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Thread: Full time employee to contractor

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    Default Full time employee to contractor

    Seems there's quite a few people I work with who used to be full time employees with benefits who have left and come back to work as contractors. Just curious if there's any beyonders who have done this. What's the pay bump like and how would you work out such an arrangement since these jobs are probably never posted.

    The idea of a pay increase at the cost of losing benefits and a more flexible work schedule is appealing.

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    If you are a healthy workaholic, then you'll be able to maximize your earnings.

    I'm sure the employee vs contractor debate has been argued to death. Pro/cons of both so that is what you are trading off. No right/wrong decision, just the one that you make at the time.

    Not sure exactly what you are asking, but I would guess that you are an employee right now and have heard that contractors doing your job are making more money so you want to approach your manager to switch from an employee to a contractor?

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    Pretty much. Also might consider joining as a contractor to full time postings.

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    This is how your pay bump should go.

    If you are making $90k as an employee, you should be asking for $90/hr as a contractor. If you are making $100k you should get $100/hr as a contractor. And so on.

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    Do consider that if it can be proven by Revenue Canada that you're contracting pretty much all of your services to a single company, then you could be considered an employee of that company and there are complications that could arise from that - creating a shill company whose sole purpose is to contract your services to another company in order to create some tax/EI loopholes might raise some eyebrows and Revenue Canada says they're actively looking for these type of arrangements.
    Will fuck off, again.

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    Originally posted by sputnik
    This is how your pay bump should go.

    If you are making $90k as an employee, you should be asking for $90/hr as a contractor. If you are making $100k you should get $100/hr as a contractor. And so on.
    So you're of the opinion that your pay should more than double if you become a contractor?

    Have you made the switch from staff to contractor or vise versa? What job was it for?
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    Originally posted by sputnik
    If you are making $90k as an employee, you should be asking for $90/hr as a contractor. If you are making $100k you should get $100/hr as a contractor. And so on.
    That's an insane pay bump. If you're making 90K on salary the rule is to divide by 2 to get your hourly rate i.e. $45/hr. Contractor rate would be double the salary rate...more than makes up for the lack of benefits. Only downside is the uncertainty of your next pay day I guess...

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    Originally posted by sputnik
    This is how your pay bump should go.

    If you are making $90k as an employee, you should be asking for $90/hr as a contractor. If you are making $100k you should get $100/hr as a contractor. And so on.
    That's probably not far off. However, you want to find out how many days a year you will be working. Some contractors get told they MUST take four weeks vacation each year, unpaid of course. Makes a big difference. Also check how many hours they expect you to bill for. With some full-time permanent contractor jobs, they expect you to bill a max of 40 hours a week, even if you might work 60 some weeks.

    The devil is in the details, and while there are benefits, contracting isn't some magical road to higher wealth, there are real tradeoffs.

    Not to mention, contractors are the very first people who get laid off.
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    Originally posted by FraserB
    So you're of the opinion that your pay should more than double if you become a contractor?

    Have you made the switch from staff to contractor or vise versa? What job was it for?
    When you factor in the lack of performance bonuses, health benefits, pension/RRSP plans, paid vacation/sickdays/holidays etc it adds up quick. Not to mention the fact that you will also be paying double CPP.

    The "pay bump" really just covers you covering these things on your own as well as a bit of a security buffer considering as a contractor you are ineligible for EI should be find your self laid off for whatever reason.

    I was working in IT Security when I made the shift to being a contractor. I have since gone back to being an employee as I was offered a job that I couldn't refuse.

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    What I've seen is closer to a ~40% bump up from a staff position. (Not at a producer)
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    Not sure how many companies do this, but my company rpvides a "total rewards" statement for you, which lays out how much each of your bebefits is worth. I know for me, with health benefits, DC Pension, bonus, stock etc, my "total" comspensation is nearly double what my salary is. So since a contractor gets none of that, they better be making double.
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    Recommend that if you go the contractor route that you have some of 'street cred' beyond just the company you work for. You should also speak with any of the placement agencies for your industry (ie: in the IT world you've got SI Systems, Ideaca, Eagle, AMI, etc.) to see if you are marketable by them, and what they think your going rate is based on your experience/education etc.

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    I switched to contracting and work from my home office now. I increased my hourly rate by 33%. My rate is comparable to other contractors in same line of work. See what others like you are charging in your field. It would be good for you to talk to someone contracting in your field. They can fill you in if you need liability insurance, WCB, so on.

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    It really depends on what your total compensation is.

    Say if you make $90K/year and has 5% bonus, good health care plan (say that worth $3K) and 40 days of vacation/stat/flex. Your total compensation is actaully ~ $112K/year.

