Contract vs Full-Time Calculator: how it works in 2026, with a worked example

Verified for tax year 2026: September 7, 2026Updated September 7, 2026By Nishant Malik

How this calculator works

The full-time side starts with take-home pay on the salary under the CRA’s payroll formulas for your province, then adds back what the employer pays for on your behalf: the RRSP or pension match, any defined-benefit pension contribution, and the value of health and dental coverage. Paid vacation is already inside the salary, so it is shown as a reminder rather than added.

The contract side multiplies the hourly rate by billable hours and billable weeks, subtracts business expenses, and applies income tax and both halves of CPP as a sole proprietor. There is no EI, no paid time off and no employer contributions. GST/HST is left out because it is collected and remitted, never kept.

The equivalent rate is found by raising the contract rate until the contractor’s after-tax cash equals the employee’s take-home plus benefits. The premium is that rate compared with the salary divided by the job’s hours.

Worked example: $90,000 job vs $55 an hour in Ontario

Line	Full-time	Contract
Pay	$90,000	$96,938 (37.5 h × 47 weeks at $55)
Business expenses	—	− $3,000
Income tax	included	− $17,247
CPP (both halves for the contractor)	included	− $9,293
Take-home cash	$67,197	$67,397
Employer RRSP match (4%)	+ $3,600	—
Health and dental coverage	+ $3,000	—
Total	$73,797	$67,397
Rate that matches the job		$60.17 an hour (30% above $46.15)

At $55 an hour the contract falls short by $6,400 a year. The job’s benefits, paid vacation and employer payroll contributions are worth about 20% on top of the salary.

Assumptions

The employee claims only the basic personal amount on the TD1; the contractor claims only business expenses. Neither has other income.
The match and health coverage are counted at face value. The match is really pre-tax retirement savings; the coverage is worth what it would cost you to replace.
Billable weeks default to 52 minus vacation minus two weeks for statutory holidays and gaps. Sick days, training and unpaid downtime between contracts can be larger.
Not modelled: incorporating, the personal services business rules, job security, EI eligibility, RRSP room (the contractor’s is based on net business income) and pension vesting.

Questions people ask

How much more should a contract pay than a salary?: As a rule of thumb, 25% to 50% more per hour. A $90,000 salary is about $46 an hour over a 37.5-hour week, but the job also comes with the employer's half of CPP, EI, a match, benefits and paid vacation, and a contractor bills only 45 to 48 weeks a year. The calculator solves the exact rate for your numbers.
What is an employer RRSP match worth?: Its full amount, every year, as long as you contribute enough to get it. A 4% match on $90,000 is $3,600 a year, which is an instant 100% return on the $3,600 you put in. A contractor has to fund all of it from the contract rate.
Do contractors pay more CPP?: Yes. An employee pays 5.95% of earnings between $3,500 and the ceiling and the employer pays the same again. A self-employed contractor pays both halves, 11.9%, on net business income, plus both halves of the CPP2 contribution above the first ceiling. Half of it is deductible.
Do contractors get EI?: Not regular EI. Self-employed people pay no EI premiums and cannot claim regular benefits if the contract ends. They can opt in for special benefits (maternity, parental, sickness) by registering with Service Canada and paying the employee premium.
How many weeks can a contractor actually bill?: Usually 45 to 48. Vacation, statutory holidays, sick days, training and the gaps between contracts are all unpaid. The calculator defaults to 52 weeks less your vacation weeks and two more for holidays and gaps; change it if your contracts are back to back.
Does the calculator include GST/HST?: No, because it is a wash: you add it to your invoices, collect it for the CRA and remit it, less the tax on your expenses. Once revenue passes $30,000 in four quarters you must register. It is not income and should not be counted in the rate comparison.
Should I incorporate instead of being a sole proprietor?: Only if you will leave a meaningful share of the profit in the company, where it is taxed at about 12% instead of your personal rate. If you spend what you earn, incorporation adds $1,500 to $3,000 a year of costs for little tax benefit. The salary vs dividends calculator shows the numbers.
Could the CRA say I am really an employee?: Yes. If one client controls your hours, provides your tools and you cannot subcontract or take other clients, the CRA may treat you as an employee (or a personal services business if incorporated), which removes most of the deductions. RC4110 sets out the tests.

If you take the contract

Contracting is a business from the first invoice. Three registrations and one habit.

Register for GST/HST once you pass $30,000 of billings, or right away so you can charge it and claim input tax credits.Register for a GST/HST account ↗
Set aside the percentage the self-employed calculator gives you from every invoice; the balance is due April 30.Paying your income tax by instalments ↗
Check whether the CRA would see you as an employee in disguise (one client, their hours, their tools); it changes who owes CPP and EI.Employee or self-employed? ↗

Sources

Every figure on this page comes from one of these primary sources. Data last verified September 7, 2026.