As a business owner, unlike other payroll taxes that are split 50:50 between the employer and employees, you actually pay 1.4 times the EI rate that an employee does, meaning that any hike hits you even harder! Payroll taxes are the most difficult for your business to cope with since you have to pay them regardless of whether you make any money or not.
What is the EI rate right now?
In 2019, there was some good news for small businesses as EI rates went down by five cents for employers – from $2.32 to $2.27. In Quebec, the EI rate for employers went down by 7 cents to $1.75.
EI RATES (per $100 insurable earnings)
However, while EI rates are going down, CPP/QPP premiums are increasing for the next six years and many provinces are increasing minimum wages – all of which raise the cost of labour for your business.
What’s next for EI rates?
In the 2019 budget, the government announced a new EI Training Support Benefit for employees that will add some costs to the EI system. In order to offset any potential increase in EI rates for small businesses, starting in 2020, the government will implement an EI rebate if your business pays $20,000 or less per year in premiums.
However, we are still waiting for the full details of this new measure and how it will work. We are calling on the government to ensure that this rebate is significant and permanent.
Also, as of March 2019, the government allows an additional five weeks of benefits when both parents agree to share parental leave. This new measure will add costs to the EI system, but due to low unemployment across the country, it is not projected to drive up rates. (Note: Quebec has a separate program for parental leave, QPIP.)
What does this mean for you?
While rates have gone down, you still pay 1.4 times the employee premiums. In past, the Small Business Job Credit (SBJC) was available (for the 2015 and 2016 tax years), which closed the gap so you paid just 1.2 times the employee rate. This ended after 2016, but we are fighting to have it reinstated!
What is CFIB doing about this?
We’ve long advocated for more fairness in the EI system for employers. Over the years, we’ve been able to score some big wins for small business:
- We advocated for stability in EI rates for years, and finally, in 2012, the federal government announced the seven-year break-even rate that ensures EI funds are used exclusively for the EI program during that time frame.
- In 2014, the government implemented a CFIB idea by creating the Small Business Job Credit (SBJC), which provided a tax credit to small business owners to offset EI premiums; we were there when the government announced this!
We’re keeping up the fight by recommending some of the following things to government:
- Ensure more transparency around how EI funds are being used to ensure that the hard-earned money that you and your employees pay into EI is only used for EI-related expenses.
- Introduce a training tax credit, such as a refundable income tax credit or an EI credit, which recognizes the investments you make in hiring and training your employees.
- Create an EI credit to encourage businesses to hire more youth between the ages of 18 and 24 that would offer employers a 12-month break on EI premiums – a Liberal Party pledge during the last federal election.
- Implement a 50/50 split in EI premiums so that employers don’t contribute more than their fair share.
- Consider putting in place a permanently lower EI rate for small businesses.
- Implement a system to allow business owners to claim over-contributions. While employees get a refund on their tax return if they go over their maximum annual contribution, employers can’t.
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