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

[tonytiger55]

Just to add... If you go down the contractor route. You also have to factor in insurance for yourself as a self employed person, i.e liability as a example. That will add to your expenses.

[revelations]

Doesent the OP need to pay GST as well on services rendered?

[Misterman]

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OP only get paid $5/hr more as contractor. 160 hr month = $800 more per month.

You get paid $1800/mth more as contractor.

On top, OP get stats and vac pay. Stats alone is already $5200/year as Mitsu pointed out. Effectively reduce the differential from $5/hr to $2.50/hr.

I think at $65/hr, I don't think OP will hit any of the new limits set by the Liberals. But at that low differential, it's not worth it to incorporate unless OP already set one up. I think doctors and SMB that clears over $150K revenue per year are the one being targeted by the Liberals.



I hope you have talked with your tax accountant in the last year or so after the rule change.

There is a reason why the doctors are pissed:
https://obj.ca/article/new-tax-rules...ian-physicians

I realize this is foreign material for most of you. But the difference in pay is NOT 5$/hr. It's not what you make that is important, it is what you take home.

Employee

Hourly 60$ + 4% vac pay=$62.50/hr minus effective tax rate and all deductions(40%, more like 42%, but we can call it 40), gives you a total take home hourly pay of $37.50 x 160hours/month = $6000

Contract

Hourly 65$ minus effective tax rate including average write offs for year end(25%) gives you total take home hourly pay of $48.75 x 160hours/month = $7800

Yes I used my personal and very normal average situation to calculate those numbers. The OP's may very well be different.

- - - Updated - - -

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Doesent the OP need to pay GST as well on services rendered?

Yes and no. As a contractor he would be invoicing 5% above the 65$/hr for GST. And then just handing that 5% over to the government. It's a moot point basically.

[ercchry]

Yeah, so marth

[Xtrema]

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Yeah, so marth

lol, so true. $65/hr for 2000hr = $130K. He doesn't even break into the 2nd bracket of AB tax or 4th bracket of Federal one. He's effective take home is about 71% after AB tax/Fed tax/CPP/EI.

29%, not 42%.

source:
https://simpletax.ca/calculator

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I realize this is foreign material for most of you. But the difference in pay is NOT 5$/hr. It's not what you make that is important, it is what you take home.

Employee

Hourly 60$ + 4% vac pay=$62.50/hr minus effective tax rate and all deductions(40%, more like 42%, but we can call it 40), gives you a total take home hourly pay of $37.50 x 160hours/month = $6000

Contract

Hourly 65$ minus effective tax rate including average write offs for year end(25%) gives you total take home hourly pay of $48.75 x 160hours/month = $7800

Yes I used my personal and very normal average situation to calculate those numbers. The OP's may very well be different.

First of all, it's $65 vs $70

But keeping with what you got there using the proper rate:

$60+4% = $62.50 * 71% = 44.38 *160 = $7100.


Again, you charges more, so you'll have income that will be in higher bracket and in higher tax rate. So your formula works (to a degree) for someone that charges more than $70/hr. Not at OP's rate.

Also, keeping money in corp has less of an advantage now. So that removes another reason.

[ercchry]

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lol, so true. $65/hr for 2000hr = $130K. He doesn't even break into the 2nd bracket of AB tax or 4th bracket of Federal one. He's effective take home is about 71% after AB tax/Fed tax/CPP/EI.

29%, not 42%.

source:
https://simpletax.ca/calculator

Not to mention that his deductions are effectively subsidized, since if he was inc he would have to pay employee and employer portions

[Mitsu3000gt]

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I realize this is foreign material for most of you. But the difference in pay is NOT 5$/hr. It's not what you make that is important, it is what you take home.

Employee

Hourly 60$ + 4% vac pay=$62.50/hr minus effective tax rate and all deductions(40%, more like 42%, but we can call it 40), gives you a total take home hourly pay of $37.50 x 160hours/month = $6000

Contract

Hourly 65$ minus effective tax rate including average write offs for year end(25%) gives you total take home hourly pay of $48.75 x 160hours/month = $7800

Yes I used my personal and very normal average situation to calculate those numbers. The OP's may very well be different.

