The upcoming increase in payroll taxes will mean every Canadian worker will see up to $305 less in take-home income on January 1st, says the Canadian Federation of Independent Business.
Canadian Federation of Independent Business (CFIB) warns that many small business employers will also struggle to meet even their payroll budgets as Employment Insurance (EI) and Canada Pension Plan (CPP) are hiked by up to 6.7%.
Canada Pension Plan Contributions
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2023 will be $66,600—up from $64,900 in 2022.
The basic exemption amount for 2023 remains at $3,500.
The employee and employer contribution rates for 2023 will be 5.95%—up from 5.70% in 2022, and the self-employed contribution rate will be 11.90%—up from 11.40% in 2022.
The maximum employer and employee contribution to the plan for 2023 will be $3,754.45 each, and the maximum self-employed contribution will be $7,508.90. The maximums in 2022 were $3,499.80 and $6,999.60, respectively.
2023 contribution
| Maximum annual earnings for CPP | $66,600 |
| CPP contribution rate of employee, employer | 5.95% |
| CPP contribution rate for self-employed | 11.90% |
| Basic exemption amount | $3,500 |
| Maximum contribution amount for employee, employer | $3,754.45 |
| Maximum contribution amount for self-employed | $7,508.90 |
Effectively, the increase means if all other deductions and the annual salary remain the same as in 2022, your annual take-home amount will be less in 2023. As an example, if your annual salary remains $50,000, the CPP contribution in 2022 was $2650.50 [(50000-3500)*0.057] and it will be $2766.75 [(50000-3500)*0.0595] in 2023.
CFIB warns that the CPP premiums will rise by up to 7.3% due to an increase in both the CPP rate and the Yearly Maximum Pensionable Earnings ($66,600 in 2023 from $64,900 in 2022), costing workers and employers up to $255 more in contributions per employee in the new year.
Employment Insurance
Effective January 1, 2023, the maximum insurable earnings will increase from $60,300 to $61,500. The employee EI premium rate will be $1.63 per $100.
This means that if you are an insured worker, a deduction of $1.63 will be made for every $100 of the salary until the $61,500 for the year has been reached. In addition, you will have to pay a maximum annual EI premium in 2023 of $1,002.45 compared with $952.74 in 2022.
The premium rate for Quebec workers will be $1.27 in 2023.
CFIB says an increase in CPP and EI could cost business owners up to $325 more per employee — a 6.7% increase from 2022.
“The maximum additional amount that an employee will pay in EI and CPP contributions is $304.71. 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. Payroll tax increases will hit Canadians at a time when most are already seeing their cost of living quickly increase,” said Dan Kelly, President at CFIB in a news release.
“The hikes will also affect small businesses. With rising input costs, staggering labour shortages and a potential recession, the economy is already in a bad shape. At minimum, government should be pressing pause until inflation is under control.”
CFIB says it has written to Deputy Prime Minister Freeland, calling on the federal government to do no harm and avoid burdening small businesses even further.
CFIB recommends Ottawa work with the provinces to freeze or offset the upcoming 2023 CPP hikes, freeze the 2023 EI increases or introduce a refundable credit, similar to the 2015-16 Small Business Job Credit, to offset the rate increases for small businesses.
View Comments (8)
I agree with the employee part, but what about for small businesses who have to contribute. This can have a huge financial impact. For larger corporations with huge profits , I can see this having minimal impact. Employees should always be encouraged to invest in their own future. Employers reward workers in the here and now. Employees should invest in their happily ever after.
People seem to be losing their minds over the increase in the CPP contributions and EI premiums.
CPP will help the seniors when they retire and the EI will help those on social programs, such as maternity leave.
Where exactly do you think the money comes from to give us the pensions and employment insurance if not from those who are working.
yup, they take now and proimise to give later. when does the giving ever happen later? anyone who thinks this is a good think puts governments on a pedestal with BLIND Faith in liars
I agree with Emily's comment. This is a good thing. Majority of Canadian's can't live off their RTR in old age. Raising contributions now will help provide a higher RTR in the future.
This is a good thing. CPP contributions are employer matched and will greatly help the majority of Canadians in retirement.
Alarmist headline.
Cyrus, keep on defending criminals in your country go ahead
Hey Allen, where do you think CPP and EI are used and for what? Once you have looked into that, you'll realise the absurdity of your comment
This is a terrible country we live in now due to the corruption of the Liberal government, instead of taking care of the citizens of this country our leaders have opted to bring in more foreigners, up our taxes and over extend our already over extended healthcare system, and believe in some kind of electric future society