Quantifying Benefits for Contractor vs Employee

[ThePenIsMightier]

Someone in here was arguing recently about the actual cost of benefits and it got me thinking...

What's the magic number for doing this Contractor-Employee compensation? For some reason, I believe it's about 16%. Does that sound right?

I'm talking about how much more a contractor should be charging to do the same job as the employee beside her. So if employee is making $100k and has "standard" benefits, vacation and stats then the Contractor should be looking at $116k to cover their unpaid vacation/stats as well as source out some supplemental health/dental benefits.

Let's say the employee gets 4 weeks paid vacation plus the 2 week's worth of stat's. Right away we know the contractor needs to make 52 weeks of money in the only 46 weeks she works. So we add 6/52=11.5% right there and our multiple is already 1.115 but I'm looking for a decent estimate of the remaining ___% and 4.5% seems high.

How do we calculate/estimate the rest? What are your basic, standard (kind of shitty) benefits worth? They're not $4,500 are they?

RRSP matching of 5% should just be counted as straight cash, shouldn't it? Or should it be ignored because it's not being shown in the employee's $100k? Or should it be added to the employee's $100k at the start of the exercise?

Thanks for your expert Marth!

[suntan]

25 years ago my friend did accounting for a large company, the total average cost of benefits back then was around $9000/employee.

Believe it or not RRSP/stock matching did not have a very high uptake. People are generally stupid.

[Cagare]

Beyond the straight measures there is an intangible here. As a contractor you can be asked to stop working at any point, not as simple as a full time employee.

Much like the old quote, you don't pay the prostitute to sleep with you, you pay so they to go away after. Much could be the same about higher pay for a contractor.

[suntan]

Local IT rate for some sort of development role (developer, architect, etc) was around $140/hr pre-pandemic. It's now around $100/hr.

[ExtraSlow]

I don't have detailed math to support this, but it'd be a hell of a lot higher than 16% for me to consider it if I was presented the option. I'd want 40% or more, and that's about what I'd expect for a normal cost differential to be in the Petroleum Engineering world.

[ThePenIsMightier]

Beyond the straight measures there is an intangible here. As a contractor you can be asked to stop working at any point, not as simple as a full time employee.

Much like the old quote, you don't pay the prostitute to sleep with you, you pay so they to go away after. Much could be the same about higher pay for a contractor.

Fair enough and very true. For the sake of argument, let's leave that "risk tax" out of these equations and assume each worker will receive full time hours with rock solid consistency.

[suntan]

Fair enough and very true. For the sake of argument, let's leave that "risk tax" out of these equations and assume each worker will receive full time hours with rock solid consistency.

That literally does not exist as a contractor. It must always be factored in. But employers account for it too.

Also usually what happens is if they like you they offer you a FT job.

[Nufy]

That literally does not exist as a contractor. It must always be factored in. But employers account for it too.

Also usually what happens is if they like you they offer you a FT job.

I have had full time hours for every one of my contracts.

[ThePenIsMightier]

We have a few saying it's well over 16%...
So let's look at it this way - if I'm hiring someone as an employee and last year, she made $125k as a Contractor, she should definitely accept an offer of $100k plus benefits as an employee?

[suntan]

I have had full time hours for every one of my contracts.

Not 40 hours, I mean job as employee.

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We have a few saying it's well over 16%...
So let's look at it this way - if I'm hiring someone as an employee and last year, she made $125k as a Contractor, she should definitely accept an offer of $100k plus benefits as an employee?

That's more than reasonable for her. If anything it's an overpay.

[bjstare]

My reasonably recent experience (5 years ago) is ~30%. This is an actual example with same company, same role.

[sabad66]

I don't have detailed math to support this, but it'd be a hell of a lot higher than 16% for me to consider it if I was presented the option. I'd want 40% or more, and that's about what I'd expect for a normal cost differential to be in the Petroleum Engineering world.

This. 16% is not nearly enough. 40% would be my minimum target too.

If you think about all the benefits an employer gives to staff:
-6% for vacation (based on 3 weeks per year)
- rrsp/pension - anywhere from 5-15%
- training, $1500/yr
- health benefits - mine are apparently worth about 7k/ year
- time spent on non-work stuff like webcasts, personal development, goals/reviews, etc
- ei and cpp premiums


All of that adds up to more than 16%

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We have a few saying it's well over 16%...
So let's look at it this way - if I'm hiring someone as an employee and last year, she made $125k as a Contractor, she should definitely accept an offer of $100k plus benefits as an employee?

Ah ok, you’re talking about going the other way. I was thinking employee->contractor. In that case I think that’s reasonable

[suntan]

As a contractor I get to pay both portions of CPP. Whoo!

