Self-Employed vs. Employee:
The Real Cost of Freedom
Grab your favourite mug—we need to talk about the biggest career decision most of us will ever make.
You know that conversation that comes up at every family gathering? The one where someone inevitably asks, "So, are you still doing the self-employed thing?" with that tone that suggests you're either living the dream or completely delusional.
Well, after years of being on both sides of this fence, and recently crunching some very real numbers, I'm here to tell you the truth: neither path is inherently better. They're just different trade-offs. And the "right" choice depends entirely on your life, your priorities, and honestly? Your tolerance for uncertainty.
Let me share what I've learned—including some eye-opening math that might surprise you.
The Numbers Game: When Self-Employment Actually Pays More
Here's something that shocked me when I sat down with my calculator.
Traditional Employee Household (Combined $140,000/year):
Gross income: $140,000
Federal and provincial taxes: ~$28,000
CPP contributions: ~$3,754 (max for both)
EI premiums: ~$1,049
Union dues (if applicable): ~$800-1,200
Pension contributions: ~$7,000-10,000
Benefits deductions: ~$200-400/month
Take-home pay: approximately $87,000-90,000
Self-Employed Household (Combined $125,000/year):
Gross income: $125,000
Business expenses: $35,000 (my husband's tools, workwear, vehicle expenses, gas to and from jobs, my home office equipment, computer, internet, portion of utilities, professional development, etc.)
Taxable income: $90,000
Federal taxes: ~$13,500
Provincial taxes (Ontario): ~$4,545
CPP contributions: ~$9,800 (both employer and employee portions)
Total taxes and contributions: approximately $17,500
Take-home pay: approximately $97,155
Wait, what? The self-employed household making $15,000 less in gross income actually takes home about $7,155 more per year?
This was my lightbulb moment. The tax advantages of business deductions are real. When you can legitimately claim expenses like tools, workwear, vehicle costs, and home office expenses, it significantly reduces your taxable income. Combined with no EI premiums and the ability to control your CPP contributions, the math changes dramatically.
The Income Rollercoaster: When the Sky's the Limit (But So Is the Floor)
Here's something they don't tell you in those "quit your job and be your own boss" articles: self-employed income isn't just unpredictable—it's wildly unpredictable.
Last month, we had our best month ever—over $11,000 in combined income. I remember looking at our bank account and thinking, "If we could do this every month, we'd be set!" But then reality hit. This month? We're looking at maybe $4,000 total. My husband's construction contracts are on hold waiting for other tradesmen to do their part, and the weather has really put a delay on things. I’m just out of tax season craze, so things will slow down for the summer.
The feast-or-famine cycle is real:
Some months you feel like you're killing it—$10,000+ coming in
Other months you're scraping together $2,500 and wondering if you should update your resume
You can't just multiply your best month by 12 and call it your annual income
You also can't assume your worst month represents your earning potential
What this means practically:
Budgeting becomes an art form—you have to plan for the low months during the high ones
Your stress levels directly correlate with your project pipeline
You develop a weird relationship with money where $8,000 feels both like a fortune and not nearly enough
You learn to save aggressively during good months because you know the lean times are coming
But here's the flip side: As an employee, your income is essentially capped. You might get a 3% raise annually if you're lucky. As self-employed, there's no ceiling. If you can find more clients, work more efficiently, or raise your rates, your income can grow exponentially. That $15,000 month? It's not a fluke—it's proof of what's possible when everything aligns.
The trade-off is that while employees have income security, self-employed folks have income potential. Some months you'll make more in four weeks than your employed friends make in three months. Other months, you'll wonder if you made a huge mistake.
But Here's the Catch: It's Not Just About the Money
Before you march into your boss's office with a resignation letter, let me tell you about the other side of this equation—the stuff that doesn't show up on spreadsheets.
