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Thread: New job, can work as temp employee or contractor, which better?

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    Default New job, can work as temp employee or contractor, which better?

    can I get your opinion. I got a job offer, with option to work as per hour temp employee or hired as incorporated contractor. They will pay $5/hr more if I incorporate.

    But, as employee I get 4% vacation pay, stat holiday pay, and eligible for overtime at time and a half.

    None of those if incorporated. But would get more tax deductions.

    Wat do you think is better deal?

    Are there enough tax deductions to offset the other perks not being included?

    What all can I write off as business expense?

    Your thoughts on this would be really helpful and very appreciated!
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    Careful incorporating if you look and feel like an employee

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    What’s the base rate? 15 vs 20$/hr is very different from 40$ vs 45$ /hr.

    Incorporating will cost a couple hundred $ at the registry plus around 1500$ a year to have an accountant do your taxes (you won’t be able to DIY it as a corporation)

    For 5$/hr I wouldn’t say it’s worth it. I’d go temp employee.
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    Do you have to incorporate or can you go as sole proprietor? Also be mindful of what Buster posted.
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    It's $65 vs 70/hr. And position has upward lifespan of only 3 years, as it's a project. Hiring manager said majority of people there are incorporated contractors. Sole proprietorship not an option.

    I've heard something about being paid dividends vs salary from own company to keep effective tax rate lower, but not sure details. Anyone do this?

    How about income splitting with wife as another way to lower tax rate, by saying she is 50% share holder?

    Are these true? Is a think outside box accountant required for these?

    Any other significant tax benefits of incorporating?
    Last edited by cidley69; 08-18-2019 at 09:59 PM.
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    Dont listen to HR - the majority of people dont think about this properly and HR does not care about the CRA on your behalf. HR is about protecting the company so its in their interest to have you as a contractor if the pay vs/benefits are similar.

    Learn about the PSB test, if not the CRA will come down on your ass hard.

    Do not INC for 5$ /hr extra for ONE company. That alone is not worth the loss of benefits, etc.

    20$/hr increase would make it better.
    Last edited by revelations; 08-18-2019 at 10:05 PM.

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    Why is SP not an option? They aren’t the ones doing your taxes. Or are they insisting you show proof of E&O insurance and WCP coverage?

    Issue with inc is that you should be billing multiple clients annually to be considered a business, so writing off everything under a Corp runs the risk of an audit

    Also keep in mind if you need a mortgage or want to change lenders at renewal you would need a two year average (if same line of work exceptions are easy) of claimed income.. as in taxed income, as in after write offs

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    Quote Originally Posted by ercchry View Post
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    Why is SP not an option? They aren’t the ones doing your taxes. Or are they insisting you show proof of E&O insurance and WCP coverage?

    Issue with inc is that you should be billing multiple clients annually to be considered a business, so writing off everything under a Corp runs the risk of an audit

    Also keep in mind if you need a mortgage or want to change lenders at renewal you would need a two year average (if same line of work exceptions are easy) of claimed income.. as in taxed income, as in after write offs
    One can get WCB coverage as a sole proprietor.
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    Quote Originally Posted by cidley69 View Post
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    It's $65 vs 70/hr. And position has upward lifespan of only 3 years, as it's a project. Hiring manager said majority of people there are incorporated contractors. Sole proprietorship not an option.

    I've heard something about being paid dividends vs salary from own company to keep effective tax rate lower, but not sure details. Anyone do this?

    How about income splitting with wife as another way to lower tax rate, by saying she is 50% share holder?

    Are these true? Is a think outside box accountant required for these?

    Any other significant tax benefits of incorporating?
    OmG after hearing this, it's a no-brainer. EMPLOYEE - do NOT contract for such a tiny premium. The magic, break even number is roughly +16% as a minimum.
    Plus, what the others are getting at is CRA deeming you an employee because you're a "contractor" with only one client, who you work 40hr/week for, at the same location, in their office, drinking their coffee, using their computer, etc etc etc. You're an employee and then CRA absolutely fists you for any claims you made on "contractor stuff".
    This is rare, but when it happens it really fucks your shit up.

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    Trudeau also yanked a bunch of the tax benefits of incorporating.

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    That's not worth incorporating for. Take the temp employee option.

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    Quote Originally Posted by cidley69 View Post
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    It's $65 vs 70/hr. And position has upward lifespan of only 3 years, as it's a project. Hiring manager said majority of people there are incorporated contractors. Sole proprietorship not an option.

    I've heard something about being paid dividends vs salary from own company to keep effective tax rate lower, but not sure details. Anyone do this?

    How about income splitting with wife as another way to lower tax rate, by saying she is 50% share holder?

    Are these true? Is a think outside box accountant required for these?