The RoR for CPP is absolutely miserable.

[Buster]

More you make, the more it benefits you.

[killramos]

Contract was about 40% over salary in my experience. Just salary, not total comp.

[ExtraSlow]

We have a few saying it's well over 16%...
So let's look at it this way - if I'm hiring someone as an employee and last year, she made $125k as a Contractor, she should definitely accept an offer of $100k plus benefits as an employee?
Depends a little on the company, but if the company was paying health insurance, some kind of RSP match or contribution, and you had a reasonable expectation of annual bonuses, then that's a deal I'd take for sure.

There's no single correct answer. Depends on individual, company, role and industry.

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Contract was about 40% over salary in my experience. Just salary, not total comp.
The last time I looked at this, which admittedly was a long time ago, total comp was shockingly close between contract and employee. That was for a real country club place though, it may be different now.

[killramos]

That is my experience, except as employee you take more risk on that delta in exchange for more security on the base.

It’s actually a funny way to look at it, but in some ways being an employee exposes you to more compensation volatility.

[suntan]

Most people can't handle being a contractor. Too much paperwork and the temptation to spend all your pre-tax money is too great.

On that note I really need to get back to my accountant on some paperwork.

[ExtraSlow]

Most people can't handle being a contractor. Too much paperwork and the temptation to spend all your pre-tax money is too great.

On that note I really need to get back to my accountant on some paperwork.

I let me bookkeeping get waay behind when I had my company. What a fuck-show that was. If I ever do that again, I'm buying software or hiring someone on day 1 to make that easier. Just the most annoying and frustrating bullshit ever.

[Nufy]

When I switch from employee to contractor 14 years ago...I figured out my hourly rate based on salary / average working hours in a year.

Then I doubled it for my starting rate as a contractor.

Not sure how I would calculate an equivalent these days if I had to go back to being an employee.

[suntan]

I shove all my receipts into monthly folders and I try to make sure I use only my CC to buy company stuff so that I have only one thing to pay off every month.

[killramos]

Most people can't handle being a contractor. Too much paperwork and the temptation to spend all your pre-tax money is too great.

On that note I really need to get back to my accountant on some paperwork.

You only have to do that if you have material expenses to write off. I would argue that most people massively overestimate the value of these.

[suntan]

I do buy some computer stuff, mileage, cell phone, office 365, some other things. I think it saves me about $200/yr lol.

Mostly I keep the company because virtually all places refuse to deal with sole proprietorships.

[ExtraSlow]

pretty easy to write of a few thousand bucks worth of expenses

[suntan]

You have to depreciate most assets which puts a crimp in the pre-tax savings.

The CRA wanted me to CCA a fucking mouse. I told the guy I was talking to to shove it. He let me expense it all in one year.

The govt is best.

[ThePenIsMightier]

So lemme play Devil's Advocate, here.


https://youtu.be/74oGgFTgpI4


If 40% is the number, who would be prepared to drop the contract where they were at about $200k and take a salary of $143k with benefits? Would that feel like a no-brainer decision?

[suntan]

Yup. Because if you were to lay me off in a couple of years that sweet sweet severance + possible EI.

[killramos]

So lemme play Devil's Advocate, here.


https://youtu.be/74oGgFTgpI4


If 40% is the number, who would be prepared to drop the contract where they were at about $200k and take a salary of $143k with benefits? Would that feel like a no-brainer decision?

As long as there was a healthy opportunity for performance incentives above that salary it’s not necessarily a bad deal.

There is more to it than blue cross premiums and a parking allowance.

[ercchry]

Some of these benefits are a fixed cost… so as compensation increases the percentage will decrease… (employer paid ei, cpp, etc)


A big one is paid days off… 3-5 weeks vacation plus flex days/PLDs… easily at 6 weeks+, then ~2 weeks worth of stats… bonuses, even at a conservative 10% of salary already puts the premium for employees at 25%+ alone… oh and don’t forget a minimum of 5% rsp matching… so 30% plus ~$15k for health benefits and cpp/ei premiums (employer paid part)

[sabad66]

So lemme play Devil's Advocate, here.


https://youtu.be/74oGgFTgpI4


If 40% is the number, who would be prepared to drop the contract where they were at about $200k and take a salary of $143k with benefits? Would that feel like a no-brainer decision?

Yes especially if there is a bonus component to salary. Even a modest 10% bonus gets you to 157, then add in benefits that you no longer pay out of pocket, paid vacation, retirement savings contributions, you’re pretty close to 200 anyways.

