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How Does This Short Term Contract Thing Work?


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Hi all,

 

Just wondered if some of the more seasoned veterans out there could enlighten us green horns as to how you go about getting hold of these summer contracts. Is it initiated by the employer or the pilot? What rates should you expect to be paid, and what are the pilot's responsibilities as opposed to the employer's? Accommodation? Transport? Food? Does he pay your taxes etc or are you responsible for that? What is the average length of contract? Would you expect him to cover PPC's or any other recurrency training? What else should be taken into consideration - do you need any kind of PL insurance?

Is it a written contract, or a handshake kind of deal?

 

Be grateful for any kind of information so I don't have to lose a few seasons getting it right.

 

Cheers

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i've never had a written contract. always on a handshake. i suggest just being very clear on EVERYTHING. i.e. one buddy of mine even negotiated in laundry soap on one deal. if it isn't clear it can be interpreted differently by different people.

 

usually the company will have set rates on what they pay. as you get to know people in the business and they get to know you it can work in your favour, that is as long as you don't turn out to be an @ssh*#e.

 

for example, the company i contracted to this summer has always paid a daily plus an hourly rate. the contract i flew i knew would be low hours so i requested and received a straight monthly salary that worked in my favor.

 

as you are starting out you take what they give you and you will learn along the way by talking to the "veterans" in camp as did i. good luck

 

 

oh, once you are on the job? the company pays all your travel, food and accommodation. that's a given or at least it should be............ :wacko:

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SANDY: CRACK A BEER, HERE WE GO.....

First of all, there is a difference between a 'short-term employee' and a 'contractor' that should be defined.

Some companies will strictly use one or the other, many companies will let you choose.

NOTE...I am not an expert on all of this (just a pilot) so please consult a lawyer, and an accountant on all this stuff. Shop around until you find one that understands and respects what you want to do.

 

EMPLOYEES

Some companies DO DEDUCT your taxes etc., but pay wages only on the days you work and not pay any benefits like life insurance etc. These guys call you a "contractor", but that's not really the case. This is more accurately called a "short-term EMPLOYEE", (as opposed to full-time, on salary and benefits).

These jobs rarely require a written contract, though always use caution. If you are nervous, ask the boss to sign something.....the genuine guys will have no problem with that.

 

CONTRACTORS

Some companies want you as an individual "CONTRACTOR", and expect you to send an invoice at the end of the month, just like the plumber they hire.

They will also only write cheques to you and the plumber once a month, so don't expect a cheque as often as employees get them.

If the helo company goes bankrupt, you and the plumber are probably un-secured creditors, so the Receiver will pay all the employees wages that are owed, then pay you and the plumber a percentage of what is left.

You are expected to pay your own taxes, CPP, EI (though if you own the business, EI premiums are probably not paid).

Workers Compensation premiums are a grey area (because of the interpretation of some small print about the Responsibilities of the Prime Contractor, (whoever provides the revenue-earning tools i.e. the helo company). Some companies will pay WCB for you. Some companies want you to pay them.

Remember that WCB is a provincial matter and you must register with EACH and EVERY province you do ANY work in, not just where you or the helo company is based. If you are paying it yourself, this is a big hassle. (I refused to work for any company that wouldn't pay my WCB, as it's not worth the risk. If you need to make a WCB claim, you have some serious problems (or your widow does), and everything should be clean and organised).

You should get personal/company liability insurance. Yes, you already have some because you are a member of CAA, or have home owners insurance etc. but don't rely on this for professional aviation matters.

Some guys form a limited liability company (Joe's Flying Services Ltd.) and that company pays taxes etc. quarterly, while some others just run as a sole-proprietor (Joe Smith) and pay taxes by the 30th of April (just remember to squirrel lots of money away for this!!).

If you are a company that charges more than $30,000 in a year for services you will need to get a GST number from Ottawa. You will charge the helo company 7% GST (or HST in the Maritimes) on your invoice, and then send this on to the Feds. This doesn't cost the helo company anything, as they get to deduct this amount from GST they owe to the Feds. It's all about Debits and Credits off-setting each other and sounds confusing, but it isn't once you get started, or get an accountant to do it for you.

