The federal government increased Employment Insurance rates in 2018 for both employees and employers.
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 rate that an employee does, meaning that this 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’s next for EI rates?
Starting in June 2019, the government will be allowing 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 there is no rate increase currently planned for 2019 due to the low unemployment rates across the country – though this could change.
While EI is not slated to go up in 2019, CPP premiums will increase for the next six years and many provinces are increasing minimum wage – all of which impact the cost of labour for your business.
What does this mean for you?
In past, the Small Business Job Credit (SBJC) was available for the 2015 and 2016 tax years, which closed the gap so you paid 1.2 times the employee rate. This ended after 2016, so despite the rate being lowered for employees and employers in 2017, small businesses actually saw an increase of $0.04 without the SBJC.
EI RATES (per $100 insurable earnings)
(as projected in Budget 2018)
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 fought to ensure that the hard-earned money that you and your employees pay into EI is only used for EI-related expenses. In 2008, the government created a separate account for EI revenues with a starting balance of $2 billion, along with a Crown corporation called the Canada Employment Insurance Financing Board to set premiums.
- 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:
- 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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