Beauty Industry Staff: Employee vs. Contractor
Beauty Industry Staff: Employee vs. ContractorThe beauty industry offers all types of work arrangements. This article is meant to help both employers and service providers understand what their roles and responsibilities are in their particular work arrangements.
Let’s start by defining the difference between an employee and a contractor:
- An employee works under an employee/employer relationship
- A contractor carries out her/his work under an independent business/contractor relationship. In our industry, contractors are commonly known as “freelancers”, “chair renters”, “room renters”…
To help you understand the difference, we have come up with 4 different categories where we will highlight the differences between an employee and contractor:
- Working Conditions
- Tools and Equipment
- Canada Revenue Agency
- Employment Standards
Employees in the beauty industry are regularly paid either a wage, salary, commission, or a combination of wage + commission. Contractors on the other hand submit invoices and may receive payment at intervals agreed upon by them and the employer. In the beauty industry however, chair/room renters pay an agreed amount to the employer and do not disclose to the employer their earnings or expenses.
Employees’ additional training is paid for or reimbursed by the employer, as where contractors pay for their own training costs and must have the required training before providing services.
Employees’ hours of work are determined by the employer, as where contractors choose their own time of work. In the beauty industry however, chair/room renters may work during their hours of choosing, as long as it in accordance with the employer’s hours of operation.
Tools and Equipment
Employees in the beauty industry are provided all the tools and equipment necessary to perform services. These tools and equipment are maintained by the employer, however, a good service provider will extend the life of any tool or equipment by using it properly and sanitizing it after every client. Employees can choose to provide their own tools.
Contractors provide and maintain their own tools and equipment. Ultimately, the employer and worker agree on the terms and conditions of their arrangement, but generally, chair/room renters are provided with a space within a salon/spa to provide services. Often a chair is provided by the employer to chair renters.
Canada Revenue Agency
Employees are deducted personal federal and provincial income tax, Employment Insurance (EI) premiums, Canada Pension Plan (CPP) from their employment earnings by the employer who in turn submits the deducted tax to Canada Revenue Agency (CRA).
Contractors submit their own federal and provincial tax deductions to the CRA. Sole Proprietors declare their earnings as personal income and therefore do not pay federal or provincial corporate taxes. Incorporated contractors submit a federal corporate income tax return along with their annual return. In terms of EI premiums, it is always the employer’s responsibility to pay the employer and employee portions of the EI premium. This includes EI premiums of chair/room renters. Contact ESG to learn more on how to deduct EI premiums from chair/room renters. In regards to CPP, the contractor is responsible to contribute to CPP.
Employees do not collect GST from their clients; Contractors including chair/room renters, (Sole Proprietors or Incorporated) must register to collect, charge, and remit GST once their gross annual revenues reach over $30K.
Employees are covered by Alberta’s Employment Standard Code which entitles employees to general holiday pay/overtime pay/minimum wage/termination pay/vacation pay and time off. Contractors are NOT entitled to many of the perks enjoyed by employees. As a contractor in the beauty industry, it is important to cover all these details in a written contract prior to commencing employment.
Contact us to learn more
Executive Spa Group (ESG)
(780) 604 2772
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