Independent Contractor

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Independent Contractor | Confident Looking Older Man in a white shirt and tie

Consulting as an Independent Contractor

Sociologists say we are in the Fourth Industrial Revolution earmarked by the rise of the independent contractor. Sometimes negatively referred to as the Gig Economy, this trend is only just getting started. Employers prefer to hire contractors rather than burden themselves with the extra taxes and costs of monthly payroll administration for employees. No industry segment is immune from this trend.  The typical Canadian independent contractor works in medical and health, education, project management, computer and IT, as well as accounting and finance. By 2020, predictions place 40% of the US workforce in this category. So, let’s just get used to this mode of employment and examine it in detail.

The Dependent vs. Independent Contractor

If you have recently lost your job and find yourself inadvertently taking on part-time jobs as a contractor to make ends meet, then you must understand your rights under Ontario’s employment laws.  Bill 148, passed last year, introduced sweeping changes to minimize the potential “abuse” of precariously employed workers.

Employers must clearly classify workers as employees, dependent contractors or independent contractors.  It does not matter whether you work as a temp, full-time or part-time.  As an independent contractor, you operate like a business.  You have the freedom to set your own hours, use your own tools, hire sub-contractors, declare profit and losses, etc.

If your work terms are just like an employee, but your employer deems you a “contractor”, then they must clearly identify you as a dependent contractor. And with this, you are entitled to the same benefits as the other employees. These include health and medical benefits, vacation pay, severance and termination notice, etc.

Dependent contractors must also remember that as self-employed individuals, you are responsible for collecting HST as applicable. You must remit these funds, along with your payroll deductions, to the government. Therefore, your fee must cover all  these costs.

Making the Transition to Independent Contractor

Permanent, full-time jobs with benefits are becoming very competitive and not easy to find or land. Depending on your circumstances, you may see this as a threat to your financial well being. Or you might welcome the chance to be your own boss and introduce flexibility and variety into your career.

In fact, an increasing number of our clients are ready for exactly this change. If the Gig Economy is here to stay, then some are ready to turn the opportunity on its head to make it work for them.

In particular, tenured employees, with decades of specialized experience, often consider branching out as consultants or starting a business to pursue an interest.  If you are ready for this, then the process needs to be managed with strategic planning and careful thought.

Setting Your Goals

We recently had the pleasure of helping Steve, a 56 year old Senior Project Manager who required help with career planning after a layoff. He had a 25-year track record of leading complex multi-billion dollar initiatives spanning several industry sectors, including energy and banking.

Our first order of business was to reflect on his past and compile an inventory of his work experience. After that, we had a detailed conversation about his goals going forward.

Steve had a wealth of valuable and transferable project management skills. He was looking to retire within 10 years and at a stage where he was seeking a flexible lifestyle. We found him quite suited for a consulting role in engineering, banking or the energy sectors. But where should he get started?

Health of the Marketplace

We helped him with a thorough investigation of the marketplace he was stepping into. Steve needed to understand how large the segment was, who his potential customers would be and whether he needed to meet regulatory compliance as an independent consultant. In addition, we helped him identify current and long- term trends that could affect his marketplace.

The point of this exercise was to ensure that, as an independent contractor, he stepped into a healthy and viable segment. He required a steady stream of customers for the next decade, at least.

We helped him build a list of potential customers while placing his previous employer and contacts at the top of the list.  And he also created a list of his main competitors.

The Independent Contractor Value Proposition

Next, we worked with Steve to concisely formulate the suite of services he would provide, along with his fee structure. In order to do this properly, he had to eyeball his competitors to ensure he had a marketable edge.

Steve settled on offering the same services as the job he performed as an employee. Costing out his fee became an interesting exercise. While it had to meet industry norms, we suggested he charge more than what he earned as an employee. Like most in his situation, he initially balked at our recommendation, suggesting nobody would hire him at those inflated rates.

That’s when we pointed out the reality of the finances for independent contractors. As a self-employed individual, he was responsible for managing his taxes, as described above for dependent contractors. In addition, he would incur extra expenses for performing his old job. This time around, he would pay for costs his employer previously covered. They include use of his home office, internet and phone services, medical or dental insurance coverage, bookkeeping, marketing, administration, etc.

It is not unreasonable at all for employers to hire former employees as higher paid consultants.

Marketing Materials

Once all of this was clearly outlined, Steve officially registered his business.  He had the information in place to develop marketing materials, such as business cards and brochures.

All consultants require an on-line presence. Depending on your circumstances, you may simply need to polish up your LinkedIn profile, set up a Facebook page, or develop a fully search engine optimized website. You will want references and testimonials prominently featured on this digital platform.

This is the first place your clients will go to assess you. Anyone considering a transition to independent contractor must budget for such upfront marketing costs.

Independent Contractor Legal Contracts

Similarly, you must also set funds aside for the services of a business lawyer. We strongly recommend all independent contractors invest in this consultation before stepping out to meet their first client.

All too often, employees making the transition into consulting undermine the value of their time and expertise. As an independent consultant, your client must always understand the connection between your fees and your services. The more the client wants, the more they should pay. A formal contract can provide a solid framework for such negotiations.

Steve’s draft contract clearly outlined the conditions for engaging his services, payment schedules, terms for breaking the contract as well as the limitations of his services.

Selling Yourself as an Independent Contractor

Networking is the life blood for funnelling potential clients into your pipeline, especially in the early days. Just like job interviews, you need to prepare and practice your elevator pitch and become very sharp at networking. Not everyone is good at it.

Steve’s personal career coach worked closely with him to ensure he had the art of networking down pat. In addition to practicing what to say, we also ensured Steve became intimately familiar with the contact manager and calendar functions on his phone and computer. And we helped him set up a proper system for tracking his progress and following up with prospects.

Steve felt confident to begin networking as soon as his marketing materials and legal contracts were ready. And his coach remained by his side to assist as a trusted partner in his new mission. 

It started out with a phone call to former colleagues and employers. We also reminded him to tap into his valuable social network to help get the word out.

Financial Planning

Transitioning from employee to consultant comes with one big hurdle: the absence of a secure biweekly paycheque!  The last part of your transition must include a session in financial planning. Financial stress is the main reason why some clients stray from the solid career transition plan we put in place for them.

If needed, we connect you to a financial coach or accountant who will help you set up a system to budget and plan your cash flow. They will also help you with strategies to manage the highs and lows of fluctuating income, typical for early stage independent consultants.

Equity’s team offers a unique service supporting individuals transitioning to careers as independent consultants.  If you are considering taking this leap or find yourself constantly employed in temporary contract jobs, contact us. We can help you manoeuvre through the Forth Industrial Age, so you do not end up overworked, underpaid and exploited.


Susan Heim is the president of Equity Career Transition and Outplacement Services, offering personalized coaching services for individuals in their quest for the perfect job and career. Equity also provides cost-effective outplacement services for organizations, large and small, in both the private and public sector.

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