CPP changes hard on biz

Photo: Getty Images

Changes to the Canada Pension Plan could be too much for some businesses according to the Kelowna Chamber of Commerce.

On June 20, the provincial and federal governments announced they had agreed on changes to the CPP.

Although details aren't available at this time, the increases are expected to be substantial said the Kelowna Chamber of Commerce in a press relese.

This expansion poses significant repercussions to Canadian businesses that are already struggling in a competitive global environment.

The Canadian Chamber of Commerce membership said it anticipated the issue and passed a resolution last autumn urging the federal government to make enhancements voluntary without imposing new costs to employers. Additional correspondence was also sent to the Minister of Finance from the Canadian Chamber lobbying against the changes will bring.

“The Kelowna Chamber of Commerce shares the concerns of businesses across Canada that the recently announced plans to expand the Canada Pension Plan could have severe negative repercussions,” said Kelowna Chamber of Commerce policy committee chairman Jeff Robinson.

“As all our members do, we support programs that help prepare Canadians for a dignified and comfortable retirement. However, the recently announced changes to the CPP will amount to a form a payroll tax, which many businesses will struggle to afford. The result will be to reduce job growth and delay investments that will bring future prosperity to our community. We share the view of the Canadian Chamber of Commerce that there are better ways our government can ensure that Canadians are financially prepared for retirement."

The details that have been announced to the public include an additional two per cent shared equally between employees and employers (on top of the current 9.9 per cent) phased in over five years beginning in 2019.

Under the current CPP, employers and employees each contribute 4.95 per cent of a salaried person's earnings between $3,500 and $54,900, up to a yearly maximum of $2544.30. Self-employed workers must pay both portions for a total of 9.9 per cent.

The new agreement would see the upper salary limit progressively increased to $82,700 and would aim at moving from a payout of 25 per cent of earnings to a 33 per cent payout.

CPP rates will have to increase if the income replacement rises from one quarter to one third, but the government has so far not stated how much this will cost. 

According to the chamber, small business owners are opposed to this change, which will likely result in hesitation for job creation as it will become costlier to hire people and could delay important business investments. Simply put, it means a jump in payroll expenses for employers, which the Canadian Federation of Independent Business claimed as "a devastating move for Canadian workers and the economy in general."

The Canadian Chamber of Commerce is asking the government to consult all Canadians on this significant change before proceeding, saying there is a better way to encourage Canadians to save for retirement without bringing in an increase to payroll taxes that will hurt the economy.