What You Give Up as an Employee
The Golden Handcuffs:
You're trading time for money, and there are only so many hours in a day
Vacation time is allocated, not chosen
Sick days have limits (and guilt often comes with using them)
You need permission to attend your kid's school play
Your income has a ceiling unless you get promoted
The Flexibility Tax:
Miss your daughter's soccer game because of a meeting? That's the cost of steady income
Daycare pickup conflicts with overtime? Someone else gets the opportunity
Your child has a meltdown and needs you? Better hope you haven't used up your sick days
What You Give Up as Self-Employed
The Security Blanket:
No work = no pay (vacation becomes expensive quickly)
You're responsible for your own benefits and retirement savings
Income can be unpredictable—feast or famine cycles are real
You're always "on"—there's no true separation between work and life
The Invisible Costs:
Self-employment taxes (both employer and employee portions of CPP)
No unemployment insurance safety net
You pay for your own professional development, equipment, and workspace
The mental load of running a business never really goes away
The Real-Life Trade-offs: Our Story
My husband and I chose self-employment not just because we're entrepreneurs at heart, but because we don't have a village. No grandparents nearby, no extended family to help with school pickups or to cover when the kids are sick for the third time this month.
What this means practically:
When our son has a fever, one of us can stay home without calculating sick day balances
We can attend every school event without requesting time off weeks in advance
Snow day? No problem—we're already working from home
Summer childcare costs? We can juggle schedules instead of paying $400/week per child
But it also means:
We haven't taken a real vacation this year (too expensive when you're paying for time off)
There's no "leaving work at work"—our dining table is often our office
Income anxiety is real when contracts end or clients pay late
We're constantly thinking about the next project, the next client, the next opportunity
The Emotional Reality Check
Employee Life: The Comfort of Predictability
There's something beautiful about knowing exactly how much will be in your bank account every two weeks. About having benefits that kick in when you need them. About being able to truly disconnect on weekends and vacations.
Employees often underestimate how valuable this predictability is until they don't have it anymore.
Self-Employed Life: The Weight of Freedom
Freedom sounds amazing until you realize it means you're responsible for everything. Every decision, every missed opportunity, every slow month—it all falls on your shoulders.
But there's also something incredible about having control over your schedule, your income potential, and your work environment.
Which Path Is Right for You?
Consider traditional employment if:
You value predictability and security over flexibility
You want clear boundaries between work and personal life
You have a strong support system for family emergencies
You prefer someone else handling taxes, benefits, and business logistics
You're building expertise in a field where employment offers better growth opportunities
Consider self-employment if:
You need flexibility more than security
You're comfortable with income uncertainty
You have the discipline to handle your own taxes and retirement planning
You have marketable skills that translate to contract or freelance work
You lack external support systems and need to be available for family
The Middle Ground: It's Not All or Nothing
Here's what I wish someone had told me earlier: you don't have to choose forever. Many people successfully move between employment and self-employment as their life circumstances change.
Transitional strategies:
Start freelancing on weekends while employed
Negotiate flexible work arrangements with your current employer
Consider contract positions that offer some of both worlds
Build up savings while employed to cushion the transition to self-employment
The Bottom Line
After running the numbers and living both experiences, here's my take: self-employment isn't more lucrative because it's inherently better—it's more lucrative because it shifts the risks and responsibilities to you.
You're essentially trading:
Security for flexibility
Predictability for control
Benefits for tax advantages
Steady income for income potential
Neither choice is right or wrong. They're just different answers to the same question: What do you value most in this season of your life?
For us, right now, the ability to be present for our kids' unpredictable schedules is worth more than vacation pay and extended health benefits. But ask me again in five years when they're older and more independent—my answer might be different.
The key is being honest about your priorities, your financial situation, and your tolerance for uncertainty. Because at the end of the day, both paths can lead to a fulfilling life—they just take different routes to get there.
What's your experience been? I'd love to hear whether you've found employment or self-employment to be the better fit for your family's needs.
