Salary VS Contract.

[snowboard]

Hey guys, i've never been a salary worker, i started as a incorporated contractor.. so i dont really understand salary pay...

im thinking about switching companies and moving to salary because well im young and cant seem to hold onto my money so i fuck up my taxxes.. and salary seems like it would be more disciplined and i could get my shit together...

but yah i dont understand salary.. if i was offered say 6000 monthly how much would i actually take home?? like is that offer gross or after tax?? i dont get it haha...

thanks for your help if you can guys..

[~Leah~]

With salary, you're making the exact same thing every paycheck. If they tell you 6K/mth, that's what your total before taxes is. If they give you a yearly rate like 60,000/year for example... and you're paid bi-weekly... just divide that by 26 (# of pay periods in a year) and each paycheck will have $2307.69 before taxes and deductions.

It isn't going to help you hold on to your money, but it does make it easier to create a budget, because you know what to expect on each check, to the penny.

[Tomaz]

I love being payed salary! Makes my life easier by not needing to worry if i cant get to work on time, or if i have a doctors appointment. I was just happy i actually get payed overtime!!! That is very rare for Salary positions. you also would need to ask if it is set up for you to be paid once a month, twice a month, or bi-weekly. All are salary, just depends which one you get to determine paying bills.

[lint]

That's a gross number. The amount you take home depends on your marginal tax rate and any other deductions that are taken off your paycheck.

The main difference is that your taxes are deducted at source, so you shouldn't have to worry about a huge tax bill at the end of the year. Moving from contract to salary won't necessarily help you with discipline. Best to find a good financial planner to help you allocate funds for taxes, other emergencies etc.

[Doozer]

I would agree with what's been said and add that it may also help your tax situation. Not your overall financial planning, but your taxes specifically.

I assume what you mean about screwing up your taxes is that because you don't get them deducted automatically, you don't save enough to pay them in bulk at year end. Therefore, you always end up trying to come up with a year's worth of taxes in April.

Having them come right off your paycheque will definitely solve that problem, and you may even get some money back each tax season. It's just sometimes a bit tough to get used to losing ~30% of your paycheque before you even get it.


My quick thoughts:

Salary pros: taxes are taken care of, benefits are generally better, still get paid for holidays, sick days, etc, and it's someone else's problem to find the work.

Salary cons: you generally take home less for the same job, and don't have the same tax deductions, often there's less diversity in the work

Contract pros: more cash up front, more deductions, more flexibility in who you work for

Contract cons: No benefits (or find your own), you have to find your own contracts (less job security), more financial planning required

[Mark_Nguyen]

Originally posted by snowboard
Hey guys, i've never been a salary worker, i started as a incorporated contractor.. so i dont really understand salary pay...

im thinking about switching companies and moving to salary because well im young and cant seem to hold onto my money so i fuck up my taxxes.. and salary seems like it would be more disciplined and i could get my shit together...

but yah i dont understand salary.. if i was offered say 6000 monthly how much would i actually take home?? like is that offer gross or after tax?? i dont get it haha...

thanks for your help if you can guys..

If lets say you made $6,000/month.

You would just be under the 32% tax bracket.

Roughly you would get $48,960/year after taxes or $4,080 net/month

[Euro838]

If this is the problem you are having, you should just hire an accountant that can manage this for you. There are hundreds of other reasons why you should be a contractor vs salary employee. I'd place financial discipline as one of the lower reasons.

[snowboard]

Originally posted by Doozer
blablabla

k that made sense to me haha.. thanks doozer
i dont know why this confuses me so much.. im just so used to simply getting paid and "supposedly" saving how ever much i think i need for taxes. which is so much less(taxes) being a contractor and paying dividends.. your right though, i dont save it and fuck myself.. i always end up being alright and paying up, but its so stressful hahaha...

[SilverGS]

Unless you are getting quite a raise moving to the salary position be prepared to have quite a bit less cash/month. Its a noticeable difference when moving from contracting to salary in terms of the cash you have available month by month.

Yes if you are not disciplined enough to save money for taxes at the end of the year its a nice thing but really it doesn't take long to figure out all that tax stuff and pay month by month.