[ExtraSlow]

If 40% is the number, who would be prepared to drop the contract where they were at about $200k and take a salary of $143k with benefits? Would that feel like a no-brainer decision?
Yes.

[Buster]

Some of these benefits are a fixed cost… so as compensation increases the percentage will decrease… (employer paid ei, cpp, etc)


A big one is paid days off… 3-5 weeks vacation plus flex days/PLDs… easily at 6 weeks+, then ~2 weeks worth of stats… bonuses, even at a conservative 10% of salary already puts the premium for employees at 25%+ alone… oh and don’t forget a minimum of 5% rsp matching… so 30% plus ~$15k for health benefits and cpp/ei premiums (employer paid part)

What are paid days off?

[suntan]

These days, every day!

[pheoxs]

Everyone keeps talking about the benefits of being an employee but seems to be ignoring the benefits of being a contractor. Being about to deduct quite a few things along with splitting profits across future years has a fair bit of value. IMO the gap is def less than 30% figure some people throw around.

All things being equal if you got a 20% bump to switch to contractor you'd probably finish the years ahead all things being equal. Though contractors tend to be the first chopped so there is the job security aspect and why some people expect a larger margin.

(Depends on the companies bonus structure though, obviously if you get a huge yearly bonus that's quite different situation)

[killramos]

Going from being an employee to a contractor. In the same job. Same position. Same company.

There are next to no legitimate business expenses in such a scenario.

Change my mind.

[suntan]

Other than buying a computer, maybe Office 365 and your own email domain not much else.

[ThePenIsMightier]

Going from being an employee to a contractor. In the same job. Same position. Same company.

There are next to no legitimate business expenses in such a scenario.

Change my mind.

Couldn't you claim your mileage as an expense to get to your employer's site/office/UnderDesk?

[lasimmon]

Couldn't you claim your mileage as an expense to get to your employer's site/office/UnderDesk?

Not if you go to the same place every day.

[killramos]

Other than buying a computer, maybe Office 365 and your own email domain not much else.

If your employer doesnt provide these things that cost almost nothing.

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Not if you go to the same place every day.

This

[suntan]

Yup, you might save $200 on your taxes.

[Nufy]

Not if you go to the same place every day.

That's why you need more than one client...at least on paper...

[ThePenIsMightier]

Not if you go to the same place every day.

Can't you work for the same single client for roughly 2 years before you risk the CRA deeming you an employee?

[Nufy]

Can't you work for the same single client for roughly 2 years before you risk the CRA Deming you an employee?

Longer than that according to my accountant. I am at my current client for almost 6 years now...

[ExtraSlow]

From what I hear, legitimate expenses aren't really the point. I wouldn't know, I was bad at that.

[killramos]

Seems appropriate

102432

[ThePenIsMightier]

Longer than that according to my accountant. I am at my current client for almost 6 years now...

I should've worded that better.
"The same client, exclusively."

[holden]

Local IT rate for some sort of development role (developer, architect, etc) was around $140/hr pre-pandemic. It's now around $100/hr.

Is this for software engineering? I though the pay in those roles had gone though the roof since Covid. I read this thread in reddit last week and people were mentioning companies giving their SWE pre-emptive raises of $20-30k just to keep up with market rates.

https://www.reddit.com/r/PersonalFinanceCanada/comments/q8n3n4/is_it_true_that_tech_salaries_or_salaries_in/

[JordanEG6]

Been a contractor from day 1. Moved to staff to get pre-approved for a home. Then went back to contracting after about a year or so.

Personally, I find it more beneficial for me to be contractor salary and tax-wise. As said, it helps alot to have more than one client.

[ShermanEF9]

Can't you work for the same single client for roughly 2 years before you risk the CRA deeming you an employee?

Thats usually only a concern if you are sole proprietor. Incorporated doesn't have this issue (and is also how my "client" is getting around this rule)

[ExtraSlow]

Thats usually only a concern if you are sole proprietor. Incorporated doesn't have this issue (and is also how my "client" is getting around this rule) I think this is incorrect, please consult a professional for all tax planning advice.

[ercchry]

Yeah, you’re not a business unless you’re a business… many people do it, but that doesn’t mean they should

[ShermanEF9]

I think this is incorrect, please consult a professional for all tax planning advice.

:dunno: Just how its worked for me the past few years.

[lasimmon]

:dunno: Just how its worked for me the past few years.

Until the audit.

[ShermanEF9]

Welp. This calls for a phone call to the accountant.

pro tip: Don't trust people when they tell you anything, even if they are confident.

