Yahoo Finance Business group urges Ottawa to freeze CPP, EI premium hikes
The Canadian Federation of Independent Business (CFIB) is urging the federal government to pause Canada Pension Plan and employment insurance premium hikes, saying the move will cost Canadian workers and "drive more businesses into despair."
The group, which represents 95,000 small and medium-sized businesses across the country, says the premium increases that go into effect on Jan. 1 will add financial pressure on both employees and employers as they continue to deal with the rising cost of living due to inflation.
"At a time when inflation is hitting Canadian families hard and many are worrying about a potential recession, pausing these planned increases would allow many workers to better weather the storm," CFIB president Dan Kelly wrote in a letter to Finance Minister Chrystia Freeland this month.
"Small businesses are also dealing with other inflationary pressures, such as increased costs of inputs, including wages, which all add to the cost of doing business. Given the potential for a recession, now is not the time to increase cost on businesses or their employees."
The CPP premium rate and Yearly Maximum Pensionable Earnings are set to rise next year, costing up to $255 more in annual contributions per employee, a 7.3 per cent jump compared to 2022. With EI premiums for employers also set to increase, the CFIB says the hikes amount to a payroll increase of up to $325 per employee for business owners, a rise of 6.7 per cent compared to this year. The maximum amount that an employee will pay in both CPP and EI contributions next year is as much as $305, the CFIB says.
Kelly says that "very few" small businesses are able to offer wage increases to offset the premium hikes, so workers will be left with less income as a result of the increases.
"It may not seem like a lot, but $300 can cost one family a trip to the grocery store or pay for their transportation or utility bills," Kelly said in a statement.
The CFIB is calling on Ottawa to freeze the CPP and EI premium increases, as well as introduce a Small Business Job Credit that will help lower the EI rate for small businesses.
Many small businesses are still struggling to recover after the COVID-19 pandemic. According to the CFIB, 52 per cent of small businesses are making less than pre-pandemic revenue levels. Another 58 per cent have taken on pandemic-related debt, with debt levels reaching $114,000 on average per business.
At the same time, small business confidence continues to decline as companies grapple with rising costs and labour shortages. The CFIB's latest business barometer found that more businesses are feeling less optimistic going into the holiday season.
"Some businesses are saying what they face these days is as bad, if not worse, than during the pandemic. So now is not the time to raise taxes and drive more businesses into despair," Corinne Pohlmann, senior vice-president of national affairs at CFIB, said in a statement.
"During the pandemic, the government froze EI premiums in 2021 and 2022. The same approach should be taken next year as well."
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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