If money is your only motivation for moving I would look at the benefits and what not of the salary position and see if they outweigh the extra money you will have on hand instead. Being young the cash usually is more worth it. If you don't want to take the risk of no benefits the extra money you have will usually more than cover you buying the benefits through blue cross or equivalent.

[bigbadboss101]

With contracting you will have write off etc. For example as a salary employee you might be in the 32% tax bracket, and have 3 weeks holidays, sick days, benefits and stock options. As a contractor you might be closer to 20% tax bracket, paid by the hour so no sick days or holidays.

Some companies I talked to are open to hiring both employees and contractors. For contractors they would take the salary and figure out the hourly rate, then times it by 1.3 to get an hourly rate. The higher rate would be to compensate for lack of benefits, holidays, etc etc.

[Supa Dexta]

I find it's generally 6-700 per 1000 you take home.

[nj2Type-S]

i just switched from a contract position to a full-time position (staff/salary) and i'd have to say that i don't miss being a contractor at all, hehe.

like mentioned already, you better save up for your taxes cuz it'll bite you in the ass at the end of the year if you don't. stat holiday pay, benefits, sick days, vacation days and job security are some of the perks of being staff, of course.

[01RedDX]

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[jmc]

Originally posted by snowboard
.. if i was offered say 6000 monthly how much would i actually take home?? like is that offer gross or after tax?? i dont get it haha...

Maybe around $4000. Depending on company pension/rsp plan deduction, misc/benefits cost if fully covered by company or not, etc.

[Maddog55]

Originally posted by Tomaz
...I was just happy i actually get payed overtime!!! That is very rare for Salary positions....

Thats actually a very common misconception. A yearly "salary" is based on a regular work schedule of 40 hours per week, 50 weeks per year (two weeks vacation) (or with some companies, a 37.5 hour work-week) So a yearly salary is based on 2,000 hours per year. ie: a $60,000 annual salary is equivalent to $30 per hour

And ALL salaried employees are entitled to overtime pay anytime they go over the 8 hrs per day or 44 hours per week.

Employments Standards Alberta states:

Except as noted below, overtime is all hours worked in excess of:

* eight hours a day, or
* 44 hours a week.

Overtime hours are to be calculated both on a daily and on a weekly basis. The higher of the two numbers is overtime hours worked in the week.

All employees, including those who are paid a weekly, monthly, or annual salary, must be paid overtime pay for overtime hours they work.

[~Leah~]

Originally posted by Maddog55


Thats actually a very common misconception. A yearly "salary" is based on a regular work schedule of 40 hours per week, 50 weeks per year (two weeks vacation) (or with some companies, a 37.5 hour work-week) So a yearly salary is based on 2,000 hours per year. ie: a $60,000 annual salary is equivalent to $30 per hour

And ALL salaried employees are entitled to overtime pay anytime they go over the 8 hrs per day or 44 hours per week.

Employments Standards Alberta states:

They may be entitled to it... but that doesn't mean workplaces actually do it...

[Maddog55]

Originally posted by ~Leah~


They may be entitled to it... but that doesn't mean workplaces actually do it...

Very true...but a person has only himself to blame if he allows a company to do that. Just like if you allow the company to hire and pay you less than the minimum wage.

First point out to the company that it is required BY LAW...and if that doesn't work....a phone call to Employment Standards will get the ball rolling. (and you can ask that you remain anonymous with them)

...Employment Standards will accept a written complaint from a current employee and endeavor to resolve the matter without revealing the name of the employee...

[mikestang]

Originally posted by 01RedDX
Here's a really handy salary calculator that shows exactly how much you'll take home on a given salary:

https://apps.cra-arc.gc.ca/ebci/rhpd...o?lang=English

thats strange... it says nearly half my income would go to taxes o.O

[Chandler_Racing]

This is not necessarily true. There are serveral exceptions to this rule.

Originally posted by Maddog55



And ALL salaried employees are entitled to overtime pay anytime they go over the 8 hrs per day or 44 hours per week.

Employments Standards Alberta states:

[Maddog55]

Originally posted by Chandler_Racing
This is not necessarily true. There are serveral exceptions to this rule.

Everyone by law is required to receive overtime pay. The only exceptions are the amounts per day/week. (different industries have different hours based on the work week. ie: 4 on 4 off, like firemen etc)
But an Employer cannot make a person work overtime and not pay them time and a half.