# permanent to contract move



## rsa12 (Jun 3, 2017)

Hi,

I am doing a permanent job and I have been offered by the company to change it to renewable contract if I wish. 

My current compensation is 
Salary: 105K CAD yearly
Bonus: 10K yearly
Benefits: Excellent Private Medical package and 200K life insurance, 14 days per year vacation 
Location: GTA

As of now I receive around 6K per month after all the deductions, note that I have yet to receive the bonus. Now if I change this to contract how much should I ask the company for? I am single at the moment and this could be a reason I dont receive any tax benefits however I feel due to the higher salary bracket I might not receive one in future even thought I would have a family. 

Are there any estimates on how much I would be able to make more if I move to contract. I live in a basement paying 900 so I can deduct 20% as home office expense which I have in there.


----------



## OnlyMyOpinion (Sep 1, 2013)

Interesting. Aside from considering the financial, what do you consider is driving this offer by the company?
Clearly they get more workforce flexibility with contract staff. How marketable are you outside of this particular company?


----------



## rsa12 (Jun 3, 2017)

OnlyMyOpinion said:


> Interesting. Aside from considering the financial, what do you consider is driving this offer by the company?
> Clearly they get more workforce flexibility with contract staff. How marketable are you outside of this particular company?


Actually they have not offered me, I have yet to talk to them. I have seen some people working on contract so I think it might be an option at this stage but before discussing with the manager I would like to know a rough idea. 

I am not concerned about being terminated from the company anytime because the job involves working on a very specific product, once you know the product well it means the company has invested time in you, generally they dont want to loose someone who has product knowledge because if they hire someone from outside then they will have to start from zero.

My only reason for the switch would be financial. I forgot to add they also offer me stock option, I doubt we can translate this to contract. Maybe in contract they can include the stock as it is...

If for some reason they terminate me then it wont be hard to find a job of 100K in GTA, can take a month maybe.


----------



## ian (Jun 18, 2016)

Think very carefully about this. If your salary and bonus is 105K, then the value of your benefits is probably in the range of 30-50K. It soon adds up. 

As a contractor you will not be paid for stats and holiday time. Only for the time you work. Right off the bat, you will be paying the employer share of CPP, about a max of $2500. per year. Not certain if you employer has a pension plan. If they do, that will disappear and you will have to make your own pension plan. On the plus side you won't pay EI but you won't collect it either. You will be without any rights to severance should the company decide that your services are no longer required.

I have seen this work well in the IT consulting field when there was an abundance of work, long billable hours, spouse who had benefits, etc. etc. and of course if your skills were marketable, transferable, and always current. But I have also seen the downside.

Part of the decision should also rest on your personality. Whether you will be comfortable with the sometimes insecurity of contract employment.

Don't make the decision based on what you could possibly write off for home office, vehicle,etc. Sit down and carefully do the math, Determine the costs of what you could be giving up. Then determine the additional income, if any from, contract work only for hours worked, and the benefits of tax avoidance from the write offs. Once you have that sorted, turn to your own personality, and then to income security.


----------



## Just a Guy (Mar 27, 2012)

you also have to worry about CRA classifying you as an employee even though you are on contract, which could get you and the company into trouble. 

The reality is, the company would only offer you contract status if it saves them money, so, while your pay may be higher, their overall contribution to you (bonuses, stock options, benefits, pension, etc.) would be less. Also, you don't get overtime, vacation pay, sick days and termination is just as easy as not renewing a contract, no severance.

Of course, it's your choice, but you really need to understand the tradeoffs you'll be making. What may initially look like "more" is likely significantly less when properly analyzed.


----------



## rsa12 (Jun 3, 2017)

*Baggage Claim*



Just a Guy said:


> you also have to worry about CRA classifying you as an employee even though you are on contract, which could get you and the company into trouble.
> 
> The reality is, the company would only offer you contract status if it saves them money, so, while your pay may be higher, their overall contribution to you (bonuses, stock options, benefits, pension, etc.) would be less. Also, you don't get overtime, vacation pay, sick days and termination is just as easy as not renewing a contract, no severance.
> 
> Of course, it's your choice, but you really need to understand the tradeoffs you'll be making. What may initially look like "more" is likely significantly less when properly analyzed.



Thankyou for the replies, 

My field is related to IT. My pension is standard Canadian pension plan minimum am mount which is deducted every month, I dont care about EI at the moment because my skill is in demand and getting a 100K job if I get terminated from here shouldnt be a big problem. My last employer here keeps on contacting me often for small contracting projects but I reject them as I dont have much time as of now. 
How much should I consider if I would have to move to contract role? Should this be 60 CAD per hour or more, is there any standard conversion formula?


----------



## kcowan (Jul 1, 2010)

The break even point is 30% more. Anything less and you are giving your employer a deal.

It is a good idea to use the extra flexibility to work less for them to take on small additional clients.


----------



## ian (Jun 18, 2016)

There have been a number of lawsuits with regard to 'full time contractors-and a few very large ones in the US involving IT companies.

As a result, I know of several large Canadian IT companies that engage full time contractors. Directly and indirectly. But at least two of them have a policy to protect themselves from potential lawsuits. They have an HR/Legal policy that limits the engagement of a full time contractor to two years.


----------



## rsa12 (Jun 3, 2017)

ian said:


> There have been a number of lawsuits with regard to 'full time contractors-and a few very large ones in the US involving IT companies.
> 
> As a result, I know of several large Canadian IT companies that engage full time contractors. Directly and indirectly. But at least two of them have a policy to protect themselves from potential lawsuits. They have an HR/Legal policy that limits the engagement of a full time contractor to two years.


2 years seems to be more than enough as I dont plan to work that much here, its an IT industry so you keep on moving. 

Do you have any idea how much should be an hourly quote for this? is there any calculator around which converts permanent to contract with respect to canadian market?


----------



## RussT (Jul 11, 2016)

I doubt there is a calculator for this. Kcowan has it about right in my opinion. Add 30% and have other clients. 

Being on a contract does not automatically mean you are self-employed, particularly if you have only one client who just happens to be your former employer.


----------



## kcowan (Jul 1, 2010)

Also the 2-year rule is adhered to by starting a new contract a few days after the current one is complete.


----------



## ian (Jun 18, 2016)

Alas, for some reason my employer would not allow that. Two years and out for temps. They were a very cautious, conservative group in HR. PITA when you get right down to it and more Personnel than HR! We could bring them back but I think six months or a year had to pass. And by that time the good ones were usually on to some other assignment or full time employment. This was for full time contract only. Those contracted on a part time or intermittent basis were not subject to the same corporate restrictions.

My understanding is that it was because of some nasty litigation that went against Microsoft, IBM, and I believe Compaq/HP...all stateside actions.


----------

