Too often, governments don’t consider the accumulative weight of all the payroll taxes you have to pay: CPP, EI, WSIB and some provincial taxes. At CFIB, we aim to push to reduce this egregious burden. It limits your ability to create jobs and increase salaries!
A minimum of three payroll taxes are levied in every jurisdiction—CPP / QPP, EI and workers’ compensation—but many provinces slap an extra fee on payroll. Newfoundland, Manitoba, Ontario and British Columbia all have health or education-related taxes based on payroll. Quebec goes even further, with a total of seven payroll taxes.
How much you’re paying
On average, a Canadian business pays $4,884 in payroll taxes on a salary of $50,000 – a premium of almost 10%. Businesses in some provinces have a slightly harder time. In Quebec for example, business owners pay on average $6,488 on a similar salary.
Employees across Canada also get hit with these taxes, which come to an average of $3,182 on a $50,000 salary (or $3,349 in Quebec), though they get their CPP / QPP contributions back when they retire.
The problem with payroll taxes for business owners
We have identified three negative impacts payroll taxes have on business owners. Payroll taxes are:
- Profit insensitive: payroll taxes must be paid, whether a business is profitable or not.
- Administrative burden: reporting and remitting payroll taxes takes time away from running a business.
- Regressive: as small businesses are more labour intensive than larger businesses, payroll taxes place a disproportionate burden on smaller businesses.
These difficulties ripple out to affect the entire economy. They often result in lower wages or fewer hours for your employees, higher prices for consumers and even fewer job opportunities for those looking to join the workforce.
Fighting for a better deal for small business
In our 2019 report, “Taxing Payroll: A barrier to business growth and competitiveness,” we outlined a number of ways governments can lighten your payroll tax burden.
- On CPP / QPP: halt or slow the increases coming each year until 2025.
- On EI: implement a credit to lower the rate for small businesses, so your premiums aren’t 1.4 times employees’.
- On provincial taxes for health and education: gradually phase out these taxes entirely; in the meantime introduce and/or raise the existing threshold to shield small businesses from these taxes. Here’s what we’re doing to combat some of these provincial levies:
- On workers’ compensation: Don’t hoard business owners’ money—return any surpluses once the funding ratio (assets over liabilities) exceeds 110%.
- Regularly review spending funded through payroll taxes, allowing for tax relief.
Lowering payroll taxes is one more important way for governments to support the labour market. Small businesses often respond to high payroll taxes by raising prices or reducing hiring—and in the long run may even lower wages for employees. Reducing high payroll taxes is not just a win for small business, but for the Canadian economy as well.