[suntan]

Is this for software engineering? I though the pay in those roles had gone though the roof since Covid. I read this thread in reddit last week and people were mentioning companies giving their SWE pre-emptive raises of $20-30k just to keep up with market rates.

https://www.reddit.com/r/PersonalFinanceCanada/comments/q8n3n4/is_it_true_that_tech_salaries_or_salaries_in/

Reddit is full of crap.

As a general market trend in Calgary, rates have gone down mostly because of the CoC.

A contractor rate of $100 is still $208K/annum though eh.

[ExtraSlow]

Welp. This calls for a phone call to the accountant.

pro tip: Don't trust people when they tell you anything, even if they are confident.

Agree, don't take my advice, I am not an expert or a contractor or a business owner or an accountant. I am just going on one conversation I had about six years ago.
Always consult a professional.

[suntan]

The test is basically

- Do you have more than one client.
- Are you responsible for purchasing your own equipment.
- Are you responsible for your own training.

And anybody can be incorporated and stay incorporated. The roadblock is whether you can claim the small business deduction. Note that that only affects profits, not revenue. If you're drawing everything out as salary or a mix of income and dividends the savings is not that much. Dividends from your business are considered non-special, so they're basically taxed at your normal rate.

Harper closed virtually all the loopholes, Trudeau closed the rest.

[Xtrema]

Is this for software engineering? I though the pay in those roles had gone though the roof since Covid. I read this thread in reddit last week and people were mentioning companies giving their SWE pre-emptive raises of $20-30k just to keep up with market rates.

https://www.reddit.com/r/PersonalFinanceCanada/comments/q8n3n4/is_it_true_that_tech_salaries_or_salaries_in/

I assume this is not Calgary. Calgary is still depressed. But it's a different tune in US (to a small degree GTA as well), there is a huge effort in retention as there seems to be a a huge game of musical chair going on. Whoever you can't retain, it'll cost you more to rehire. Which makes employees who stuck with you feels like chumps and they looks for another jobs. Vicious circle.

Retention is an hot top among top execs. We had a round of adjustments in July due to some pressure and losses but in no way as lucrative as that reddit post.

[suntan]

The USA has been like that in IT for decades.

It's weird right now. Stackoverflow's latest developer survey said that a lot of people lost their jobs, and a whole bunch of them are saying that they're leaving the occupation permanently.

[ExtraSlow]

The USA has been like that in IT for decades.

It's weird right now. Stackoverflow's latest developer survey said that a lot of people lost their jobs, and a whole bunch of them are saying that they're leaving the occupation permanently.

Pretty sure you were reading the rigzone boards bro.

[suntan]

Everybody's playing musical career chairs right now.

It's a common thing in O&G but in IT last time it happened was in 2000.

[schurchill39]

So lemme play Devil's Advocate, here.
If 40% is the number, who would be prepared to drop the contract where they were at about $200k and take a salary of $143k with benefits? Would that feel like a no-brainer decision?

I'd take that in a heart beat. By my back-of-the-napkin-marth the equivalency number is around 40% when you consider everything everyone here has already mentioned like health benefits, bonus opportunities, vacation, , RRSP matching etc. To me, once you're at an equivalent dollar value the non-tangibles start to play a big role in the decision. Mainly that comes down to job security or what happens if you get laid off. As an employee I'd get some form of severance and I could collect EI, as a contractor I just took equivalent pay with no safety net if I get cut loose. To truly be equivalent on the risk factor I personally would want to be around 60%.

That being said, as a contractor since 2018, I've never actually got 60% much less 40% but beggars can't be choosers when your skillset is very specialized and no one is hiring full time for that role. I've probably only ever begrudgingly averaged around 10% and some years came out under being an employee just because of lack of work = sitting. If you were a true contractor and had multiple clients where you were paid on a per project and kept busy enough to bounce around then it might be worth it, otherwise I've yet to see a role where a fairly paid employee position wouldn't have me out ahead.

[ExtraSlow]

This is a good point. It's not common where you have both options in front of you at the same time, so it's super hard to compare.

[ThePenIsMightier]

I've heard an HR person recently say "it's 30%".
Looking at many typical benefits packages, I find myself saying,
"How much fucking life insurance does a worker need?!? Particularly when it's gone once you retire so when you actually die, you won't be insured. Would you have bought this much life insurance with the extra 30-40% cash you'd be getting as a contractor??"

[ExtraSlow]

So are you a contractor yet or what? Get at it.

[suntan]

I've heard an HR person recently say "it's 30%".
Looking at many typical benefits packages, I find myself saying,
"How much fucking life insurance does a worker need?!? Particularly when it's gone once you retire so when you actually die, you won't be insured. Would you have bought this much life insurance with the extra 30-40% cash you'd be getting as a contractor??"

