Are subcontractors cheaper than employees?

Only if they are genuinely independent. The CRA decides whether someone is an employee by the working relationship, not by the label, and getting it wrong can mean back payroll and penalties.

How long before a new hire pays for themselves?

It depends on the role and your margin. Work out how much extra work, or how much of your own time, they need to free up each month to cover their full cost, then check whether that work is really there.

Do I need payroll software?

For one or two employees it is not required, but it makes deductions, remittances and year end slips far easier to get right. Many owners find it pays for itself in time saved.

← Answers

What does it really cost to hire someone in Canada?

More than the wage. On top of pay, you match their CPP contributions, pay 1.4 times their EI premium, pay workers’ compensation for your industry, and owe vacation pay, at least 4% in most provinces, plus statutory holidays. Then come the tools, the training and the weeks before they are fully up to speed. Work out your own number before you hire, not after.

The payroll costs you add

You match the employee’s CPP contributions dollar for dollar and pay 1.4 times their EI premium. Workers’ compensation, through WorkSafeBC, the WCB in Alberta or your province’s board, is set by your industry and your claims history. Some provinces also charge an employer health tax once a payroll passes a certain size.

Vacation and statutory holidays

Vacation pay is a minimum of 4% of wages in most provinces, and more after several years of service in some. Statutory holidays are paid days too. Both are part of the cost of every hour worked, not extras.

The costs that are not on a pay stub

A truck or mileage, tools, a phone, safety gear, training and certification. And your own time: showing them the work, checking it and fixing what goes wrong while they learn.

The ramp up

You pay a full wage from the first day, and full output usually comes weeks or months later. Plan for that gap in your cash, especially if the hire is meant to free you up for sales or estimating.

Remit on time

The deductions you hold from their pay, plus your share, belong to the government until you send them. Keep them separate and remit on schedule, because late remittances carry penalties and the money is easy to spend by mistake.

Also asked

Are subcontractors cheaper than employees?: Only if they are genuinely independent. The CRA decides whether someone is an employee by the working relationship, not by the label, and getting it wrong can mean back payroll and penalties.
How long before a new hire pays for themselves?: It depends on the role and your margin. Work out how much extra work, or how much of your own time, they need to free up each month to cover their full cost, then check whether that work is really there.
Do I need payroll software?: For one or two employees it is not required, but it makes deductions, remittances and year end slips far easier to get right. Many owners find it pays for itself in time saved.

Written for your trade

This is the kind of thing Solomon works through with owners using their own numbers. See how it works →