It is quite common for IT industry to offer contact works. Naturally, many people would ask how they compare to each other. At what hourly rate of a contract can I at least make the same as an employee after all the taxes and expenses? It does need some investigation and calculations.
First question might be weather to incorporate or stay as a sole-proprietor as a small business which does impact the taxes and expenses and many more. The major benefit of corporation is to separate corporation from personal assets. I personally would prioritize to limit the liability over additional cost to set up and maintain a corporation. If the corporation is quite simple, many tasks can be done by us. These days there are so many use-friendly accounting software there. Some people can do the payroll and accounting themselves. See this article for more pros and cons of incorporating.
There are a lot more costs for an independent contactor. Health insurance and business insurance are the big-ticket items. Paid vacation and sick days should be added to the hourly rate of contact work. Some employers cover the phone and internet bills because of remote work. This should be also added to the hourly rate of contact work. Need to set up business bank accounts because it is always a good idea to sperate business finance from personal finance. Lawyer fee for the contracts. Accountant or bookkeeping fees. Also, independent contactor if they pay themselves a salary more than $3500, they will have to contribute both the employee portion and employer portion to CPP. Unless they pay themselves a lower salary than $3500 and pay more in dividend. However, only salary can generate RRSP room. Dividend doesn’t. There are a lot additional cost to take into consideration financially when select a contact work.
This is a complicated matter. Please do consult an accounting professional.
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