If you have a company with employees that make a lot of insurance claims, it will raise the premiums for everybody.

Vacation is considered a benefit and requires a monetary value and subsequent liability on the balance sheet.

Life insurance and STD/LTD has been creeping up because millennials and gen Y are actually less healthy than gen x and boomers at the equivalent age.

[CompletelyNumb]

30% Minimum.

Whether or not a person thinks it's a "good deal" and takes an offer is on them. We're coming into a generation of kids that want double the pay to work remotely part time. In all industries.

[ThePenIsMightier]

If you have a company with employees that make a lot of insurance claims, it will raise the premiums for everybody.

Vacation is considered a benefit and requires a monetary value and subsequent liability on the balance sheet.

Life insurance and STD/LTD has been creeping up because millennials and gen Y are actually less healthy than gen x and boomers at the equivalent age.

It's not about claims. The point I'm making (that you're failing to see) is that when the benefits are on silly items that you never would have purchased if given the opportunity with even double the cash, then aside from a monetary value on paper, they have no value to the employee.
Tricking Killramos into dropping his contract to take a $50k hit but he gets a "free" Chrysler and a box of Android phones isn't putting him ahead.

The emphasis on excessive layers of overlapping Life/ADD/LTD/etc insurance within many benefits policies is a false benefit.
Free massages, glasses, braces, computers, sporting goods and so on are far more valuable to far more people. (And *gasp, more rare).

[suntan]

Oh no I agree, just saying a lot of it is what is termed "non-cash expense".

Although I'd say STD/LTD is very important, and also super cheap if you get it through a group plan with lots of members.

Come on, the private hospital room benefit not doing it for ya?

Drugs and dental claims are what raises premiums since everybody uses them.

[ThePenIsMightier]

These types of insurance are more important to me when I'm retirement age. If I'm retired, I no longer work at the company and don't get the benefit of the insurance that I've been paying into for (potentially) decades.

[killramos]

You guys are way too focused on STD/LTD when STI/LTI is the real carrot.

[suntan]

As long as you're covered.

[ThePenIsMightier]

I think I have updates to the main thread a little later. It sounds like she is making a move, but I didn't have the exact details correct in the earlier posts.

*As a small aside, I've been asked to provide temp support to a company that won't amount to more than 10 hours per month. I'm not a Contractor, but they want to pay me a full rate and not deduct any tax or CPP/EI.
The agreement states I am responsible for all that tax, CPP and EI. I think this is fine as long as I claim all of this on whatever line "Other Income" is on my taxes. Although... That just means I am going to be taxed correctly (later). How is the CPP & EI supposed to get dealt with? Who would end up paying the Employer's portion?

[killramos]

I’d personally let r buck on CPP and EI. Fill out the other income as you said and let it tell you what you owe for those. Do you have other employment because if so you are probably maxed out anyway.

[suntan]

Contractors never pay EI. Make sure she never, ever remits EI because she will never get that money back.

She pays for both CPP portions.

If the amount of money is that small she should just take the money in as dividend income is not subject to EI or CPP.

[ThePenIsMightier]

I’d personally let r buck on CPP and EI. Fill out the other income as you said and let it tell you what you owe for those. Do you have other employment because if so you are probably maxed out anyway.

Yes, I should've mentioned that my regular employer is full time.
So, when I put in an amount on that "Other Income" line, it is not only calculating the tax I owe, but also the CPP and EI? I thought it would only be the tax, but perhaps that was silly of me.

[ercchry]

Yes, I should've mentioned that my regular employer is full time.
So, when I put in an amount on that "Other Income" line, it is not only calculating the tax I owe, but also the CPP and EI? I thought it would only be the tax, but perhaps that was silly of me.

So for 2021 max CPP/EI earnings is $61,600/$56,300 so as long as your FT employer has already deducted $3,166.45/$889.54 for each, you have paid your maximum annual contribution… so if you paid either for this PT contract work, it would be an over contribution and the CRA would just return it back

[ThePenIsMightier]

So for 2021 max CPP/EI earnings is $61,600/$56,300 so as long as your FT employer has already deducted $3,166.45/$889.54 for each, you have paid your maximum annual contribution… so if you paid either for this PT contract work, it would be an over contribution and the CRA would just return it back

Great. Thank you!
No, I won't be paying anything as the cheques will be ($___rate)*(___hours) with no deductions of any kind. And then it sounds like when I claim this "cash" on my tax return, they will be calculating that I don't owe anything for CPP and EI.
Sounds good to me!

[killramos]

Yes, I should've mentioned that my regular employer is full time.
So, when I put in an amount on that "Other Income" line, it is not only calculating the tax I owe, but also the CPP and EI? I thought it would only be the tax, but perhaps that was silly of me.

