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  • Feb 23rd, 2019 9:19 am
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[OP]
Jr. Member
Jan 4, 2014
131 posts
73 upvotes
Paris

Salary vs Contract Employment

Question for my fellow RFD'ers.
I was offered two jobs. One is full-time and pays $90,000 p.a plus benefits (on par with most companies)
The other $100,000 on contract for a year. I have to be incorporated.
I understand the security of the full-time job and the added benefits etc. The contract has tax break benefits/allowances.
Which is the better option? Why?
35 replies
Newbie
Mar 25, 2012
44 posts
11 upvotes
High Park
It depends on the job/opportunity between the two companies.

Is the company that offered you the contract a company that you want to eventually become a FTE (Full Time Employee) of? If so, depending on the company, you may have a harder time with this as you may be labelled as a "contractor" in the eyes of your coworkers or hiring managers.

Again, depends on the company and what your career plan is.
Sr. Member
Mar 23, 2009
553 posts
266 upvotes
Toronto
I would take the permanent job over the contract one in that case. If you factor in benefits such as paid vacations, rrsp matching/contributions, paid sick days, etc and also the costs of setting up and running your own incorporated business, the $10k difference isn't enough to justify going with the contract IMHO.
Deal Addict
Jun 12, 2015
2127 posts
725 upvotes
Ontario
10k but comes with extra filing/tax cost vs 90k + probably close to 10k worth of benefit + security

Take the 90k!
Deal Fanatic
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Nov 19, 2004
8587 posts
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Cambridge, ON
Also watch incorporating and then working for one company. The CRA will likely see this as an employer - employee relationship.
Sr. Member
User avatar
May 18, 2005
690 posts
29 upvotes
Toronto
Don242 is the winner.

Be VERY careful CRA is very aggressive in investigate contract vs employee sutuations


Anyway take 90k full time job.
Member
Dec 5, 2011
408 posts
114 upvotes
Toronto
BlackRanger3d wrote:
Jan 31st, 2016 9:25 pm
Don242 is the winner.

Be VERY careful CRA is very aggressive in investigate contract vs employee sutuations


Anyway take 90k full time job.
If you don't make a lot or any deducations and you pay yourself 100% salary, what consequence is there is the CRA deems you as a PSB?

Why would the CRA bother going after people making 100k/year, especially those who don't write-off a lot of expenses? It seems like they would target contractors earning much more than that and attempting to defer taxes.
Deal Fanatic
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Nov 19, 2004
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sinankeser wrote:
Feb 1st, 2016 1:40 pm
If you don't make a lot or any deducations and you pay yourself 100% salary, what consequence is there is the CRA deems you as a PSB?

Why would the CRA bother going after people making 100k/year, especially those who don't write-off a lot of expenses? It seems like they would target contractors earning much more than that and attempting to defer taxes.
If you go in as a sole proprietor it is usually fine. But when you incorporate, the cra is cracking down on this. By definition it is likely an employer-employee relationship and so it should be treated as such. Why is the company asking for the person to incorporate? Because they know this helps to absolve them because they can claim they are paying a business and therefore the onus is on the contractor. As a corporation you can reduce your taxes as a small business and pay out dividends, have greater limits using PHSP or other plans, etc. In this case, without knowing all the details, it very much looks like it would be deemed an employer - employee relationship where supplies are from the employer, there is no risk to the "employee" so by definition you would be out of luck if the cra decided to investigate.
Member
Dec 5, 2011
408 posts
114 upvotes
Toronto
don242 wrote:
Feb 1st, 2016 2:05 pm
As a corporation you can reduce your taxes as a small business and pay out dividends, have greater limits using PHSP or other plans, etc. In this case, without knowing all the details, it very much looks like it would be deemed an employer - employee relationship where supplies are from the employer, there is no risk to the "employee" so by definition you would be out of luck if the cra decided to investigate.
Paying out dividends offers virtually zero tax advantage (I believe it offered lower taxes before 2013) besides not having to pay CPP (vs salary), but you also don't get RRSP contribution space, so it's not exactly that lucrative.

PHSP, sure that's true but if you're a corp vs. employee ostensibly with benefits that would offer significantly cheaper healthcare than what you'd save through a PHSP.

don242 wrote:
Feb 1st, 2016 2:05 pm
...it very much looks like it would be deemed an employer - employee relationship where supplies are from the employer, there is no risk to the "employee" so by definition you would be out of luck if the cra decided to investigate.
If you're an IT contractor or engineer, there are often no "supplies" to consider. Also, you said there is no risk to the employee, but clearly being contractor is risky (as you have explained, i.e. the punitive tax rate imposed on a PSB if they're "cracked" down on by the CRA) but also from the perspective that you can be fired without reason pretty much without severance, unlike a full-time employee. That is a risk in and of itself.
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Nov 19, 2004
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sinankeser wrote:
Feb 1st, 2016 2:17 pm
If you're an IT contractor or engineer, there are often no "supplies" to consider. Also, you said there is no risk to the employee, but clearly being contractor is risky (as you have explained, i.e. the punitive tax rate imposed on a PSB if they're "cracked" down on by the CRA) but also from the perspective that you can be fired without reason pretty much without severance, unlike a full-time employee. That is a risk in and of itself.
http://www.cra-arc.gc.ca/E/pub/tg/rc4110/rc4110-e.html
Member
May 2, 2010
246 posts
61 upvotes
No one has mentioned HST implications if going the contractor route... Would that apply in his business?
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Nov 19, 2004
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hotski7 wrote:
Feb 1st, 2016 8:55 pm
No one has mentioned HST implications if going the contractor route... Would that apply in his business?
Of course you would include HST on your billing invoice.
Member
May 2, 2010
246 posts
61 upvotes
don242 wrote:
Feb 1st, 2016 9:02 pm
Of course you would include HST on your billing invoice.
Right, so the OP should make sure that he will get paid $100k plus HST, if he goes that route. It isn't clear that has been agreed to and if not negotiated properly, it would be a painful mistake.
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Nov 19, 2004
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hotski7 wrote:
Feb 1st, 2016 9:24 pm
Right, so the OP should make sure that he will get paid $100k plus HST, if he goes that route. It isn't clear that has been agreed to and if not negotiated properly, it would be a painful mistake.
HST is required to be collected so probably not an issue. But yes, if the OP is going to go that direction, it doesn't hurt to mention it. The HST is a pass through cost for the company anyway.
Deal Fanatic
Aug 29, 2006
7615 posts
1503 upvotes
In this case the Salary position is more attractive since there is also cost and headache associated with setting up your company /hiring accountant that the extra bit for contractor honestly doesn't seem to worth the trouble.

If it was 20~30% more, then it may be worth thinking about.
The Devil made me buy it - RFD. :twisted:

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