DID YOU KNOW: the Canadian Government is offering small businesses back money to invest in their companies?
Almost 90% of Canadian small businesses that pay Employment Insurance (EI) premiums qualify for a tax credit that will reduce EI payroll taxes. The Small Business Job Credit is forecasted to save small employers more than $550 million in 2015 and 2016 combined.
The best part is business owner’s don’t have to do a thing in order to qualify.
What it is
This announcement will result in a 15% net reduction in Employment Insurance premiums paid by small businesses over the next two years.
The Small Business Job Credit will effectively lower the EI premium rate from $1.88 to $1.60 per $100 of insurable earnings. It is available to businesses that pay $15,000 or less in employer EI premiums and is in effect for the 2015 and 2016 tax reporting years.
Dan Kelly, President of the Canadian Federation of Independent Business is enthusiastic saying, “A 15% reduction in EI premiums will make it easier to hire new workers or invest in additional training to help entrepreneurs grow their business.”
How it Works
Currently, businesses pay 1.4 times the legislated EI premium rate. Therefore, premiums are calculated like this:
(Total salaries x EI premium rate) x 1.4 = premium owed
The lower rate will reduce EI payroll taxes by nearly 15%. Here are two simple examples that illustrate the bottom line benefit for individual small businesses:
Money owed under the old $1.88 rate
|Money owed under the temporary $1.60 rate||Savings in one year|
|14 employees, each earning $40,000||$14,740||$12,540||$2,200|
|3 employees, each earning $25,000||$1,974||$1,680||$294|
What to do
Nothing! Once T4 slips have been filed, the Canada Revenue Agency will calculate the credit for all eligible businesses automatically. Credits will be applied against any outstanding tax debt that exists, and the remaining amount will be refunded to the business.
Where to Learn More
If you would like to learn more, you can visit the Canada Revenue Agency website at cra-arc.gc.ca or the Department of Finance website at fin.gc.ca.
For more information on how Ceridian can help your small business automatically calculate pay and remit to Canada Revenue Agency requirements click here.