Should be handled if you correctly filled out step 7 which moves from tax owed to total owed of your T1 ( a few schedules here as well ) or any tax prep software will just do that shit for you.

imo don’t overthink it and just declare the other income and follow the instructions for determining your EI and CPP contributions.

[suntan]

I think I have updates to the main thread a little later. It sounds like she is making a move, but I didn't have the exact details correct in the earlier posts.

*As a small aside, I've been asked to provide temp support to a company that won't amount to more than 10 hours per month. I'm not a Contractor, but they want to pay me a full rate and not deduct any tax or CPP/EI.
The agreement states I am responsible for all that tax, CPP and EI. I think this is fine as long as I claim all of this on whatever line "Other Income" is on my taxes. Although... That just means I am going to be taxed correctly (later). How is the CPP & EI supposed to get dealt with? Who would end up paying the Employer's portion?

1) Are you invoicing them?
2) Are they giving you a T1 or are they handing you cheques payable to "ThePenIsMightier"?

[Hallowed_point]

Eveythings ok until you get that little brown envelope from the CRA..not worth the stress dealing with those buffoons imo. Been there, done that. The moderate increase in pay vs the stress and paperwork/tax hassle ..nah. It would have to be at least a 50% jump vs employee status for me to ever consider it again.

[ThePenIsMightier]

A small update to what essentially started this thread (not that you have been sitting on the edge of your seats, LoL!)

So she has taken the plunge to another job going from (what I thought was) a Contractor to a salaried employee. The screwy thing is that apparently she wasn't really a "contractor" but actually a strange version of "hourly employee". I swore she was a Contractor, but under this weird system she was in, she made $75/hr and got zero benefits of any kind, at all. No vacation and no stat's. Nothing. She was expected to take 5 weeks of vacation a year and with the ~10 stats a full-time year for her was $135k which she was fine with when it was FTE but when it dropped lower, she realized she was exposed to the risk of a Contractor without the benefits because she couldn't fill her time with other clients or have any biz write-offs or pay herself in dividends etc.

Her new salaried employee role is for about 25% less at $102k in terms of salary. But now she gets up to 5% RRSP matching, 4 weeks vacation, flex spending (tiny), travel insurance, all sorts of life/LTD/ADD/etc insurances, and reasonable dental for her and her family. Plus the increased "stability" of FTE for as long as that lasts in our complex economy. (For killy - It doesn't look like she's high enough on the totem pole for incentive plans, etc).

So, I think she did reasonably well... not excellent, but certainly decent. If she was FTE at the old place, I could see this being less attractive, but she said she was dropping below 0.75FTE for a few months, so this seems like an easier decision. Would you agree?

The new company considers their benefits plan to be "worth 30%" and I have a tough time with that. There are some intangibles, but I always find myself asking "for every extra $10k someone handed me at my job, how much of it would I spend on bulking up life insurance policies that would vapourize when I quit or retired?" The amount of life insurance in some of these benefits plans is crazy. I think it was Buster that said something like "the only thing that is more money is more money."

So back to the quantifying game, if she was still consistently getting $135k at the first place, would you take the 25% hit for the added benefits and stability? It's a Hell of a lot better than the 30%-40% that some folks were talking about earlier.

[ExtraSlow]

So what I'm hearing is you have no idea what your wife's employment situation is. You thought she was a contractor but she wasn't? If she's not submitting a T2, that's a big clue.

Anywhoooo, doubt anyone is changing their answers from before. $102K +5% = $107,000 per year. You can assign whatever value you want to benefits, but it's non-zero.

Also doesn't sound like she has two options in front of her anyway, so not sure what you are worried about. Unless you are concerned that she's not making $600k like she should be if she was motivated. Maybe you can upgrade?

[killramos]

A small update to what essentially started this thread (not that you have been sitting on the edge of your seats, LoL!)

So she has taken the plunge to another job going from (what I thought was) a Contractor to a salaried employee. The screwy thing is that apparently she wasn't really a "contractor" but actually a strange version of "hourly employee". I swore she was a Contractor, but under this weird system she was in, she made $75/hr and got zero benefits of any kind, at all. No vacation and no stat's. Nothing. She was expected to take 5 weeks of vacation a year and with the ~10 stats a full-time year for her was $135k which she was fine with when it was FTE but when it dropped lower, she realized she was exposed to the risk of a Contractor without the benefits because she couldn't fill her time with other clients or have any biz write-offs or pay herself in dividends etc.

