The weight of payroll taxes

Small business owners presently find themselves navigating an economic landscape riddled with challenges, including reduced revenues, mounting debt, inflationary pressures, persistent labour shortages, and higher overall costs of doing business.

In recent surveys, they have said that taxes are their top issue of serious concern, and that payroll taxes are the most harmful type of tax.

Payroll taxes are a cost that employers must pay regardless of profit, and they can entail a heavy administrative burden.

Depending on where their business is located, an employer pays between three and seven different payroll taxes, including CPP/QPP, EI, workers’ compensation, and provincial payroll taxes. Payroll taxes make it less affordable for employers to raise wages and create new jobs.

On a $50,000 salary, an employer may pay between $4,538 in Alberta (9.1% effective rate) to $6,632 in Quebec (13.3% effective rate) in overall payroll taxes.

Overall payroll taxes increase employer labour costs by 9.1% to 13.3% on top of a $50,000 salary1
Employer effective payroll contribution ($) and equivalent overall payroll tax rate (%) on a $50,000 salary, by province in 2023 (as of August 2023)
Province Amount of Employer Payroll Taxes ($)
National Average $5,067 (10.1%)
QC $6,632 (13.3%)
BC $5,658 (11.3%)
NS $5,233 (10.5%)
ON $5,143 (10.3%)
NL $4,953 (9.9%)
MB $4,813 (9.6%)
PE $4,593 (9.2%)
NB $4,563 (9.1%)
SK $4,548 (9.1%)
AB $4,538 (9.1%)

For employees, payroll taxes reduce their take-home pay (a 7% cut on a $50,000 salary) and purchasing power. They can also be a deterrent to increased workforce participation.

This report offers several important recommendations to governments on how to modify payroll taxes to enhance small business growth and competitiveness, such as delaying the introduction of the second CPP/QPP earnings threshold increase, lowering EI premiums for small businesses, and gradually phasing out provincial payroll taxes.

Business owners can visit CFIB’s website for more information on payroll tax deductions.

  1. Note: CFIB calculation, based on a small business with a payroll of $2.5 million.
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