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Health Insurance Matters
By Lina Demedieros
Owner Operator Model still the best Business Model
Recently I read an article advising that it was best to be a driver versus being an independent owner operator because of the cost of fuel. Is this so? NO.
The best business model today that provides you with freedom, ownership, control and value is still the Owner Operator business model. Fuel is probably your largest expense aside from truck payments and insurance, however at the end of the day the benefits are great. It just requires a little homework as opposed to having the homework done for you up front as a company driver.
So I thought this month I would provide you with a comparison on the business model being a driver versus an owner operator.
A driver gets an hourly wage or salary per month, Employment Insurance, Canada Pension Plan and sometimes Benefits. The inherent cost to the employer is large since they are subject to pay health tax, payroll tax, CPP contribution on your behalf, WSIB coverage and Group Benefits that produces an average of a $100 to $150 monthly expense for the employer. A $45,000 net taxable income after tax delivers only approximately $30,000 of take home pay after all these expenses have been addressed. The tax man alone gets approximately 20-28% of your pay cheque.
As an Owner Operator earning $140-$150,000 Gross, you pay tax or draw corporately on $45,000 excluding your truck payment, insurance, meals, CPP coverage, private insurance for loss of income, out of province (if required), health & dental coverage. The tax man still takes 20-28%, however you do own the truck, pay for maintenance and fuel. The key to profitability is managing your money. The opportunity here to reduce your operating costs is amazing. Your job is to ensure that the opportunities you get will generate a profit.
The average Owner Operator is 45-60 years of age. Loss of Income Coverage can cost as much as $2,500 to $3,600 annually. It protects for both injury and illness. WSIB on the other hand, offers more administration and only covers a person while on the job, at $5.70 per $100 of replacement income. Based on your Gross Earnings of $150K the cost would be $3,500-$4,000 annually for occupational coverage only. Keeping in mind that as an employee you have mandatory WSIB and then only if it is NOT an occupational injury or disease if you have group insurance it will cover you based on the benefits negotiated by your employer this could be 6, 12 or 24 months. Individual and Group Benefits are not comparable. The definition for disability is superior in an Individual contract. This is why you pay the big bucks for coverage.
Coverage for Health & Dental is 100% tax deductible, irrespective if you are a sole proprietor or incorporated company. Loss of Income coverage is paid with your net taxable income dollar, so collecting the benefit is tax free. Drivers equally are afforded tax frree benefits if deducted on from their take home pay. The Health & Dental plan is a taxable benefit if the company pays for this benefit. For a married individual this could be anywhere from $125 to $150 monthly at a 50% participation by the employer. While a portion of the Health & Dental benefit is deemed to be taxable, the taxation rate is higher than your 20-28% faced as an Owner Operator. You deduct 100% of the cost of health care insurance.
The benefits if collected as an Owner Operator exceed anything collected as an employee.with Company benefits.
The big difference between the two is like choosing a partner; she or he could make you or break you. Be sure you look before you leap. A good carrier has achieved balance and looks to you as an integral partner, not just an employee.
Lina M. Demedeiros
Living Benefits Specialist
E&O.E.
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