Her new salaried employee role is for about 25% less at $102k in terms of salary. But now she gets up to 5% RRSP matching, 4 weeks vacation, flex spending (tiny), travel insurance, all sorts of life/LTD/ADD/etc insurances, and reasonable dental for her and her family. Plus the increased "stability" of FTE for as long as that lasts in our complex economy. (For killy - It doesn't look like she's high enough on the totem pole for incentive plans, etc).

So, I think she did reasonably well... not excellent, but certainly decent. If she was FTE at the old place, I could see this being less attractive, but she said she was dropping below 0.75FTE for a few months, so this seems like an easier decision. Would you agree?

The new company considers their benefits plan to be "worth 30%" and I have a tough time with that. There are some intangibles, but I always find myself asking "for every extra $10k someone handed me at my job, how much of it would I spend on bulking up life insurance policies that would vapourize when I quit or retired?" The amount of life insurance in some of these benefits plans is crazy. I think it was Buster that said something like "the only thing that is more money is more money."

So back to the quantifying game, if she was still consistently getting $135k at the first place, would you take the 25% hit for the added benefits and stability? It's a Hell of a lot better than the 30%-40% that some folks were talking about earlier.

Is she eligible for performance incentives or bonuses?

[ThePenIsMightier]

Is she eligible for performance incentives or bonuses?

As mentioned, it doesn't look like it.

ExtraSlow
It's not my wife. Did I say wife? Is it your wife because I'm your alt?

[ExtraSlow]

As mentioned, it doesn't look like it.

ExtraSlow
It's not my wife. Did I say wife? Is it your wife because I'm your alt?

My mistake. I originally though thtis whole thread was about you, then I guessed wife when you said "she". Anyway, if "this person" didn't know that they were an employee vs contractor before, they should do everything they can to stay as an employee because they don't sound like they'd handle the contract thing well. Employee is easier and better for most people.

[ThePenIsMightier]

My mistake. I originally though thtis whole thread was about you, then I guessed wife when you said "she". Anyway, if "this person" didn't know that they were an employee vs contractor before, they should do everything they can to stay as an employee because they don't sound like they'd handle the contract thing well. Employee is easier and better for most people.

No bigs. It was essentially me who screwed up the interpretation. She told me her hourly rate in a way that (to me) sure sounded like she was a Contractor when she was asking for advice about this in the first place.
I didn't think many people or companies carried the "hourly wage and nothing else" biz model into people making over $100k

[bjstare]

I didn't think many people or companies carried the "hourly wage and nothing else" biz model into people making over $100k

It's how we bring people in on short notice (e.g., due to urgent, unforeseen client needs). Our normal recruitment process is measured in months, not weeks, and when we identify the right person for the right role with an urgent need, we bring them in through a staffing agency whereby they're an employee of that agent and receive hourly + stat holidays, but nothing more. It's not intended to be a sustainable solution as we don't employ contractors or hourly employees in the long term; it's used as a temporary solution to bridge someone until we can get through the bureaucracy to hire them full time (or turf them if they don't pan out)... for us, this approach is used regardless of the $$, almost all are >$100k.

[suntan]

A small update to what essentially started this thread (not that you have been sitting on the edge of your seats, LoL!)

So she has taken the plunge to another job going from (what I thought was) a Contractor to a salaried employee. The screwy thing is that apparently she wasn't really a "contractor" but actually a strange version of "hourly employee". I swore she was a Contractor, but under this weird system she was in, she made $75/hr and got zero benefits of any kind, at all. No vacation and no stat's. Nothing. She was expected to take 5 weeks of vacation a year and with the ~10 stats a full-time year for her was $135k which she was fine with when it was FTE but when it dropped lower, she realized she was exposed to the risk of a Contractor without the benefits because she couldn't fill her time with other clients or have any biz write-offs or pay herself in dividends etc.

Her new salaried employee role is for about 25% less at $102k in terms of salary. But now she gets up to 5% RRSP matching, 4 weeks vacation, flex spending (tiny), travel insurance, all sorts of life/LTD/ADD/etc insurances, and reasonable dental for her and her family. Plus the increased "stability" of FTE for as long as that lasts in our complex economy. (For killy - It doesn't look like she's high enough on the totem pole for incentive plans, etc).

So, I think she did reasonably well... not excellent, but certainly decent. If she was FTE at the old place, I could see this being less attractive, but she said she was dropping below 0.75FTE for a few months, so this seems like an easier decision. Would you agree?

The new company considers their benefits plan to be "worth 30%" and I have a tough time with that. There are some intangibles, but I always find myself asking "for every extra $10k someone handed me at my job, how much of it would I spend on bulking up life insurance policies that would vapourize when I quit or retired?" The amount of life insurance in some of these benefits plans is crazy. I think it was Buster that said something like "the only thing that is more money is more money."

