs of having traditional employees. There are both pros and cons in this kind of arrangement for both the carrier and the driver.
First and foremost, the relationship needs to meet the guidelines of the Canada Revenue Agency under Employee or Self-employed (RC4110). Some of the things the CRA reviews is:
- Does the worker provide their own tools and equipment?
- Can the worker subcontract the work or hire assistants?
- What is the worker’s degree of financial risk?
- What is the degree of responsibility for investment and management?
- What is the worker’s opportunity for profit?
In addition to the tax issues, whether a worker is an employee or a self-employed individual also affects how they are treated under the Canada Pension Plan, the Employment Insurance Act, Income Tax Act, Workers Compensation, and other labour rules.
It's important to note that self-employed drivers must charge GST/HST for their services if they exceed $30,000 in pay annually. Quite often small carriers paying self-employed drivers do not pay GST/HST to them on their gross earnings, which can be risky. Any GST/HST paid by the carrier will be given back to them on their returns, and helps the driver so that they are not handed a bill during a CRA audit. If as a carrier you chose to do this, be sure that your drivers have GST/HST numbers and that their accounts are active.
There are definitely benefits for both carriers and drivers in a driver-service arrangement, including tax advantages and keeping costs down, so long as both parties understand their obligations.
For further information on this topic, please see The Driver Service Dilemma by Scott Taylor, TruckNews.com (August 19, 2014).
Tia Chisholm, HUB International TRANSPORTATION
HUB International TRANSPORTATION specialists are based in Vancouver. Our longstanding relationships with the best providers in the business allow us to deliver the solution that serve you best. With HUB, you can run your business knowing that you are headed in the right direction.