1. Yes, they will file and pay HST by themselves. You are responsible to confirm their HST number (HST Agent require, if number was not correct, HST agency will reject your ICT on this transaction).
2. Contractors have certain freedoms on time, work arrangement, etc. see your text book or search "Contractor". Employee signed short-term contract (6-month or 1 year) still employee. For employee, company deduct payroll tax and pay employer's EI and CPP, with vacation. Contractor: nothing unless indicate in contract.