How are you getting 42% tax? You know it's tiered right?

[Xtrema]

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How are you getting 42% tax? You know it's tiered right?

To give him benefit of the doubt, he probably have significant portion that clears well over $160K per year, so he may have significant portion in that bracket.

[Mitsu3000gt]

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To give him benefit of the doubt, he probably have significant portion that clears well over $160K per year, so he may have significant portion in that bracket.

Ah, the ol' humble-brag approach

[Misterman]

So you guys haven't contracted. You've apparently never had a job either, or if you have you haven't cared to examine your gross vs net pay difference. And have no understanding of the difference between tax rate and total deductions. That's cool though, I'm sure you're all more knowledgeable than anyone who has done both or any certified accountants. . Good luck to OP.

[Xtrema]

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So you guys haven't contracted. You've apparently never had a job either, or if you have you haven't cared to examine your gross vs net pay difference. And have no understanding of the difference between tax rate and total deductions. That's cool though, I'm sure you're all more knowledgeable than anyone who has done both or any certified accountants. . Good luck to OP.

I think a lot of people here have done it and currently doing it and we are telling you as of 2019, there is very little incentive to contract if you don't clear over $130K per year especially with a single customer or unless you have a very creative expense scheme that CRA has not caught on yet.

There are a lot of people who plays the CRA audit roulette too.

[Buster]

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So you guys haven't contracted. You've apparently never had a job either, or if you have you haven't cared to examine your gross vs net pay difference. And have no understanding of the difference between tax rate and total deductions. That's cool though, I'm sure you're all more knowledgeable than anyone who has done both or any certified accountants. . Good luck to OP.

Three things to never do when you walk into a room full of people:

1. Assume you are the best looking
2. Assume you know more than everyone else/ are smartest
3. Assume you are the richest

[Misterman]

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Three things to never do when you walk into a room full of people:

1. Assume you are the best looking
2. Assume you know more than everyone else/ are smartest
3. Assume you are the richest

Some good information here fellas. Take heed.

[suntan]

https://www.ey.com/ca/en/services/ta...9-personal-tax

Do $160K.

Even adding CPP/EI, you'll get nowhere near 42% average tax rate.

Misterman is the new Gestalt. Now with spellchecker!

[sabad66]

[sabad66]

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https://www.ey.com/ca/en/services/ta...9-personal-tax

Do $160K.

Even adding CPP/EI, you'll get nowhere near 42% average tax rate.

Misterman is the new Gestalt. Now with spellchecker!

that's a good calculator. If you type in 130k ($65/hr), it will show your marginal tax rate as 36% and the ineligible dividends marginal tax rate at 28.5%. I see that as showing the tax advantage in AB between employee->corp is < 8%

[Xtrema]

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that's a good calculator. If you type in 130k ($65/hr), it will show your marginal tax rate as 36% and the ineligible dividends marginal tax rate at 28.5%. I see that as showing the tax advantage in AB between employee->corp is < 8%

You won't even hit an average of 42% in AB until you hit around $430K.

[suntan]

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that's a good calculator. If you type in 130k ($65/hr), it will show your marginal tax rate as 36% and the ineligible dividends marginal tax rate at 28.5%. I see that as showing the tax advantage in AB between employee->corp is < 8%

Yeah but then your corp pays taxes, which makes up the difference.

[CompletelyNumb]

+30% pay over and above employee rate is the break even for going contracting in many fields.

$5 on $65 is a joke, take the temp employee option as fast as you can.

[arcticcat522]

If he is talking about all deductions, I can see 42% being accurate. If I use my gross number and multiply it by 42% I get close to my net. I make no where near 430k. I do pay a small portion of my medical coverage though.

Edit.....besides the point. *Temp. employee for the win