High payroll taxes hurting small businesses and employees in Ontario

Toronto, September 14, 2023 – Payroll taxes have increased in Ontario and most other Canadian provinces since 2019, further driving up the cost of doing business for employers and decreasing employees’ take-home pay, according to The weight of payroll taxes, a new report by the Canadian Federation of Independent Business (CFIB).

“Payroll taxes are taking a major bite out of both employers’ and employees’ earnings, at a time when we are all under immense inflationary pressure. CPP and EI premiums both went up earlier this year, and more increases are coming,” said Christina Santini, CFIB’s director of national affairs.  

Ontario businesses pay four payroll taxes: Canada Pension Plan (CPP), EI (Employment Insurance), Workplace Safety and Insurance Board (WSIB) premiums, and the Employer Health Tax (EHT). Payroll taxes are taxes on wages that employers and employees must pay, regardless of business revenues or expenditures.

According to the report, Ontario has the fourth highest total payroll taxes in the country this year at $5,143, using a $50,000 salary (in a business with a $2.5 million payroll). Federal payroll taxes (CPP and EI) account by far for the highest portion of payroll taxes in Ontario, totaling $3,908 or 76% of the $5,143 payroll tax total.

In addition, for employees earning $50,000, take-home pay is cut by 7% in almost every province (higher in Quebec) due to CPP and EI employee contributions, leaving them with only $46,418. 

Ontario’s ranking improved over 2019, when it had the third highest total payroll taxes in the country based on a $50,000 salary.

“The Ontario government has made some positive moves to ease the payroll tax burden on small businesses, but it hasn’t been enough to offset federal CPP and EI increases,” said Julie Kwiecinski, CFIB’s Ontario director of provincial affairs. “The province’s small businesses have benefited from the EHT exemption threshold hike to $1 million, lower WSIB premium rates, and the return last year of $1.2 billion in WSIB surplus funds.”     

To enhance small business growth and competitiveness, CFIB recommends that the federal government delay the second CPP earnings threshold increase, and implement a 50:50 split in EI premiums between employers and employees, or a lower rate or credit for small businesses.

CFIB recommends that the Ontario government increase the EHT exemption threshold to $2.5 million (as in Manitoba), continue to lower WSIB premium rates, and keep returning WSIB surplus funds to small businesses as legislated under Bill 27 (Working for Workers Act, 2021).

For media inquiries or interviews, please contact:
Dariya Baiguzhiyeva, CFIB

About CFIB
The Canadian Federation of Independent Business (CFIB) is Canada’s largest association of small- and medium-sized businesses with 97,000 members across every industry and region, including 38,000 in Ontario. CFIB is dedicated to increasing business owners’ chances of success by driving policy change at all levels of government, providing expert advice and tools, and negotiating exclusive savings. Learn more at cfib.ca.