Are you a self-employed worker or employee in disguise?
<p><em>What makes someone self-employed? Is it the fact that they can choose their schedule or their clients? Or is it rather that they are their own boss? Did you know that if you only have one customer, you could be considered an employee? This is called an employee in disguise. Let's take a closer look at what this is and how to avoid it so as not to have tax problems later on.</em></p> <p></p> <h3><strong>What is an employee in disguise?</strong></h3> <p>Let's start at the beginning: what exactly is disguised salaried employment? This is when someone who defines themselves as self-employed but works for a single client and is a subordinate. The question of control is very important here. For example, an employee may not be able to choose their work schedule or refuse contracts requested by the employer.</p> <p>Salaried employment can unfortunately be advantageous for some employers as they do not have to pay benefits to these types of workers. Others simply don't realize the difference between an employee and a freelancer/contractor. A self-employed worker is more of a collaborator than an employee.</p> <h3><strong>The consequences of being considered an employee in disguise</strong></h3> <p>To begin, the self-employed person will undergo a tax audit to determine if they are truly an entrepreneur or an employee. If the conclusion is that they are in fact a disguised employee, they will lose their benefits and entrepreneurial status: business expenses will be refused. For example, it will not be possible to deduct mileage or work equipment, and you will have to pay more taxes. It's something to think about.</p> <p>It should be noted that the company at fault for having a disguised employee will also have financial consequences.</p> <h3><strong>Criteria to be considered self-employed</strong></h3> <p>As a contractor or freelancer, for a while you may only have one primary client. How then do you keep your status as a self-employed worker and not an employee in disguise? Here is some advice:</p> <p><strong>The contract</strong><br /> Both parties sign <a href="https://www.momenteo.com/blog/the-importance-of-having-a-good-contract-of-services">a service contract</a> and not an employment contract – hence the importance of taking time to draft the right type of contract. If the customer refuses to sign a contract, this is a bad sign.</p> <p><strong>Tools and equipment</strong><br /> The self-employed individual uses, most of the time, their own tools and equipment to do the work requested. They are not forced to use the client's tools. For example, being forced to use the company's car or computer to complete the contract can be an indication that the person is an employee and not a contractor.<br /> <br /> <strong>Control and exclusivity</strong><br /> Is there any control on the part of the client? For example, do they require the person work a certain schedule at a certain location and/or the self-employed person does not take on other clients? If so, that's more of an employer-employee relationship. To be considered a self-employed person, you must remain free to have your own schedule, place of work and customers. You must remain your own boss.</p> <p><strong>Training</strong><br /> Is the self-employed person obliged to take training provided by the client? Of course, it is important to <a href="https://www.momenteo.com/blog/how-to-stay-up-to-date-in-your-field" target="_blank">stay up-to-date in your field</a>, but this is always at the discretion of the self-employed individual not the customer. In addition, the self-employed person is not obliged to participate in social activities since they are not an employee.<br /> <br /> <strong>The duration of the contract</strong><br /> Often, in service contracts, there is a beginning and an end. Of course, the contract can be renewed if necessary. If the work is continuous, it could look like salaried employment.</p> <p><strong>The online presence of the self-employed worker</strong><br /> Does the self-employed person present themselves in different mediums as self-employed? For example, do they have a website, social media, business cards with their title? Have they had other clients or worked on other projects in the past?</p> <p><strong>Payment</strong><br /> Usually, self-employed individuals send invoices to their clients at the end of their contract or after completing a specific task, as set out in the service contract. If a person is paid by the week or by the month, it looks a lot like salaried work.</p> <p>If you, as a self-employed person, realize that you are making a living from salaried work, have a discussion with the client. Because legally neither they nor you can stay in this situation. Either you are self-employed, or you are an employee.</p> <h3><strong>The dangers of having only one customer</strong></h3> <p>If you have only been self-employed for a short time, be aware that there are certain dangers to having only one client, other than the fact that it can be perceived as disguised salaried employment. First, this is a big risk, because if this client decides to stop working with you, then you will lose all your income at once. Also, if they know that they are your only customer, they could be more demanding, especially in terms of prices and deadlines. They could say things like ''I know you have time to give me this by Wednesday, I am your only customer, I do not accept your increase in rates''. It may seem simpler to have only one main customer, but keep in mind that diversification can be more appropriate in the medium and long term. For example, you can choose to have only one large client at a time or several small mandates at the same time.</p> <p>In conclusion, avoid disguised salaried employment. Obviously, the first step to avoid this is to ask questions. If you feel that you are more of an employee than a collaborator, take a moment to check what your real status is to avoid trouble. Know that as a self-employed worker, you always have <a href="https://www.momenteo.com/blog/declining-a-project-why-and-how">the right to refuse a project!</a></p> <p><br /> </p>