‘For workers earning $60,000 or more, both the employer and employee will see more than a nine-per-cent increase in premiums’
Planned increases to Canada Pension Plan (CPP) premiums on Jan. 1, 2021 should be delayed, according to the Canadian Federation of Independent Business (CFIB).
The group is urging the government to hold taxes, such as CPP/QPP (Quebec Pension Plan) and the federal carbon tax, at current levels to allow employers to recover from the pandemic and economic slowdown before their costs go up.
The CFIB is recommending a one- to two-year pause on the seven-year schedule of rate hikes.
One in three small businesses are losing money every day they are open due to COVID-19, and 70 per cent say the government should not increase payroll taxes, like CPP, as part of their economic recovery plan, according to the CFIB.
“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,” says Dan Kelly, CFIB president. “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 Jan. 1.”
Under the government’s plan, the contribution rate for employees will gradually increase by one percentage point on earnings between $3,500 and the original earnings limit from 2019 to 2023.
The enhancement “increases the CPP retirement pension, post-retirement benefit, disability pension and survivor’s pension” that employees may receive without affecting eligibility for the program, says the government.
Impacts to compensation, recruitment
However, CPP premium rates for all workers will rise by 3.8 per cent in 2021, while the amount of income subject to premiums is also rising by 5.3 per cent, says the CFIB.
“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.”
Back in 2018, the CFIB warned CPP costs could end up being higher than predicted.
Another point of concern for CFIB is that a CPP hike will decrease businesses’ ability to hire staff, and currently, only 42 per cent of businesses are fully staffed.
“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,” says Kelly. “Small firms are counting on the federal and provincial governments to put a temporary freeze on this harmful plan.”
Cliff Tyeg, a district manager for CFIB, also called for the suspension of the CPP hike.
“If you are an independent business owner in Canada, now is an incredibly important time to stand with your neighbours to protect your ability to serve your community,” he said in a LinkedIn post. “The federal government needs to hear from the small business community that this is NOT the time to move forward with these extra burdens!