Tax year 2026
Is the contract rate better than the salary?
Compares an employee package against contractor revenue, and finds the hourly rate at which the two match. This is a compensation comparison, not a test of how a role should be classified.
Health cover, pension match, anything an employer pays that a contractor buys.
Paid for an employee, unbilled for a contractor.
Break-even contractor rate
$63.55
an hour matches the employee package over 1,762.5 billable hours.
| Employee salary | $100,000.00 |
|---|---|
| Value of benefits | $12,000.00 |
| Employee package total | $112,000.00 |
| Employee take-home after deductions | $74,458.50 |
| Billable hours a year | 1,762.5 |
| Contractor gross revenue | $132,187.50 |
| Difference | $20,187.50 |
Assumptions: the contractor bills 1,762.5 hours, having lost 25 paid days an employee would keep. The comparison stops at gross revenue against the employee package, because a contractor's tax depends on their business structure, their expenses, whether they are registered for GST or HST, and whether they pay themselves in salary or dividends. None of that is knowable from these inputs.
A contractor also pays both halves of CPP, carries their own insurance, has no employment insurance entitlement in most cases, and absorbs the gaps between contracts. This compares compensation only. Whether a role is genuinely contracting rather than employment is a legal test set by the CRA, and it is not a choice the two parties can simply agree on.
What this assumes
The figures are estimates of payroll deductions for employment income, worked out on the basic personal claim. They do not know about other credits you claimed on your TD1, and they do not cover self-employment, dividends or investment income. The methodology sets out every assumption and where these estimates stop being reliable.
Sources
- Current year tax rates and income brackets (2026) · Canada Revenue Agency · checked
- CPP contribution rates, maximums and exemptions, 2026 · Canada Revenue Agency · checked
- Canada Employment Insurance Commission sets the 2026 Employment Insurance premium rate · Employment and Social Development Canada · checked