Freelancer or employee? Which are you?
The BBC has been under fire this month for its practice of paying presenters and other contributors as freelancers. The Guardian reported yesterday that staff contracts will be offered to many of these individuals following a review of the BBC’s tax policies. The move is in response to accusations that the broadcaster has been complicit in tax avoidance by paying contributors through personal service companies, which are eligible to pay a lower tax rate than individuals.
According to Keith Maskell, a staff representative for the Canadian Media Guild, similar issues have cropped up for the CBC over the years. Maskell says the benefits of freelancing — the ability to deduct expenses, the lack of income tax and premiums deducted at the source — are appealing, but can lead to tax problems for certain kinds of freelancers.
“If you’re an individual freelancer and all you do is freelance for a single client like the CBC it may cause some problems with the Canada Revenue Agency,” he says. “They’re going to look really hard at a freelancer whose sole source of income is a single engager.”
Maskell describes a situation at CBC Vancouver a few years back with an individual who’d been working steadily as a freelancer for an extended period of time. When his position was cut, the contributor requested severance pay but was denied it.
“This raised the issue of, is he an employee? Is he an independent contract?” says Maskell. “It was pretty easy to show that he was in fact an employee of the CBC. He had CBC business cards, he had a desk, office space, he had a phone number in the directory, his hours were posted on a schedule, he was an employee in pretty much every respect.”
Although the contributor was granted his severance pay, there was a downside to the decision.
“Revenue Canada said ‘okay now we have to figure out all of these EI premiums and CPP premiums and tax withholding that should have happened and didn’t,” says Maskell. “Pension contributions, benefits contributions, taxable and non-taxable benefits… it turned out to be a bit of a nightmare for all involved.”
Maskell says the situation led to changes in the CBC’s hiring practices.
“As a result of this we were able to get a commitment from the Corporation that they would cease this practice wherever and whenever possible,” he says. “They realized it was as much of a nightmare for them as it was for the individual and for the bargaining agent.”
Maskell warns freelancers who earn all their income from one source that they may encounter tax-related problems.
“Back in about 2001 or 2002 we had a lot of CBC freelance contributors who had their tax returns reviewed,’ he says. “It wasn’t a full-on audit, but a lot of people wound up getting some phone calls or some letters saying ‘what exactly is the deal here, because you’ve put yourself down as self-employed but all of your income is coming from a single source.'”
If you have concerns about your own employment status at CBC, the Freelance branch of the CMG is available to advise.
