Quantifying Benefits for Contractor vs Employee

[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]

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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]

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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]

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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]

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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]

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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]

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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]

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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]

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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]

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

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

[bjstare]

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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]

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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]

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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 ?