You can get your wife to do all this stuff for you, and pay her a salary. (Because she is related to you the salary must be within reason). This means you may move into a lower tax-bracket, and she probably won't move up into a higher one. This is called income-splitting, it's completely legal, and keeps more money in your household rather than going to Ottawa as taxes. It's about time !!

Some contractors decide to form a LIMITED LIABILITY company (i.e JFS Ltd) because the company can only be sued for the value of what is in the company e.g. maybe a truck, your helmet, a laptop, and/or some cash. The lawsuit would not be against Joe Smith personally, and therefore his house, car and future earnings would not be at risk.

CAUTION.....this is not as bomb-proof as it sounds. If you register your company with your provincial government, the limited liability does not cover you in any other province!! You would have to register your company Federally to cover yourself across all the areas we work. Again, talk to a lawyer.

 

CONTRACTS

If you are a "contractor", always get a written contract, unless you know ALL of the management on a very close personal basis. It should list which one of you is responsible to pay what, and what the various rates are.

There is often a statement about each of you obeying the CARs etc.

Many companies already have these, or you can draw up your own. It just clarifies things for both parties, and genuine bosses don't mind signing it. It will be invaluable if there is a disagreement after the contract.

 

EXPENSES

ALL expenses should be paid by the helo company, from your home and back again. Some companies only pay from the nearest airport (with a scheduled service) and back again.

You may need to add these to your month-end invoice to claim them.

All training expenses, i.e. PPCs and endorsements, should be paid by the helo company. On initial hiring, the helo-company should pay all expenses for your check-flight, but usually not any wages, until the Cheif Pilot says you are acceptable, and you agree on terms etc.

If you sell yourself cheaply, your pilot brothers will find out about it and drag you into a dark alley to discuss the issue in an unpleasant manner !!!!!

 

RATES

These vary widely in style. Each company usually determines this stuff, with only the actual amounts up to limited negotiation.

Very few companies will guarantee a certain number of flying hours, but you should be able to get some sort of minimum payment. e.g. I will commit to fly for only you over the next 150 days, if you guarantee me at least 100 days of work; OR, I will work for you from May 1st until August 31st, and you must pay me a minimum of $24,000 over that period.

Make it look like the helo company is actually getting some committment on your behalf, and it will all be pretty easy. Good luck, and don't go cheap !!

 

THE AUDITORS

Government regulations say that genuine "contractors" will probably work for different hirers (often 3 or more) in the course of a year, or at least write different contracts for terms in that year. Also "contractors" are supposed to determine what hours they come in to work, and go home again etc. etc. etc. etc.

Tax Department Auditors may look into your affairs, often without informing you that an inquiry is in progress. Often these people seem to be pilot-hating pitbulls, but sadly that's just their job!

That fancy truck and computer that your company just bought with pre-tax dollars, may be determined to be invalid and you may be assessed a tax fee and a penalty.

 

CONCLUSION

Contracting works very well for some guys because of it's ability to write-off a lot of expenses before tax etc., but it can have it's risks, after all you are a busineess owner, or entrepreneur now. Some guys prefer the ease of a regular salary, or even the 'short term employee' route.

 

I hope this helps, and I didn't go on for too long.

Veterans, did I forget anything ??????

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Overtalk makes a good point - the big thing to watch if you are a contractor is who gets it in the neck if something happens - if you are an employee you are protected somewat, unless you are acting outwith the terms of your employment.

 

"Aside from whether your tax is deducted at source, you can identify the essential difference between the two in the way that you're treated. An independent contractor is outside the employer's business and is told merely what has to be done, and not how.

 

In Canada, there is a 4-part test as to whether you are an independent contractor or not, but, unless you actually own the air service or have income from other business pursuits, it is difficult to meet (deductions at source are not part of it)."

 

from Operational Flying

 

Although you can claim more expenses, you still need the cashflow to take advantage! Many people find it eaasier just to pay the tax.

 

 

Phil

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