Be Prepared for the Impact of Employer Payroll Tax Increases in 2021

Payroll taxes, including UIC, CPP and WSIB, will experience large increases to their maximum earning ceilings resulting in substantially increased costs to employers who pay salaries at a rate greater than the ceiling.

Employer CPP Contributions for 2021 will increase from 5.25% of payroll to 5.54. The maximum pensionable earnings will increase from the current $58,700 to $61,600, a 4.9% increase. The maximum contribution will now be $3,166.45, an increase of $268 per employee. These are legislated federal increases, which will continue through 2023 to fund pensions at a higher level.

Employment insurance maximum insurance ceiling will increase by 4% to a maximum employer contribution of $1245.36, or an increase of $47.

The WSIB has announced a premium freeze for 2021. However, high-wage employers, including construction, will experience a substantial jump in the maximum insurable ceiling from $95,400 to $102,800 for a 7.8% increase in premium costs.

The WSIB, by statute, is required to use the average industrial wage measure as published by Statistics Canada immediately before July 1 of the previous year to adjust the Ceiling. The closing of much of the economy this spring resulted in many lower-paid workers being temporarily laid off. This had the effect of artificially greatly increasing the average industrial wage measurements and the maximum insurance ceiling. We project that this will increase the cost of coverage per general contractor employee by approximately $170.00.

Unfortunately, the only possible correction is a legislative amendment to the Workplace Safety and Insurance Act, 1997, which at this time has not been presented. The outlier to this trend is the Ontario Employer Health Tax (EHT). The budget has proposed to raise the employer exemption from a payroll of $490,000 to $1 million, a move that will provide relief to many small and medium-sized employers.

The total projected impact of these payroll tax increases on construction employers in 2021 is an incredible $485 per employee. At a time when unemployment is very high and the economy is struggling to recover, construction employers must endure employment tax increases greater than those when the economy was growing.

OGCA is working with the Ontario Government and the Canadian Construction Association to address this issue. For more information, please contact David Frame at David@ogca.ca.