Whether you’re figuring out your first career path or looking to change directions, a new series from Global News, Hot Jobs, focuses on career strategy for a new era in work.
Canadians are not making much more money today than they did over a decade ago.
That much is obvious from the most recent Census, which showed median incomes growing by just under 11 per cent between 2005 and 2015.
There was clear growth, of course — but not nearly enough to keep up with the cost of living. While the Consumer Price Index (CPI) grew by just over 20 per cent in that time frame, the cost of housing alone across Canada jumped by almost 45 per cent in the past five years — much of the growth concentrated in the Vancouver area, though prices outpaced income growth right across the country.
As the cost of living outpaces wage growth, more people are working multiple jobs.
Labour Force Survey data shows that there were just over 863,000 Canadians holding multiple jobs in September 2008. That number had grown to more than 1 million by September of this year.
Whether it’s an extension of your full-time job, like being a marketer who manages someone’s social media profiles on the side, or something totally unrelated like driving an Uber a few hours each week, a few extra hours a week could add the cushion your bank account needs.
Sluggish incomes are but one reason why many people are turning to additional work in the gig economy, Jeff Tennery, the CEO of Moonlighting, a company that links freelancers with potential clients, and that will soon begin operating in Canada, told Global News.
“If you look at the last two decades of wage growth, it’s been very stagnant,” he said.
“From 1996 through the last 22 years, you’re talking about a wage growth that has not even stayed anywhere near on par with things like education bills, fuel bills, housing, food.”
But a lack of pay growth isn’t the only reason why people turn to side jobs, said Linda Nazareth, senior fellow for economics and population change at the Macdonald-Laurier Institute (MLI).
Sure, there are people who do it out of necessity, but a McKinsey and Company study from 2016 found that a majority in the U.S. — 72 per cent — do it by choice.
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There’s even the potential that gig work can make people happier, Nazareth noted.
“In the best case, the side gigs are done by those who are transitioning from something they may not love to something they love,” she told Global News.
“They have one job, but their real ambition is to be their own boss, so they start a business. Or they follow a passion.”
But there’s more to consider than whether or not a side gig will make you happier. You have to also consider whether it’s actually worth your time.
There are tax implications associated with earning money on the side, and plenty of mistakes that people can make when it comes to managing their money.
Here are some tips to help you maximize the benefits of your side gig:
How much you make depends largely on the side gig you take
“The range is huge” when it comes to freelance income, said Gennaro De Luca, a financial planner and managing director of WEALTHplan Canada.
A computer programmer building and maintaining a website outside a full-time position can make anywhere from $40,000 and $80,000 in extra money because they can bill at $100 per hour, he said.
Meanwhile, a client who bakes muffins and cakes part-time can bring in anywhere from $1,200 to $1,300 in additional income per year, de Luca added.
Freelancers’ income also varies when they obtain work through firms like Moonlighting.
Tennery has seen people take in $300 per gig, and use the service to supplement their income to the tune of $12,000 per year.
Sit down and figure out the equipment and other costs you’ll need to start your side gig
Before you commence a side gig, it’s a great idea to sit down and figure out, as much as possible, how much you’ll need to pay to operate it, De Luca said.
The needs of the side gig will vary with the job, of course. An Uber driver, would have to pay for car maintenance, as well as insurance, mileage and mobile phone expenses.
Many expenses can be deducted, of course, but nevertheless, there are costs that drivers will need to pay at the start if they wish to operate.
Generally, it’s important to know what your expenses are to work that job.
“Any expense that is incurred, in order for you to earn that income, is generally going to be tax-deductible,” he said.
Common expenses include supplies, bank charges and costs associated with an office space.
“Those types of things are common to everyone, but the individual expenses would be different for everyone depending on the nature of the work.”
Tell a good story
An entrepreneur’s personal story is important — and defining yourself as a freelancer is different from how you do it at a full-time job, Tennery said.
Say a person works a full-time job building guitars.
That same person might also be an amazing rhythm guitarist on the side, Tennery said.
“People like to hire people that have a story,” Tennery said.
“They have this great experience in a full-time job, but there’s some sort of hook.”
Use every avenue to promote your name
Let people know you’re in business, is advice that Tennery offers.
Freelancers, he said, don’t just promote themselves through a single avenue like Moonlighting.
They do it in numerous places, like Upwork, another freelancing platform.
They also look at every advertising opportunity available to them, whether it be TV, radio, online or mobile.
“Use every avenue possible, every vehicle, every tool possible to put your name out there,” Tennery said.
“It’s really an advertising game.”
Don’t incorporate too soon
Incorporation is the process an entrepreneur undergoes of forming a company — essentially it means you’re creating an entity separate from yourself when you’re running a business.
There are advantages to doing this — one of them is that you create a “corporate veil” for yourself and your shareholders, according to Investopedia.
When starting a business, people often feel the need to incorporate, or start a company to protect themselves, de Luca said.
“There’s this notion that incorporating protects you in some way from any kind of liability,” he said.
What people often don’t consider when doing this is all the filing obligations that come with it — to say nothing of the bookkeeping required.
“It’s not generally necessary, especially when you’re first getting started,” de Luca said.
“It really just adds an additional layer of cost, an additional layer of administration with really no additional benefit, at least not initially.”
Don’t register for a GST/HST number unless you have to — and you likely won’t
Just as you don’t need to incorporate right away, you won’t always need to register for a GST/HST number.
Under Canadian tax law, you’re considered a “small supplier” if you pull in less than $30,000 in revenue in four successive quarters.
However, “most people won’t earn $30,000 in terms of their side gig,” de Luca said. “They will register for a GST/HST number with the Canada Revenue Agency (CRA) voluntarily, thinking it’s something that they have to do.
“Again, that adds an additional layer of administration and tax to withhold and remit to CRA that’s not necessary.”
Put money aside to meet your tax obligations at the end of the year
For the cash you must remit, however, it’s important to set money aside, de Luca said.
Side gigs generally produce a “nominal” amount of additional income, but sometimes they produce enough to bump you into a higher tax bracket — and clients can forget this.
It doesn’t happen often, de Luca, said, but there are people who have forgotten, not only that a side gig can bump them into the next tax bracket, but that the income they make is taxable.
He offered the example of a client in Ontario who had a full-time job and offered public relations services on the side.
She earned an additional $60,000, but didn’t plan properly.
The extra income pushed her from income taxes of just under 30 per cent to over 43 per cent; she also didn’t keep accurate records and didn’t collect HST on the money she made over $30,000. This meant she had to dig into her own pocket to remit the money to the government for the second half of the year.
She ended up making less than $30,000 in after-tax cash flow that she could save or spend from the $60,000 she had earned.
Had she planned early enough, she would have saved substantially more money.
De Luca recommended setting aside anywhere between 15 and 20 per cent of your gross revenue in an account that you use specifically for tax purposes.
“It might be more than what you need, but at least you have some money set aside so you can meet your tax obligations at the end of the year,” he said.