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TL;DR: Alice & Bob work as contractors for a Canadian company, in Canada. Alice is underpaid, Bob is/was overpaid. How can Bob (legally) compensate Alice for her work?

I am working as a lead software dev in a small team for a large Canadian corporation. One of my teammates, call her Alice, was interviewed and hired 3 months ago as a junior developer at a rate of 35$/h. Over the last few months, she has proven to be far more capable than we expected, and we (team members and manager) estimate that she should instead be at the 50-55$/h paygrade. Her contributions are essential to our team's continuing existence and the success of its projects.

The problem is that corporate policy prevents giving raises within the first 6 months. I've also been experiencing personal issues which lowered my ability to work during the past few weeks, but I've continued to be paid normally (at 65$/h), both to avoid HR issues and because "everyone has their bad month" (in my manager's words).

From a legal standpoint, we are contractors: we are both sole proprietors of our respective sole proprietorships, and we are selling our services to the large corporation.

I would like to financially compensate Alice for her work. What's the least-annoying legal way of accomplishing this? Can I ask her to write me invoices for programming work to make up for the difference until her raise comes through in three months?

  • $35/hr to $50/hr is a pretty big raise to me. Are there other junior developers that make that much or does this raise also includes a title promotion? If she's really worth $50/hr then she should be able to find a job at a "better" company that is willing to pay what she's worth. Getting promoted may have different requirements than getting a raise. – milk Jan 24 at 17:32
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For you to "compensate Alice for her work" seems like the wrong framing. She is working for the corporation, not for you or your sole proprietorship. You are acting on a generous impulse to help your colleague and are not expecting anything in exchange for what you plan to give her, right? This would be a personal gift between friends and would be nontaxable to her and nondeductible to you.

That said, please reconsider whether to make this your problem. If the corporation values her work, they could give her an additional bonus to make up for the delay in the raise, or find some other fair solution that does not come out of your pocket.

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  • "You are acting on a generous impulse to help your colleague and are not expecting anything in exchange for what you plan to give her, right?" That's correct. The sentiment is "thank you for your (underpaid) work so far, we really appreciate it". I guess it really does count as a personal gift since there is no exchange or contract between us. "they could give her an additional bonus to make up for the delay in the raise" That may take an entire year from now. I'm not even sure if policy even allows for contractors to receive bonuses. – Ping Lan Jan 24 at 3:50
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    @PingLan to follow up on nanoman's answer: it's only six months. Think of this as probation, not a disrespect. – RonJohn Jan 24 at 6:27
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The least complicated way would be just to hand Alice some cash, with full agreement on both sides that is simply a gift between friends with no strings or expectations attached.

Now on to the reasons why I feel you shouldn't do this:

Please separate Alice's concerns from your own, as it only muddies the waters.

Your current personal issues have no impact on Alice's salary, and it sounds like you feel guilty about her picking up the slack. That could become sticky very quickly. A few examples off the top of my head:

  • Would you offer to personally supplement Alice's salary up to $55/hour? If that's the case, what happens when she's offered a raise up to $45/hour? Would you continue to pay her out of your feelings of guilt another $10/hour for the next year? The next 2 years?

  • What happens when word gets out that you're paying her out of your pocket and other co-worker(s) feel like they're underpaid, too?

It could be Alice is more than content with her current salary. You suggesting to her she is underpaid can only cause problems. If you convince her to think, "Hey, you're right! I'm getting screwed here!" what can she do about it? After all, it's corporate policy that she can't get a raise. She was happy enough with the pay 3 months ago to take the job, after all. If Alice has been employed for 3 months, that means she should be eligible for a raise in as few as 3 months.

If your manager agrees Alice is underpaid, it's up to her to go to bat for her employee. "Corporate policy" is a nonsense reason to not give Alice a raise. Policies are changed all the time; Claiming "policy" is a cop-out. It's not like saying the laws of physics prevent it, it only means there's a memo or a piece of paper somewhere that says "we don't want to".

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