Payroll taxes planned for 2023 mean every Canadian worker will see up to $305 less in take-home pay starting Jan. 1 — unless their employer is able to make up the difference, according to the Canadian Federation of Independent Business (CFIB).
And as employers face employment insurance (EI) and Canada Pension Plan (CPP) hikes of up to 6.7 per cent, many will struggle to meet even their existing payroll budgets, it warns.
As of Jan. 1, 2023, CPP premiums will rise by up to 7.3 per cent due to an increase in both the CPP rate and the Yearly Maximum Pensionable Earnings (YMPE), costing workers and employers up to $255 more in contributions per employee, it said. On the same date, EI premiums for employers are set to increase by as much as 5.2 per cent per employee.
All together, the increases in CPP and EI could cost business owners up to $325 more per employee — a 6.7 per cent increase from 2022.Advertisement
“The maximum additional amount that an employee will pay in EI and CPP contributions is $304.71. It may not seem like a lot, but $300 can cost one family a trip to the grocery store or pay for their transportation or utility bills. Payroll tax increases will hit Canadians at a time when most are already seeing their cost of living quickly increase,” said Dan Kelly, president at CFIB. “The hikes will also affect small businesses. With rising input costs, staggering labour shortages and a potential recession, the economy is already in a bad shape. At minimum, government should be pressing pause until inflation is under control.”
Majority of small employers haven’t recovered from COVID
Few small employers can afford to raise wages to offset CPP and EI increases, according to the CFIB.
More than half (52 per cent) of small businesses across Canada have not returned to normal levels of revenue, according to the latest Small Business Recovery Dashboard. And over half (58 per cent) are still carrying pandemic-related debt averaging over $114,000.
“Some businesses are saying what they face these days is as bad, if not worse than during the pandemic. So now is not the time to raise taxes and drive more businesses into despair. Give them a break,” said Corinne Pohlmann, senior vice-president of national affairs at CFIB. “During the pandemic, the government froze EI premiums in 2021 and 2022. The same approach should be taken next year as well.”
CFIB has sent a letter to Deputy Prime Minister Freeland calling on the federal government to do no harm and avoid burdening small businesses even further.
CFIB recommends Ottawa work with the provinces to freeze or offset the upcoming 2023 CPP hikes, freeze the 2023 EI increases or introduce a refundable credit, similar to the 2015-16 Small Business Job Credit, to offset the rate increases for small businesses.
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