'Every Canadian Worker' Could Lose $305 From Their Take-Home Income In January – Here's Why
The CFIB warns that payroll tax increases will impact Canadians at an already-difficult time.
An office. Right: Canadian dollars.
Canadian workers across the country could find that they're down over $300 in January, due to upcoming increases to payroll taxes.
In a recent press release, the Canadian Federation of Independent Business (CFIB) warned that "every Canadian worker" can expect to lose up to $305 of their take-home income on January 1, unless their employer steps in and makes up the difference.
The federation says that hikes to both the Canadian Pension Plan (CPP) and Employment Insurance (EI) mean that many employers will struggle to meet their existing payroll budgets.
As of January 1, the CFIB explains that CPP premiums will increase by up to 7.3%, costing employers and workers up to $255 more per person in contributions.
What's more, EI premiums for employers will go up by up to 5.2% per employee, costing as much as $325 more per worker – up 6.7% from the same time in 2022.
\u201cWorking Canadians will see their take-home income drop on January 1 due to a big hike in CPP & EI premiums. Counting on your employer to make up the difference? They are dealing with up to a 6.7% increase in their end of the payroll taxes. \nhttps://t.co/lkPg5MJzKi\u201d— Dan Kelly (@Dan Kelly) 1670961602
“The maximum additional amount that an employee will pay in EI and CPP contributions is $304.71," Dan Kelly, President at CFIB, explained.
He added, "Payroll tax increases will hit Canadians at a time when most are already seeing their cost of living quickly increase,” noting that $300 could instead cover a family's trip to the grocery store or their utility bills.
“The hikes will also affect small businesses," Kelly continued in a statement. "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."
The CFIB says that most small businesses owners can't afford to raise staff wages to offset the increase in payroll taxes, with over half saying they still have pandemic-related debt averaging over $114,000 and some even saying business is now worse than it was during the height of the COVID-19 pandemic.
The short-term solution, according to CFIB, is for the federal government to work alongside provinces to freeze or offset the upcoming CPP hike and freeze the 2023 EI increases (or introduce a refundable credit).
In a letter to Deputy PM and Finance Minister Chrystia Freeland, dated December 6, CFIB said the January 2023 increases to the CPP and EI premiums "will add pressure on all businesses and particularly on those least able to afford it."
"It’s important to note that very few small employers are in a position to offer their employees a wage increase to fully offset their own CPP and EI increases, so most Canadian workers will see a reduction in their take home income because of these additional costs," it read.
"At a time when inflation is hitting Canadian families hard and many are worrying about a potential recession, pausing these planned increases would allow many workers to better weather the storm."
The federation – which has 95,000 members – has also created a petition for business owners to share their concerns.
This article's cover image was used for illustrative purposes only.