    Any other significant tax benefits of incorporating?

    Incorporated average tax rate is going to be around 25-30%, whereas average tax rate as employee is going to be more like 40%+

    But you're situation is not the same as regular employee vs contractor I'd guess, which most people here commenting wouldn't be aware of. Even as an employee you'll be essentially a contractor with a crappier rate. You don't get any of the benefits of being an employee in project work. Is there any pension? Benefits? Sick time? The only thing you're likely getting is the 4% vacation time, which you easily lose out on when you factor in your tax rate. The one place you could stand to benefit, is that you get time and half OT as a T4. If you're going to work crazy hours for most of the project as they tend to do, then you might very well benefit by earning 90$/hr for extra time.

    I wouldn't worry about anyone trying to fear monger about the CRA coming down on you for PSB. You already said you're on a project with a duration of 3 years. That right there means you aren't fulfilling the role of an employee because your work is temporary. But definitely never answer any CRA questions if they call you. Just tell them to handle all communications about business through your accountant. And as for accountant, if you go the route of contractor, call Hakim Kapasi. That guy is a gem and essentially wrote the book on doing taxes for people that do this line of work.

    I do the contract route myself in project work. I've weighed my options on going back to a regular employee job as some of the benefits are nice. But if it was a comparison between just doing another project job under some contract handler like NES, Sureflow, Roevin, Petroplan, etc, etc, and choosing between T4 or Incorporated. It's a no brainer, incorporated 100%.

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    Also be mindful about doing your taxes. If you do them yourself, no problem. If you have an accountant do them, the difference between personal and incorporated tax returns is often +$1,000 at least.
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    I think it will really come down to how many business expenses you think you will have.

    I do the contract employee thing currently, and I can’t really fathom what I could legitimately be claiming as business expenses in my role.

    I definitely pass the employee sniff test though, most people I work with don’t really know Day to day what my employment situation is, and I end up managing a lot of actual employees lol.
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    Employee is awesome. Many reasons aside from take home pay. One to keep in mind you'd be eligible for EI at the end, and at that pay grade, that could be pretty substantial. We all hope never to need EI, but if you need it and can't get it, it hurts.

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    Plus costs if being incorporated can be pretty high depending on your insurance needs. At least $5k/yr is a good starting place.
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    Plus, if there ten people on the project, and half are employee and half are contractor, guess who gets sent home first when the project slows down?
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    If you will be getting even a shred of the perks the full time employees get as a temp (bonuses, health benefits, free days off, paid vacation, etc. etc.) 100% that. In the typical employee vs contractor scenario you usually need to be paid about double for it to simply even out, let alone making it the more attractive option. Depends on the company, but after things like LTIP, STIP, vacation, RRSP matching, health benefits, HSA, etc. are taken into account, you are way ahead as an employee. I contracted once and never will I ever do that again unless I am desperate. That $5/hr difference is only around $10K/yr and you will probably have seen that value in a matter of months as an employee. On top of that, contractors don't have to be severed so if they are looking to get rid of anyone, you're first in line. I am not sure if there are any differences for you being a temp employee vs a normal employee are though, so my comments are assuming you are treated as a normal employee for the duration of your temp term. Getting employers to pay you more than about 20% above a full time employee as a contractor is difficult in my experience, so it's virtually never worth it IMHO.
    Last edited by Mitsu3000gt; 08-19-2019 at 09:00 AM.

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    For $5, employee.

    I would do it if it's $20 or something.

    As Buster said, Trudeau pulled a lot of benefits already. You won't gain much.

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    I incorporated one time for a project in a similar timeline. I had crazy expenses for my role. I wasnt aware of the auditing potential and my accountant never once raised this issue as I had one client the entire time.

    I think the one poster hit the right question. Do you expect to be able to write off a lot of expenses? If not it's a no brainer to go as an employee. My offer at the time was the same as yours and they explained the advantage of incorporating as being the better of the options which was deceptive.

    In my case the project I was on was a smaller company that had 95% of those working on the project as contractors so me incorporating made things much easier for them.

    Also in my specific role I'd say 70% of my expenses would have been eligible under employee or incorporating.

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    Quote Originally Posted by ExtraSlow View Post
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    At least $5k/yr is a good starting place.
    To start? For what? Are you roping in all other costs on top of insurance? My 5 million dollar liability policy is 1300$(which is also a tax write off in itself)


    Quote Originally Posted by ExtraSlow View Post
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    Plus, if there ten people on the project, and half are employee and half are contractor, guess who gets sent home first when the project slows down?
    The ones that don't pull their weight or don't have any connections. You're all disposable as none of you are actually employed by the company that has contracted another company to provide them with project staff.

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