Is Self-Employment Right For You?

With the recent changes to our job market landscape due to COVID, you might be considering some different options to your employment strategy, including making the leap to becoming Self-Employed.

Self-Employed individuals have always been an important part of Canada’s labour market. Around 2.9 million Canadians were self-employed as of a 2018 Statistics Canada Survey, making up about 15% of Canada’s total employment, and self-employed individuals make up significant portions of some critical industries.

 Why are so many Canadians choosing to be self-employed? The most common reason given by self-employed workers is that they don’t want to have a boss; they want to be their own boss. The freedom, independence, and flexible hours are the most attractive features of being self-employed for many people. 

 The second most common reason people choose self-employment is the nature of the work itself. Industries such as agriculture, construction, and professional services naturally lend themselves to self-employment because they don’t often follow a set schedule and can involve more investment, risk, and potential profit. Self-employed individuals in these fields (and others) range from a single person, such as a tradesperson, farmer, or consultant, to much larger organizations such as multi-project construction companies, large scale food production operations, or consultancy firms.

But is self-employment right for you? Whether you’re considering becoming self-employed for the first time or considering becoming an employee, there are some important factors to consider.

What’s The Difference?

Advantages of Self-Employment

There are many advantages to being self-employed, and they typically revolve around freedom and control. Never liked shift work? No problem, you determine your working hours. Frustrated by approval processes? Easy, you make all the decisions. Dread your daily commute? Solved, you can work from home. Hate playing office politics? Good news, there is no office to politic in unless you make one and staff it with the people you want. 

The main advantages of being self-employed can be summarized as:

• Flexible schedule for work/life balance
• Unhindered ability to pursue your ambitions
• Choice of work location, wardrobe, colleagues, and more
• Directly reap the rewards of your efforts

Of course, the potential to make more money than if you did the same type of work as an employee is another major factor. Self-employed individuals can typically charge a higher rate of pay for services than an employee would receive because the company doesn’t have to make provisions for things such as: 

• Canada Pension Plan contributions
• Employment Insurance premiums
• Income Tax remuneration
• Vacation
• Sick leave
• Overtime/Holiday pay
• Benefits (Accident, Health, Dental, etc.)
• Tools and Equipment
• Working space

Additionally, one of the biggest advantages self-employed individuals have is that they can claim business expenses as deductions to pay less tax and increase their earning potential. This varies by industry and profession, but it can include things such as:

• Accounting and Legal Fees
• Advertising Expenses
• Business tax, fees, licenses, and expenses
• Insurance expenses
• Interest and bank charges
• Maintenance and Repairs
• Meals and Entertainment
• Office Expenses
• Salaries
• Motor Vehicle Expenses

Check CRA’s website for more and up-to-date information on these and other expenses.

These are some of the most commonly cited reasons people choose self-employment, so if you’re seeking greater freedom to pursue your goals, more control over your day-to-day, and more money in your pocket to put towards the things you value, then self-employment may be right for you.

Disadvantages of Self-Employment

Of course, with greater freedom comes greater responsibility. Self-employed individuals are obligated to perform some of the duties their employer would otherwise do for them, and the personal risks are greater.

Corina Daradich, Office Administrator and Bookkeeper at Community Futures in Moose Jaw, SK, says there are a number of things self-employed individuals need to keep on top of as soon as they become self-employed.

“It’s very important to be aware of everything you need to remit to the provincial and federal government you work in,” she says. “If you sell products of any kind, you should be collecting PST, and if you are selling products and services that exceed $30,000 in any 4 consecutive fiscal quarters, you need to collect and remit GST as well. Anyone considering starting a business, sole proprietorship, or corporation should visit the government of Canada’s website and BizPal to better understand your responsibilities.”

“For individuals who are self-employed and looking to have employees of their own, it’s also very important to register for a payroll program account,” she says. “This is something you will likely want to speak with a bookkeeper and accountant about.”

Similarly, a self-employed person will have to make decisions about the nature of their self-employment, whether to be a sole-proprietor or corporation. Aziz Kapasi, Partner at Kapasi and Associates Chartered Professional Accountants, says that if you want to keep things minimal, a sole-proprietorship may be the way to go. “It can be as simple as using online bookkeeping software, or maintaining a spreadsheet, to track your income and expenses, and then declaring that on your personal tax return,” he explains. “Though if you’re going to use software, make sure you learn it properly, and keep all business related receipts.”

“However,” he continues, “you will be personally liable for the activities of the business, which puts your personal assets at risk. Choosing to incorporate will separate your personal assets from those of the corporation, and some companies who hire contractors may even require it for liability and insurance purposes. But there is much more involved, and more fees to consider, so you’ll definitely want to speak with an accountant to set it up properly from the beginning,” he says.

This is an important consideration for any self-employed person, so make sure to check out our other resources on this topic, Aziz’s blog, as well as the Corporations Canada website for more information.

Moreover, while self-employment may give you the option to choose your own hours, location, wardrobe, and social circle, you will still likely need to adjust these in order to be successfully self-employed. Sure you won’t have to play office politics to win over the higher-ups to secure a promotion at your company, but that doesn’t mean you won’t be playing a similar role to secure your next big contract. If you work in agriculture or food production, you may not have a boss who has you work overtime and weekends on short notice, but the weather might. And wearing jeans and a T-shirt may be your prerogative as a self-employed professional, but a suit and tie may help convince prospective clients how professional you really are.  

These are just some of the things you’ll want to consider when thinking about becoming self-employed, and if they seem like more effort than they are worth to you, then perhaps self-employment is something you shouldn’t jump into just yet.

The Bottom Line

So long as you are aware of and fulfill your obligations as a self-employed individual, the benefits can be well worth the extra investment of your time and money. This is especially true if you are in an industry or profession that naturally lends itself to self-employment. Certainly, if you are considering self-employment, you should speak with a trusted accountant and lawyer to ensure you fully understand what your obligations will be and how you can best fulfill them.  

Of course, not everyone is in a position to invest that extra time or money, and depending on your life circumstances, you simply may not want to have the extra burdens incumbent upon self-employment. If you’re looking to simplify your life, have a regular schedule and income, and focus more on life outside of work, then you may want to seek employee positions for the time being.

Whichever you choose, do everything you can to go into it with eyes wide open and the confidence that it’s the right decision for you.