    If you are doing 1920hr/year (take 10 day stats + 2 weeks of vac off), you have to charge at least $60/hr to be on the same boat. You have to charge more if you are forced to take more vacation = less billable hours.

    Sure you pay less in income tax (14% under $500K as small business) vs 30% average for $90K. But that only offset the extra work you have to do to keep books and pay a CA every year to go thru them as well. You must have enough in company to pay CRA every quarter. And as Speedog said, you may want to find a few clients as well as a single client may not go over well.

    Also as contractor, you have to charge more for surviving lean times. The possibility that you may of out of gigs for weeks may seem impossible right now but it is there. You can't claim EI. So you have to charge more for reserve.


    So Sputnik's $90K = $90/hr isn't THAT far off.

    EDIT: Also remember that some firm require a flow thru partner as well. So you may lose $5-$7/hr to them.

    Originally posted by RawB8figure
    It would be good for you to talk to someone contracting in your field. They can fill you in if you need liability insurance, WCB, so on.
    This is also very important. Supply and demand impact contractors a lot quicker than full time employee.
    Last edited by Xtrema; 09-11-2013 at 10:53 AM.

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    I've been a contractor several times in the past and in my experience it's not nearly as good as full time employment. Benefits, multiple bonuses, stock plans, RRSP match (this is a big one), health coverage, vacation, flex days, etc. all ends up being WAY more than a 15-20% wage bump most companies want to give you for being a contractor. You'd need more like 50%+ wage bump to cover what you're missing out on, in O&G anyway. Contractors are also the first to go when staff cuts are made.

    $90/hr would be the absolute bare minimum if you made $90k/yr before. That's still too low IMO compared to the benefits many O&G permanent positions offer.

    Say you make $100k a year, in O&G you probably also get:
    3-4 weeks vacation
    5-6 flex days
    full health coverage + health spending account + Fitness allowance
    Short term bonus
    Long term bonus (often in the form of stock)
    5-10% RRSP matching
    Parking ($600/mo)
    Job security

    Also when you're salaried there is way more flexibility if you need to take off for an hour for an appointment, sneak out an hour or two early for a long weekend, or something. If you're a contractor, you can't bill for that.

    You need a massive salary bump to try to match that as a contractor. I would never do it again unless the pay was ridiculous.
    Last edited by Mitsu3000gt; 09-11-2013 at 11:07 AM.

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    I made the jump and the pay bump was quite significant. I maxed out my union pay as an employee at $42/hr (W/ double time overtime, great benefits, $130 LOA, $5/hr pension) I left and went contracting and was getting $85-$100/hr (OT was 1.5x, no benefits, and $130 LOA, plus $1.10/km on my truck) Or else I would charge a flat rate of $1250/day with the same perks as above, just no OT.

    As far as being forced to take time off etc, in my field there are a lot of companies with a lot of work. All the tickets I had made me quite desirable, If one company didn't have work for me, another was calling that did. In 2008 I billed out 332 work days, the other 24 I could have probably worked if I wanted to, but every one needs some time off now and then. If I had worked as a contractor I would have made max $250k in wages that are taxed heavily and $39,500 Contributed to my pension. As a contractor I pulled in $460k that year, it was not heavily taxed since I didnt take much of a wage and left most in my company, the nice perk was that I made $70,000 using my truck, with the income from the truck, and the write off it provided, even after paying for gas and maint. I was able to get a nice new truck every year.
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    ...
    Last edited by Sugarphreak; 07-21-2019 at 02:04 PM.

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    Originally posted by sputnik
    This is how your pay bump should go.

    If you are making $90k as an employee, you should be asking for $90/hr as a contractor. If you are making $100k you should get $100/hr as a contractor. And so on.
    LOL what???

    Typically its about 30-40% more going from salary to contractor in O&G.

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    Originally posted by CapnCrunch


    LOL what???

    Typically its about 30-40% more going from salary to contractor in O&G.

    And typically, the contractor is getting ripped off.


    His post said what you should be getting, not what you can expect to get. Read the ones above that cover the actual $$$ value of the benefits you get as employee.

    Throw in the threat of a PSB classification, and being a contractor should damn well be paying you double.
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    Originally posted by CompletelyNumb



    And typically, the contractor is getting ripped off.


    His post said what you should be getting, not what you can expect to get. Read the ones above that cover the actual $$$ value of the benefits you get as employee.

    Throw in the threat of a PSB classification, and being a contractor should damn well be paying you double.
    I did read that.

    That why I said 30-40%.

    Are you just cherry picking the posts that support you and ignoring the ones that don't to make a point?

    Some people come out further ahead being a contractor, and some don't.

    Dodging a psb is easy. If an employee can't figure that out, then they should probably stay staff.

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