By Mike Millian, President of the Private Motor Truck Council of Canada
Underneath the surface of the transportation industry is a movement of drivers and carriers that are embracing an incorporation model, sometimes referred to as Driver Inc. Under this model, drivers are incorporating themselves to work for companies as independent operators, even though they are operating a company truck, have no more rights of movement than a company driver, and are, in all sense of the word, an employee of the company. The CRA deems this type of employment, if identified correctly, as a “personal service business”, which comes with the task of independently filing and paying taxes under the driver’s business, not the employer they’re working for, and comes with a higher tax burden as write offs that are available to true independent contractors, such as meals, fuel, repairs are not available for a personal service business.
This means that carriers are saving money by hiring what they claim are ‘independent drivers.’ This type of practice allows carriers to avoid paying for incentives that often come with working as an employee, such as benefits, and also does not include the legal protections that are in place for employees, such as short- and long-term disability, sick leave, holidays, overtime, and termination rights. These incorporated drivers are left to their own devices – running a ‘business’ without guidance, incentives, or systems in place to support them in the long-term – while the carrier reaps the rewards of reduced payroll costs and obligations.
This is simply the ‘root’ of the problem – the domino effect of issues that improperly classified incorporated drivers creates and leaves behind impact all facets of the industry. For instance, carriers that work under and encourage this model have the capacity to bid on jobs at a reduced rate, in comparison to others, because their operations costs are lower than they should be as a result of dodging tax obligations and other required source deductions. This means that carriers that legitimately operate their businesses with employees or legitimate incorporated drivers and owner/operators need to lower their costs to compete and gain the work; however, can’t afford to do so.
Meanwhile, there are some incorporated drivers who are il-versed about the financial obligations that come with operating a “personal service business”; therefore, aren’t filing their taxes properly or, in some cases, at all. According to Teamsters Canada, the Canadian Trucking Alliance and Association du camionnage du Québec, this type of fraud is costing governments at least $1 billion annually. In addition, the tax rate for a “personal service business” is 33 per cent – meaning that incorporated drivers under this model would be paying more in taxes than company drivers (if they are filing properly).
There is zero legal benefit for a driver to become incorporated under this model; however, it continues to gain traction and buckle the momentum of the transportation industry. Simply put, we need to be better at educating others about what it means to operate under an employer, the financial obligations and protections that come with employment, and enforcing the rules when others break them.
For example, we’ve had members share stories of new hires questioning why there was money deducted off their paycheques. To prevent any misunderstanding of how your company operates, take the time to educate your new hires about the many benefits that come with being an employee – including having access to benefits, short- and long-term disability isnurance, unemployment insurance, sick leave, holidays and overtime – and what the financial breakdown looks like on their paycheques. This level of transparency from the word ‘go’ will help set the stage for trust, nurture your company’s workplace culture, and remove the risk of turnover.
Other members have shared stories of learning about a driver operating under the incorporated model while operating a company vehicle for another company. If you discover a driver working for a carrier operating under this model, report the carrier to the CRA – or talk to your supervisor, who will handle the report on your behalf.
We need to band together to prevent this problem from gaining even more momentum and taking away from all that we’ve worked towards: a legitimate place to drive, operate and serve in the transportation industry.