Payroll Tax Increase is cheered by Canadian Businesses

How do you get thumbs up from both business and labour leaders after announcing an increase in payroll tax?

Consult the stunt by Finance Minister Jim Flaherty.

For months it has been reported that the EI (Employment Insurance) premium for employer and employee will increase by 21 cents and 15 cents for every $100 starting January 1, 2011.

On September 30th, Minister Flaherty, in a news conference said that the actual increase will be two-thirds lower than the previously announced rate, 7 cents and 5 cents respectively for employer and employee for every $100 of insurable earnings, starting January 1, 2011. The payroll tax was reduced due to the fragility of economic recovery in Canada.

Business leaders attending the news conference expressed their satisfaction, with the decision. Businesses will be able to save $60/employee in payroll tax with this reduced increase of payroll tax.

This reduced increase in payroll tax is temporary only, since EI tax will be allowed to go up by 10 cents for every $100 in 2012 and subsequent years.

Payroll tax is a major detrimental to Job Creation by employers. We will wait to see the impact of this payroll tax increase on job market, when it comes to effect in 2011.