Contractor vs Employee Cost Calculator
Compare the total cost of engaging a worker as an independent contractor versus hiring them as an employee in 2026. As a contractor, a business pays the invoiced amount with no CPP, EI or Employer Health Tax obligations; as an employee, the same gross pay adds employer CPP, CPP2, EI premiums and, in British Columbia or Ontario, Employer Health Tax on top. This calculator is a cost comparison only — it does not determine whether a worker is legally a contractor or an employee. That question turns on the CRA's tests of control, ownership of tools, and chance of profit or risk of loss, among other factors, and misclassification carries retroactive CPP, EI and penalty risk regardless of what a contract says.
Estimate only for the 2026 tax year. Not tax, accounting or financial advice. Talk to RN Canada about your situation.
How it works
The calculator takes the entered pay level and shows it as-is for the contractor route, then applies employer CPP (5.95%), CPP2 (4% between $74,600 and $85,000), EI at 1.4x the employee premium, and, where the province is BC or ON, the applicable Employer Health Tax, to show the fully-loaded cost of the employee route on the same pay.
What the result includes
Results show the contractor cost (the amount invoiced), the fully-loaded employee cost (gross pay plus employer CPP, CPP2, EI and, where applicable, Employer Health Tax), and the dollar and percentage difference between the two — it does not include a worker-classification determination.
Assumptions
Assumes the entered amount is the full annual pay or invoiced total, that GST/HST on a contractor invoice is generally recoverable as an input tax credit and so is excluded from the comparison, and that Employer Health Tax only applies in British Columbia and Ontario above their respective exemptions. Retroactive assessment risk from a CRA misclassification is not modelled.
Frequently asked questions
No. It only compares the cost of each arrangement. Worker classification is a legal question the CRA determines using factors such as control over the work, ownership of tools and equipment, and the worker's chance of profit or risk of loss — not by what a contract calls the relationship. See the CRA's guide on employee or self-employed status for the actual test.
Hiring as an employee adds employer CPP (5.95%), CPP2 (4% between $74,600 and $85,000), EI at 1.4x the employee premium, and, in British Columbia and Ontario, Employer Health Tax on payroll above the applicable exemption. A contractor is typically paid the invoiced amount with none of these employer costs.
The CRA can assess the business for unremitted CPP and EI, often retroactively across multiple years, plus interest and penalties. This calculator does not model that retroactive risk — it compares the ongoing cost of each classification going forward.
No. Classification must follow the actual working relationship, not the cheaper outcome. The CRA's control, tools and chance-of-profit-or-risk-of-loss tests look at how the work is actually performed, and misclassifying an employee as a contractor to save cost creates compliance risk.
A contractor who is GST/HST-registered generally charges GST/HST on their invoices, which the business can often recover as an input tax credit; that is separate from the payroll costs this calculator compares.
Last reviewed: 2026-08-19. Sources: Canada Revenue Agency — Employee or self-employed?