this post was submitted on 24 Aug 2023
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I'm a Data Scientist working my first job since my masters, where I've had an extremely successful last 2.5 years at my employer with the different projects I've done. I don't think I'm making very much though, only $78K. In addition, due to a coworker leaving all my time is being spent doing simple SQL reporting that isn't developing my skill set, and the company isn't hiring a replacement.
I recently applied to a position posted by a recruitment agency and got an interview with them. It would be a for a 12 month contract but the pay would be around $150K if I got it. In addition the work would be more senior and relevant in the sense that I'd be basically building their data science capabilities from scratch. Being self-employed I'd have to take care of paying taxes, the employer portion of CPP, etc. - but for that increase in pay I'd be crazy to not take it, right?
It's also worth mentioning that I have fairly minimal monthly expenses and about $100K in savings in case something goes wrong, so it's not like I'd be risking a mortgage or anything terrible if something went wrong.
Hi hi. Engineer here that has moonlit in the past using incorporated entities.
First, I agree with the other commenter that your existing wage appears low. Better market understanding would be good here.
Second, a good 'rule of thumb' for your indirect expenses (rrsp, cpp, ei, insurance) is 35% on top of a full time salary. So, if your salary today is 78, your indirect expenses (which your employer currently bears) takes that up to 105.3k. Add your incorporation costs, annual filings (including unaudited statements), and setup costs (IT equipment, payroll, etc.) that's going to take you to 110/115. Don't forget that you will be over HST reporting minimums so you will need to register, collect, and remit GST / provincial sales tax.
A guaranteed 150 for 12 months seems to make financial sense, just consider whether you can build a pipeline of later work (with your enhanced skillset) during that time.
Hope that helps.
I think a lot of people incorporate when they don't need to. If you are working for one client, why would you absolutely have to incorporate? If you have appropriate insurance in place, that's a god awful amount of work to do for kinda questionable reasons. It can act as a tax deferral, but you gotta pay it at some point. And people's incomes mostly go up, so unless you are like >57 years old, I've never really bought the income deferral argument. The integration will get you on dividends. So what's the point?
Just my two cents. Not saying it's right, but for simple self employment, yeah I've never fully understood...