North America, led by the U.S. and Canada, is the world's largest economy with a GDP of $24.99 trillion and a population of over 370 million. With abundant natural resources and skilled, tech-savvy workforces, North American contractors are highly sought-after. A 2021 Upwork Report revealed that 36% of the U.S. workforce is freelancing, highlighting the region's importance as a hiring hub for contractors.
While there are challenges to navigate when hiring independent contractors, the benefits they provide can give your company a competitive advantage. Here are key reasons to hire global contractors:
- Finding talent across the US and Canada is generally easy
- Most contractors do not require training or resources to perform the role
- Hiring a contractor is faster and easier than onboarding an employee
- Contractors can be more cost effective
- Hiring contractors allows you to increase or decrease staff numbers based on changes in the market and global economy
- Global contractors have fewer compliance challenges than employees
There are key differences to recognize between contractors and employees. While a contractor operates independently, on a “per-project” basis, an employee works solely for the company. A worker classified as an employee receives benefits and is part of the employer’s payroll. While an employee will need to adhere to their organization’s guidelines and work schedule, a contractor has the flexibility to decide when and where they work. Contractors are often valued for a specialized skill set and are given information only to complete the project for short term tasks. An employee generally has a broad, well-rounded skillset. They often require lengthy training and onboarding as they’ve been hired for long-term objectives.
Canada
Canada, known for its natural beauty and friendly populace, has a workforce of around 20.65 million. Despite facing supply chain issues, inflation, and rising interest rates, it boasts a low unemployment rate of 4.9%. The self-employed sector is growing as Canadians increasingly seek work flexibility.
Toronto, Canada's largest city, has emerged as a major tech hub in North America. A 2022 CBRE report showed a 44% increase in tech workers since 2016, ranking Toronto third in North American tech talent. Major tech companies like Apple, Microsoft, and Amazon have established a presence there. Ontario's recent law against noncompete clauses and the University of Toronto's high degree completion rate further contribute to the city's thriving tech ecosystem.
Vancouver, Canada's third-largest city, is a burgeoning tech hub, ranking in the top 10 North American tech markets. Tech jobs have grown by 63% since 2016, totaling over 44,400 positions. The city also supports a gig economy, signaled by a rise in coworking spaces pre-pandemic. The University of British Columbia contributes to the skilled talent pool with over 2,800 annual graduates. However, be prepared to pay premium salaries for tech talent in Vancouver.
Montreal, Quebec's largest city, is a growing tech hub, housing companies like Google, SAP, and Shopify. In the first half of this year, non-Quebec companies invested CAD 1.74 billion, launching 57 projects and creating 4,700 jobs. The city ranked 15th in CBRE's 2022 Top Tech Talent rankings and boasts over 141,000 tech workers. Language laws requiring fluency in French could impact companies looking to invest.
In Canada, the distinction between an independent contractor and an employee is subject to stringent regulations, and the parameters can vary by province. For instance, in Quebec, the Quebec Civil Code governs worker classification, while in other provinces, the Canada Revenue Agency (CRA) has specific criteria for evaluating worker status.
Canadian courts and tax authorities consider multiple factors in worker classification:
- Subjective Intentions: The initial plans and written agreements between the company and the worker.
- Objective Facts: The actual practice of the relationship, assessing whether it aligns with the parties' stated intentions.
- Control over Work: Workers with more autonomy in how they perform their tasks are generally considered contractors.
- Ownership of Tools: Those who use their own tools are more likely to be considered contractors, while company-provided resources indicate an employer-employee relationship.
- Control over Profit: Contractors have the potential for increased profits based on work efficiency and reputation, giving them the ability to charge higher fees.
- Risk of Loss: Contractors bear the financial risks of their work, incurring losses if the costs exceed the fees they charge.
Understanding these factors is crucial for companies operating in Canada to ensure compliance with labor laws and tax regulations.
United States
The U.S., known as "the land of opportunity," continues to attract immigrants despite global economic challenges. In July, it created 528,000 jobs and reported a low 3.5% unemployment rate. The number of independent contractors has surged to 23.9 million, up from 12.9 million in 2017.
San Francisco and the Northern California Bay Area lead the U.S. in tech contracting, ranking No. 1 in CBRE's Top Tech Talent 2022. The area boasts 378,870 tech workers, constituting 11.4% of its total workforce—double the North American average. Software engineers make up nearly 75% of this talent pool. Silicon Valley remains unmatched in North America for tech talent, backed by local universities, government, and investors.
Seattle ranks as a leading North American tech hub, with over 189,000 tech workers. It's a popular destination for young tech contractors and tops the Axios-Generation Lab Next Cities Index as the most desired location for post-graduates. From 2016-2021, it saw significant tech talent growth, second only to Toronto.
Atlanta is an emerging contractors' hub, attracting major companies like Apple and Microsoft. Ranked 11th in North America for tech talent by CBRE 2022, the city benefits from educational partnerships with local colleges.
North Carolina's Research Triangle is an expanding tech and science hub, boasting a 5% growth in tech workers during the pandemic—ninth highest in the U.S. The growth is attributed to both global giants like Apple and local startups like Epic Games. The area's affordability, reduced salary expectations, and lower competition make it attractive for tech talent. Local universities, a major research park, and an international airport provide essential resources and connections for both workers and companies.
In the United States, differentiating between employees and independent contractors is crucial due to the severe consequences for misclassification, including back taxes, unpaid benefits, and financial penalties. Form W-9 is a key document for independent contractors, serving a similar role to a W-4 form for employees. It must be completed and signed before work begins and include the contractor's tax ID number.
Like Canada, the U.S. does not have a straightforward formula for classification but relies on common law rules focusing on three areas:
- Behavioral Control
- Financial Control.
- Type of Relationship
Additionally, the U.S. Department of Labor employs an Economic Reality Test based on six Supreme Court factors to ascertain employment status. This test aligns closely with the common law rules, offering another layer of guidelines for businesses to ensure proper worker classification.
G-P Contractor, part of the Global Employment Platform™, simplifies hiring contractors globally, streamlining the process and mitigating legal and financial risks for companies. It offers a single solution for your global workforce needs.
Download the full guide to learn more here