Canadians’ take-home income to drop by up to $305 on January 1 due to EI, CPP hikes
The upcoming 2023 increase in payroll taxes will mean every Canadian worker will see up to $305 less in take-home income on January 1, unless their employer is able to make up the difference.
And as employers face Employment Insurance (EI) and Canada Pension Plan (CPP) hikes of up to 6.7%, many will struggle to meet even their existing payroll budgets, warns the Canadian Federation of Independent Business (CFIB).
As of January 1, the CPP premiums alone will rise by up to 7.3% 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.
Also on January 1, Employment Insurance (EI) premiums for employers are set to increase by as much as 5.2% per employee. All together, the increases in CPP and EI could cost business owners up to $325 more per employee — a 6.7% increase from 2022.
“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.”
Few small employers can afford to raise wages to offset CPP and EI increases. Over half (52%) 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%) 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.
Business owners can share their concerns with the upcoming payroll tax increases by signing CFIB’s petition here.