Startups need to have a thorough understanding of their workforce structure, short-term and long-term strategic business plans, and their obligations as an employer before deciding the best way to grow their team: by hiring a new employee or engaging the services of an independent contractor.
If you are getting ready to hire, review your startup’s budget and priorities to determine the right hiring decision for your team. Remember that what is right for you now may change as your startup grows and evolves. Study all of your options.
Employees generally have an exclusive, and sometimes long-term, relationship with the employer. If it’s long-term stability that your organization requires, choosing to hire a full-time or part-time employee typically gives you the consistency, dependability and availability that you desire.
An independent contractor (or consultant) is typically someone who can provide you with short-term, niche expertise to support your business decisions. They can be anything from a sounding board to your project leader. Whatever your requirements, there is expertise available, locally or globally.
Note: The CRA will ignore an individual’s designation as an independent contractor if there are indications, in terms of tax purposes, that the individual is actually an employee.
Regardless of the form of engagement, startups need to execute agreements that define the position, responsibilities, remuneration (including any equity interests, such as options), and benefits during a term of engagement.
Keep in mind that individuals own the intellectual property rights for what they develop, whether it be software code, graphics, logos, marketing materials, or simply ideas. Fortunately for startups whose value derives from intellectual property, creators can legally assign their legal and moral (attribution) rights to a startup at any time.
Ideally, startups will obtain written agreements that assign intellectual property rights from the co-founders, employees or independent contractors when the hiring takes place. If these agreements are signed by the individuals after they first began work on the project, the startup should make some additional payment to the person who is assigning his or her rights (as little as a few dollars will do). This will help ensure the agreement’s validity and enforceability.