CPP Premium Hikes Will Challenge Small Business

With one in three small businesses losing money every day they are open due to COVID-19, things are about to get even worse with an upcoming hike in Canada Pension Plan (CPP) premiums scheduled for January 1, 2021, says the Canadian Federation of Independent Business (CFIB). In fact, more than 70 per cent of small businesses say government should not increase payroll taxes, like CPP, as part of its economic recovery plan. "Payroll tax increases are bad news for small businesses in any year, but hiking them in 2021 will make the tough months ahead even harder," says Dan Kelly, CFIB president. "Let's not forget that the premium hike hits employees too, ensuring that every working Canadian will see a drop in their take-home income unless their employer is able to give them a larger raise on January 1." As part of a seven year plan to raise CPP premiums in order to provide for greater CPP benefits decades from now, CPP premium rates for all workers are to rise by 3.8 per cent in 2021. The amount of income subject to premiums is also rising by 5.3 per cent. This means for workers earning $60,000 or more, both the employer and employee will see more than a nine per cent increase in their CPP premiums. One major concern heading into 2021 is that the planned CPP hike will decrease businesses' ability to hire staff. Currently, only 42 per cent of businesses are fully staffed. Payroll taxes are more burdensome on small businesses as they tend to be more labour intensive. They also have to be paid regardless of whether the business is profitable or not, which will be an additional blow to firms that end 2020 in debt.