Canadians Will Receive Up To $305 Less In Pay In 2023
In a high inflationary environment along with seven straight policy interest rate hikes by the Bank of Canada, and the possibility of a looming recession, Canadians will see up to $305 less in take-home income on January 1.
In a press release, the Canadian Federation of Independent Business (CFIB) explained that many employers will face Employment Insurance (EI) and Canada Pension Plan (CPP) hikes of up to 6.7%.
“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.
If your employer can cover the difference, Canadians will not see an increase in payroll taxes. However, the CFIB warns that many businesses are already struggling to meet their existing payroll budgets.
"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."
Source: Canadian Federation of Independent Business.
As of January 1, CPP premiums will rise by up to 7.3% due to an increase in the CPP rate and the Yearly Maximum Pensionable Earnings (YMPE). As well, EI premiums for employers are set to increase by as much as 5.2% per employee.
Combining both CPP and EI premium increases will cost employers up to $325 more per employee.
According to the latest Small Business Recovery Dashboard, 52% of small businesses in Canada have not returned to normal levels of revenue and 58% are still holding pandemic-related debt averaging over $114,000.
Small Business Recovery Dashboard as of December 13, 2022. (Source: smallbusinesseveryday.ca).
During the pandemic, the federal government froze EI premiums in 2021 and 2022. But some businesses are saying they are facing greater financial challenges now.
CFIB, which represents 95,000 small and medium-sized enterprises (SMEs) across Canada has sent a letter to the Minister of Finance, Chrystia Freeland asking to pause CPP and EI premiums in 2023.
“Small businesses are also dealing with other inflationary pressures, such as increased costs of inputs, including wages, which all add to the cost of doing business” the letter reads.
Kelly has urged Freeland to take a three-step approach.
Engage with the provinces to freeze or offset the 2023 CPP increases; and,
Freeze the 2023 EI premium rate increases, or
Introduce a Small Business Job Credit (similar to the one introduced in 2015 and 2016) to effectively lower the EI rate for small businesses.
