By Preeteesh Peetabh Singh
Dialog Reporter
You might see some new numbers in your paystubs this year.
On Jan. 1, the federal government announced a hike in Canada Pension Plan (CPP) and Employment Insurance (EI) premiums. This means more money will be taken off people’s paychecks and higher payroll deductions.
Canadians earning at least $51,000 annually will contribute $49.50 more towards their CPP. This will also see an increase in the maximum contribution to $2,356.20 per year. Employers’ contributions also move up dollar to dollar.
CPP benefits will rise from $986.67 to $1,012.50 per month for the new recipients calculated on the average yearly maximum pensionable earnings for the last five years. Those who are already receiving them will see a hike by 1.8 per cent on their benefits.
Employment Insurance will see a similar jump in premiums too. Anyone earning $47,400 or more annually will have to pay an additional $51.50 for a total EI premium of $891.12 per year. Employers will pay an additional $71.61 for a total premium of $1,247.57 per employee per year.
Small business owners might feel the pinch of this increase in EI premiums. These employers will have to pay more for each worker they have on staff which when combined together, could become a huge number. This might lead them to cut costs by laying off staff or by increasing profit margins, meaning higher cost to the customers.
They might also consider hiring part-time staff, since the increase in premiums is made on the annual earning of an individual. Hiring part-timers will mean low wages and therefore low CPP and EI premiums for the employers. This strategy can lead to underemployment.
The EI benefits will see a marginal increase of $16 bringing them to $501 per week. The frequent users of the EI benefits might have to take up a job at 70 per cent of their previous hourly income. This could mean low earnings, low spending and a weaker economy.
Amongst all the possible impacts of this hike, Stephen Harper’s government is set to deliver the promise it made in the 2011 election campaign by creating a new EI benefit for parents who need to take time off work to care for seriously ill children. This new benefit will provide income support for up to 35 weeks after its implementation. It is expected to come into effect by June 2013.
Canada is a tax-heavy country, it is fair on the government’s part to tax people as long as they are providing services, but why is the common man unable to access those services as easily they would like to?
