Employee to Subcontractor wages (CAD)

You don't want to be on CRA's shit list, at some point in the dispute process it becomes more like a legal action than a tax problem and becomes a completely adversarial thing where CRA doesn't care what is right they just want to keep their win stats high at all costs

file your taxes every year and play nice

I have the opportunity to work from home instead of going to the office everyday. I work at the computer doing drafting all day. If I get paid $20 an hour now what would be an equal wage to accept for a sub contractor?

Thought my friends?

Curious about this but why are you considering subcontracting based on this info? Surely you're just a regular employee who tele-commutes???

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As other have said make sure you carefully read the CRA's guidelines for determining your status re: employee/subcontractor. The fact that you work at home rather than using your former employer's office and equipment is one factor, but it is not enough by itself.

Being a subcontractor is attractive because you can deduct business expenses, but you may not have much to deduct. Also as a subcontractor you will have to collect and remit sales tax. Businesses like subcontractors over employees because they don't have to pay their portion of EI/CPP which is a cost to them over and above your gross wages they pay. When you become a contractor you will have to pay the CPP you would have as an employee plus the amount your employer would have paid - but you don't need to pay EI, but you also forgo the security should you be laid off. Lots to consider.

Be careful,

If you are doing the same work for the same company you may not be a contractor at all - just another employee. This can cause issues for both you and your employer (withholding, disallowance of business expenses etc.)

While CRA's views are not necessarily determinative - have a look at the test here:

http://www.cra-arc.gc.ca/E/pub/tg/rc4110/rc4110-e.html#workers_employment_status

This guy is correct. CRA is cracking down on people who are treating themselves as contractors when the reality is they tick most of the boxes in the "are you an employee" list.

Being a subcontractor is attractive because you can deduct business expenses, but you may not have much to deduct. Also as a subcontractor you will have to collect and remit sales tax. Businesses like subcontractors over employees because they don't have to pay their portion of EI/CPP which is a cost to them over and above your gross wages they pay. When you become a contractor you will have to pay the CPP you would have as an employee plus the amount your employer would have paid - but you don't need to pay EI, but you also forgo the security should you be laid off. Lots to consider.

This is only true if you set up shop so that you're an employee of your incorporated company. If you pay yourself dividends instead of a salary, the CPP requirement isn't an issue, and the tax rate on dividend income is lower than on employment income. That said, the advantage to paying yourself with dividends has been shrinking over the years, but there's still savings to be had when you consider that the business tax rate has shrunk as well.

Come to think of it a couple of years ago CRA wanted to know the in depth details of the other income that I had been claiming yada yada as if i was running a business .

I wrote back that I was just paying the tax on the income from fee for service odd jobs so other than listing some joe jobs … there are no details

CRA left me alone but my situ is pretty simple and the amounts were pretty small

This is only true if you set up shop so that you're an employee of your incorporated company. If you pay yourself dividends instead of a salary, the CPP requirement isn't an issue, and the tax rate on dividend income is lower than on employment income. That said, the advantage to paying yourself with dividends has been shrinking over the years, but there's still savings to be had when you consider that the business tax rate has shrunk as well.

Ummm… no, self employed individuals pay twice as much CPP as employed individuals.

In 2013, the maximum amount is $51,100. The contribution rate on these pensionable earnings is 9.9%, split equally between you and your employer. If you are self-employed, you pay the full 9.9%. The maximum contribution for employers and employees in 2013 is $2,356.20 each.

If you are self-employed, the maximum contribution is $4,712.40. Your contributions are based on your net business income (after expenses). You do not contribute on any other type of income, such as investment earnings. If, during a year, you contributed too much or earned less than the set minimum amount, your contributions will be refunded when you file your income taxes.

http://www.servicecanada.gc.ca/eng/services/pensions/cpp/contributions/

For people who have incorporated their businesses, yes, there is no CPP assessed on dividends and you can avoid paying it. But let's keep this on track…

I think you have to be careful here. Are you only working for one customer? If so and you are a sole proprietor then you will be forced by the government to be an employee of the company who you are doing the work for. If you set up a corporation then you are ok. Typically consultants charge out at 3.2 times wage. So if your wage was 20 / hr charge out rate should be around 65/hr. But of course you can lower it to be under your larger competition. What is the going rate for contracted drafting services? Also don't forget you have to collect and submit GST.

This is very misleading - setting up a corp won't save you if you would otherwise be deemed an employee - in some ways it could be worse.

Holy crap this thread if moving quickly. Thanks for all the input guys.

I am moving to another town and the boss wants to keep me so I would be working full time for him from home. Although I could see myself looking for other work at some point.

Chances are he will offer me a low wage and I will end up working for a new company in Calgary.

Are you going to remain working with your current employer but as a contractor? Or will you be looking for other customers as well?

This is my industry and we see wayyy too many people selling themselves (and the industry) short with their hourly rate. You didn't say what kind of drafting you do but I'd start by maybe trying to find out what your competitors are charging and go from there.

Off the cuff, I think you should be billing out at $50/hr minimum.

I am a steel detailer. Totally agree with others selling them self's short and bring down the industry standards.

I'm architectural but my primary source is Calgary. I think you will be able to find full time employment without much trouble. It's really started to pick up there once again. Best of luck with your move. :)

You should be able to make much more in Calgary. Or with a consultant company in Vancouver, Anthony seamans, Stolberg engineering, AMEC if they are hiring again…. Are you a shop detailer?

In my experience, most consultants charge about triple what they pay their employees. $50 - $60 per hour would be a good starting point. We had one contractor who charged per day, and a day was a minimum of 4 hours. M-F he worked at least 10 hrs a day like the rest of us, but weekends he was often out after 4 hrs to go fishing.

He was also first to go when we stopped production.

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whats the definition of a consultant … a guy who's got no job