There are mainly 3 common types of employment in IT sector in Canada
- Full Time Employment
- T4 Contracting
- Incorporated Contracting
This guide provides comparison b/w Full Time Employment & Incorporated Contracting.
You may also want to review the page on “Parameters to be considered when you select between FTE & Contract Jobs” before you make a decision.
*This post is for informative purpose. Please do your due diligence before you make any decision. The points mentioned below may vary from person to person.
Interview Process/Offer Letter
FTE
Contracting
Interview process remains the same. Probability of an extra HR round.
You join the company as a Full Time Employee.
You have to submit documents to company & they process your offer letter.
Interview process remains the same. Usually no HR Round
You get into a legal contracting agreement with Employer / Third party Vendor/Consultant.
No offer letter, instead a legal contract signed by both
Remuneration/Salary
FTE
Contracting
Usually negotiated as per year salary.
Employer runs your salary & deducts tax on your behalf.
You get salary after the taxes are deducted.
Eligible for EI (Employment Insurance) in case of a job loss.
Usually negotiated as per hour rate.
You may have to generate Invoice and Employer/Consulting firm pays that invoice.
No tax will be deducted. You need to pay tax from the amount.
*Not eligible for EI during a job loss.
Taxes
FTE
Contracting
Tax deducted by Employer. You get salary after the tax is deducted.
You have to file tax once in a year.
Tax exemptions such as RRSP, CPP etc. can be availed.
Filing taxes is easy. You can do it on your own.
You are liable to pay taxes to the government.
3 types of taxes (monthly, quarterly, yearly depending on your case)
Tax exemptions such as RRSP, CPP etc. can be availed.
You should be very good with knowledge related to taxes & you definitely need an accountant to file your taxes.
Benefits
FTE
Contracting
Health Benefits, Insurance & Stock options from your employer.
Employer may match RRSP contribution.
Little options to get tax exemptions.
No employer benefits can be availed. You need to procure your own Insurance & health benefits.
No Employer contribution for RRSP.
Better tax exemption options.
Mortgages
FTE
Easy to get mortgage from the bank.
Contracting
Banks usually ask for 2 years of continuous employment proof. Not easy to avail mortgage like Full timers.
Disclaimer: *You need to consult with a professional mortgage consultant before you make a decision. This slide is just for informational purpose.
Work
FTE
Contracting
Manager helps you build a career path in the company.
Improve your career path in the same organization, grow up the ladder.
Need to understand more about the company, its customers
Better job security
No support from Employer on the career building. You have to build your own career.
Little appreciations, rewards & recognition for your work.
Need to understand the market as a whole because you will be switching employers, domains and technology.
Lesser job security.
Pros and Cons of FTE
Pros
Cons
Better job security. Looking for people who wants a stable job.
Career growth.
Appreciations, rewards & recognitions.
Benefits – Paid leave, health benefits, Insurance etc.
Pays more tax compared to contracting. Very limited options to save taxes.
Remuneration will be less compared to the contracting job.
Sometime, you may get stuck up in a poor team or with a bad manager.
Pros and Cons of Contracting
Pros
Cons
Salary/Remuneration is better than Full time employment.
Better tax management. Pay lesser tax if you plan well.
No more worry about appraisals.
Renegotiate your remuneration every 6 months, based on your skills, value in the market.
Less job security. Contract can end without notice
Always needs to be updated with the market trend & technologies.
Always keep the professional network active.
Expensive & complicated tax filing. Need to have a professional accountant to manage the account. You need to be well versed in tax related matters