Employee vs. Contractor
Most modern businesses work with independent contractors instead of, or in addition to, hiring permanent employees. The arrangements are common in cases where a business cannot guarantee a constant flow of work, a worker is self-sufficient, or the business needs a specialist.
However, if your relationship with a contractor resembles an employer/employee relationship, the CRA may treat it as such by issuing a ruling. In this case, the business will face penalties and a liability for unremitted payroll withholdings and other payments, and the worker will not be able to claim most of his or her business expenses.
Quite often, where CRA issues a ruling stating that one worker or a small group of workers are employees, the audit extends its scope to other workers within the business who perform similar roles. As the audit extends, so too does the potential liability for your business.