So back to the quantifying game, if she was still consistently getting $135k at the first place, would you take the 25% hit for the added benefits and stability? It's a Hell of a lot better than the 30%-40% that some folks were talking about earlier.

That hourly pay arrangement is quite common. We have a couple of employees in that arrangement - if they want WFH they forfeit the benefits.

The new FTE position is better.

[schurchill39]

It's how we bring people in on short notice (e.g., due to urgent, unforeseen client needs). Our normal recruitment process is measured in months, not weeks, and when we identify the right person for the right role with an urgent need, we bring them in through a staffing agency whereby they're an employee of that agent and receive hourly + stat holidays, but nothing more. It's not intended to be a sustainable solution as we don't employ contractors or hourly employees in the long term; it's used as a temporary solution to bridge someone until we can get through the bureaucracy to hire them full time (or turf them if they don't pan out)... for us, this approach is used regardless of the $$, almost all are >$100k.

I'm one of those people. It sucks balls, would not recommend. I wish I could have been brought on through my LTD if it wasn't an employee position but from a business perspective I understand why employers go this route.

[ThePenIsMightier]

I'm one of those people. It sucks balls, would not recommend. But from a business perspective I understand why employers would do it.

You've got an agent/pimp making a pile off of you?

[schurchill39]

You've got an agent/pimp making a pile off of you?

Pimpin' ain't easy and hoe'ing is hard.

[bjstare]

I'm one of those people. It sucks balls, would not recommend. I wish I could have been brought on through my LTD if it wasn't an employee position but from a business perspective I understand why employers go this route.

If someone has an LTD set up, we'll use that too (but still, only for a limited duration). We just use the agency because it's easy solution when someone doesn't have anything set up.

[ExtraSlow]

I have a buddy who has to both use an LTD AND a pimping company for the job he's working right now. Seems like a lot of fucking around, but what do I know? He said those requirements were part of the deal with the end-customer, and he's making more per hour than he's ever made before so he's happy. Sounds fucked, but I'm just some idiot wage-slave.

[npham]

The pay cut is in line with a buddy who had an offer from an OO, he mentioned it was around 30%. One of my old bosses was converted to a shareholder/employee from a contractor role as well and he said the cut was around 25-28%. So at 25%, she's ahead of the two first-hand stories I've heard.

[ThePenIsMightier]

The pay cut is in line with a buddy who had an offer from an OO, he mentioned it was around 30%. One of my old bosses was converted to a shareholder/employee from a contractor role as well and he said the cut was around 25-28%. So at 25%, she's ahead of the two first-hand stories I've heard.

Good to know.
Thanks for your insights.

[Nufy]

Anyone have a coles notes for the acronyms ?

STD/LTD
STI/LTI
FTE (Full time employee ?)

Anymore That I missed.

Great conversation btw...

[ThePenIsMightier]

Anyone have a coles notes for the acronyms ?

STD/LTD
STI/LTI
FTE (Full time employee ?)

Anymore That I missed.

Great conversation btw...

Short-term disability. Long term disability. (Insurances).
Short-term and long-term incentive plans.
Full-time equivalent. So, 0.8FTE is usually 32hr/week rather than 1.0 FTE=40

ADD or AD&D= insurance for accidental death and dismemberment.


Edit - someone else was using "LTD" to mean they have a Limited Company (Ltd.) set up. So basically, a Contractor.

[hampstor]

It's been a little bit since I got granular into the weeds on how to quantify FTE vs Contractor rates, but the general principle was [ FTE total compensation cost to employer ] + 20% is what was tolerable for the rate of a contractor. The 20% was the 'risk premium' that an individual takes being a contractor, basically not getting a severance package when they get walked out.

Total comp cost to employer includes...
- Total compensation paid to employee (salary/bonuses/pension)
- Regulatory burdens paid by company (eg. the company will pay WCB premiums for the employee)
- Statutory burdens paid by company (eg. LTD/CPP/EI - remember that as an FTE, the company pays a portion of this too while a contractor takes the full burden)
- Other costs (benefits premiums paid by company/STD/training/professional dues/insurance)

Take all that, add 20%, and that's generally what a contractor should ask for.

In the end it was about 40-50% higher than the total compensation paid to an FTE.

[Nufy]

Anybody living in both worlds these days ?

I currently work as a contractor but have been requested to change to a Employee.

The offer is quite generous so I am going to accept it. however I have contracts with a few other companies with whom I do smaller work.

As long as there is no conflict of interest identified...Can it work ?