In Canada, being self-employed is better than being an employee.
By the end of 2021, 2.6 million Canadians were self-employed, according to Statistics Canada.
Evgeny Rosen was an employee for HomeLife reality in Toronto but changed his life. For the last nine years has been a self-employed realtor. He said his decision was the right one because he can watch his kids grow up and have unlimited income from home, but there are some downsides as well.
“Disadvantages are that you are responsible for everything you did, spent and earned, so if you have no income, it is only your problem,” Rosen said.
While employees receive significant support from their hiring company, self-employed people have to find new clients by themselves. This means their income is not permanent and it can cause extra stress.
Self-employed people are constantly thinking of ways to improve their business, while employed individuals spend their free time for personal use, rather than thinking about the company that employs them.
Another advantage is a free schedule. A self-employed person can choose their flexible office hours. But self-employed individuals may struggle to separate their personal and professional lives because of self-designated office hours and working from home.
Another disadvantage is self-employed individuals pay more taxes.
The contribution rate on pensionable earnings is 11.4 per cent, the contribution rate is split equally between the employee and your employer. According to the federal government, self-employed individuals pay the full 11.4 per cent.
However despite these potential challenges with self-employment, the list of advantages is longer.
“The advantage is that you first count your expenses and only afterward pay taxes. When you are an employee, you pay taxes every month,” Rosen said. “If you are self-employed, you can write off all expenses that you incurred to earn your income.
“For example, office rent, petrol and internet, so your income gets lower and consequently, you pay fewer taxes,” he said.
According to the government of Canada, self-employed individuals only get taxed on their net income (pure profit after all expenses), while employees get taxed on their full gross income and can’t deduct any expenses including transport, phone bills and rent.
Independence, freedom, and the ability to be your own boss. A self-employed person does not have to worry about being fired any day without explanation, unlike an employee.
Sometimes the firing does not even happen face-to-face, employees get a phone call or email. According to Canada Labour Code, there are no laws prohibiting an employer from terminating employees via phone or email.
Self-employed individuals are still required to make contributions to the Canada Pension Plan (CPP), and these contributions are calculated when they file their tax return. Self-employed taxpayers are permitted to buy and set up additional retirement income investments on top of the CPP.
Self-employed people pay taxes alone but can earn more than employees who are not self-employed because they control their income and do not need to wait for a salary increase.
Employed professionals always have the maximum salary they can reach, while self-employed professionals have no limits on how much they can earn.
Self-employed people work to make them rich, while employed people work to make the company rich.
Owning a business can be a perfect investment for the future because it grows in value and can be a retirement fund, a heritage for children, or it can be sold to provide a carefree life.
To be a successful self-employed person, one should have the willingness to sacrifice in the short term to enjoy the huge benefit in the long term.