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CPP premiums rising 9.3 per cent, prompting warning from small business

November 19, 2020
By Talent Canada Staff

(Deyan/Adobe Stock)

Canada Pension Plan premiums are set to rise 9.3 per cent in January, prompting a warning from some small businesses who have been battered by the pandemic.

The Canadian Federation of Independent Business (CFIB) said one in three small firms are losing money every day they are open due to COVID-19. And more than 70 per cent of small business owners want Ottawa to hold payroll taxes flat as part of the economic recovery plan.

“Payroll tax increases are bad news for small businesses in any year, but hiking them in 2021 will make the tough months ahead even harder,” said CFIB president Dan Kelly. “Let’s not forget that the premium hike hits employees too, ensuring that every working Canadian will see a drop in their take-home income unless their employer is able to give them a larger raise on January 1.”

Seven-year plan

As part of a seven year plan to raise CPP premiums in order to provide for greater CPP benefits decades from now, CPP premium rates for all workers are to rise by 3.8 per cent in 2021.


The amount of income subject to premiums is also rising by 5.3 per cent. This means for workers earning $60,000 or more, both the employer and employee will see more than a nine per cent increase in their CPP premiums.

Curtailing job creation

One major concern heading into 2021 is that the planned CPP hike will decrease businesses’ ability to hire staff.

Currently, only 42 per cent of businesses are fully staffed.

Payroll taxes are more burdensome on small businesses as they tend to be more labour intensive. They also have to be paid regardless of whether the business is profitable or not, which will be an additional blow to firms that end 2020 in debt.

CFIB sent a letter urging the federal government to hold taxes, such as CPP/QPP and the federal carbon tax, at current levels to allow small businesses to get back on their feet before their costs go up.

“Given the difficult situation many smaller firms are facing simply trying to hold on to their staff, now is not the time to raise taxes,” concluded Kelly. “Small firms are counting on the federal and provincial governments to put a temporary freeze on this harmful plan.”

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