Contract or full-time? What each one really costs

Contractors look expensive per hour. Full-time hires look cheap until you add everything on top of the salary. This page only uses numbers that have a public source.

What a full-time hire costs

Hiring a senior software engineer in Toronto costs an employer $174,119 to $177,352 a year once CPP, EI, Ontario's Employer Health Tax and benefits sit on top of the median posted base salary. The posted range for that job is $139K to $185K, median $166K.

What a senior software engineer costs the employer, per year

Line	Amount
Base salary (posted median, senior software engineer)	$165,800
CPP (5.95% on $3,500-$74,600)	$4,230
CPP2 (4% on $74,600-$85,000)	$416
EI employer (2.282% up to $68,900)	$1,572
Small employer: Ontario EHT (first $1M of payroll exempt)	$0
Large employer: Ontario EHT 1.95%	$3,233
Group health, dental and life benefits (assumption: $175 per employee per month)	$2,100
Total, small employer	$174,119
Total, large employer	$177,352

Leaves out bonus, equity, RRSP/pension matching, workers' compensation premiums, vacation pay (inside base), recruiting fees, equipment and office. Benefits are an assumption, not a published figure.

What a contractor costs

There's no public source for Canadian tech contract rates that I'd stand behind, so this page doesn't quote one. Ask two or three contractors or agencies for their rate on the exact work and compare it to the full-time total above.

What a contractor's rate has to cover:

• their own health and dental, and any retirement savings
• time off and sick days, since they only earn while billing
• gaps between contracts
• their own equipment and training

Risks beyond cost

Intellectual property

Get a written IP assignment from a contractor before work starts. For employees, use a separate confidentiality and IP agreement that a lawyer has reviewed.

Knowledge

When a contract ends, a lot of context leaves with it. Put documentation in the scope of work.

Classification

The CRA and provincial employment standards look at the real relationship. If someone works only for you, on your schedule, with your tools, they may be an employee, whatever the contract says.

When to choose which

A contractor fits bounded work with a clear end. A full-time hire fits ongoing work that needs context.

Choose a contractor when

• the project has a clear scope and an end date
• you need a specialist for a migration, an audit or a launch
• you need capacity now and can pay for the speed

Choose full-time when

• the work is ongoing and core to the product
• the person needs to understand your customers and your history
• you want them mentoring others or leading technical work

The contract-to-perm path

Contract-to-perm works when both sides know the conversion terms on day one: the salary, the benefits start date and any equity. Vague "we'll figure it out later" promises go badly when the numbers show up.

What I'd do

I've filled contract and full-time roles since 2018. The mistake I see most is treating a contractor like an employee without the stability or the benefits. If they've been working only for you for a year, they're probably an employee.