Today the Harper government announced a new tax credit for small business employers. I’m not sure the initial press coverage gave a very clear description of what is being done.
First, there will be no actual reduction in the upfront EI premiums that employers will have to pay. All employers, including those who qualify for the tax credit announced today, will continue to pay employer EI premiums based on the existing employee rate of $1.88 per $100 of insurable earnings. However, on filing their T4s the small business employers that will qualify – those with less than $15,000 in employer EI premiums paid in each of 2015 or 2016 – will see the CRA automatically recalculate these employer EI premiums based on a nominal employee EI premium rate of 1.60. In other words the actual employer EI premiums paid will be reduced by 160/188, when employer T4 returns are filed.
Second, although described as new, the only new thing is the name being used. In previous years, this tax credit was termed the ‘Hiring Credit for Small Business’ (see this Department of Finance press release). For 2013, the value of this tax credit was estimated at $225 million. The ‘new’ tax credit announced today – the ‘Small Business Job Credit’ – is estimated at $550 million over the 2 years 2015 and 2016. Taking into account inflation, this represents an increase of something in the order of $100 million, not that significant given the almost $20 billion collected in EI revenues in fiscal 2012/13.
Alan McEwen is a Vancouver Island-based HRIS/Payroll consultant and freelance writer with over 20 years’ experience in all aspects of the industry. He can be reached at email@example.com, (250) 228-5280 or visit www.alanrmcewen.com for more information.