EI premiums: Joe Oliver announces cuts for small businesses
Government hopes employers will hire more to boost sluggish job growth
Faced with stubbornly sluggish job growth numbers, Finance Minister Joe Oliver has announced a cut in employment insurance premiums for small businesses.
Businesses that pay up to $15,000 in EI premiums will benefit from the break, which reduces the EI premium from $1.88 per $100 of payroll to $1.60. That is a drop of 15 per cent in EI costs.
Oliver estimates about 780,000 Canadian businesses will benefit from the credit, which takes effect in the 2015 tax year.
“Small businesses drive our prosperity and give back to our communities,” Oliver said, speaking at a small family-owned business in Toronto called Value Wood Products.
He estimated small businesses provide half of private sector jobs.
$500M to small business
The cut would take effect Jan. 1, 2015 and remain in effect through 2016.
The EI cut will return about $500 million to small business owners to encourage job creation, Oliver said.
There's no paperwork associated with the change — instead Revenue Canada will calculate it when businesses file their taxes.
Asked whether the policy reflects concern about Canada’s job picture, which showed that 100,000 jobs were lost in the private sector last month — the highest one-month drop on record — Oliver seemed to downplay any such link.
“It’s not a sign of worry, it’s a sign of confidence that we’re continuing on the right path,” he said.
In addition to the cut announced today, Oliver touted the Harper government’s decision to impose a seven-year break-even rate-setting mechanism on EI in 2017. This will mean that EI premiums are no higher than needed to pay for the EI program and should lower premiums for all employers, he said.
The union Unifor pointed out that EI costs are down in Canada because fewer unemployed Canadians are eligible for them. It estimates only 36 per cent unemployed Canadians is eligible, either because they have worked too few hours or because they have claimed EI before and haven't worked long enough to collect again.
Unifor president Jerry Dias says instead of cutting premiums, the federal government would get more economic impact from improving benefits for unemployed workers.
"Increasing access to EI benefits would mean unemployed workers could better support their families. And let's face it, unemployed people are spending every cent they have in the local economy, not hoarding it like business often does," he said.
'Big, big news for small business': CFIB
The Liberal party has urged the Harper government to lower EI premiums to encourage job creation. Employment critic Scott Brison says premiums have been kept artificially high and should have been cut when the account balanced.
NDP finance critic Nathan Cullen suggested the cut is the wrong measure for the Canadian economy, saying it’s an “insult for those Canadians who are either out of work or facing the prospect of losing their job.”
Cullen was critical of the multiple changes made to EI by the Harper government.
“These guys continually play politics with everything that the government does and my concern is that in their desperation, they will introduce short-term, not very thoughtful, measures to get a couple of headlines, but that more over the medium and long term hurt the Canadian economy,” he said.
This is a half billion dollars coming back into the pockets of entrepreneurs at this tough economic time.- Dan Kelly, CEO Canadian Federation of Independent Business
The Canadian Federation of Independent Business was among the business groups that have called for cuts to payroll taxes. Its CEO Dan Kelly was at Oliver’s news conference, calling the premium cut “big, big news for small business.”
“This is a half billion dollars coming back into the pockets of entrepreneurs at this tough economic time,” he said.
Restaurants Canada also welcomed the change and said young people would benefit.
"The regressive nature of payroll taxes discourages employers from hiring youth because the tax rate compared to their wages is disproportionately high," said Joyce Reynolds, executive vice president of government affairs.
She called for deeper tax relief for small businesses.
"A way to make the tax more progressive and benefit youth job seekers would have been a tax credit program focused on youth hires," she said.
The Conservative government is gearing up for an election in 2015, hoping to focus on economic issues and, in particular, items that hit the pocketbook of everyday Canadians.
With files from Louise Elliott