The last few years have been rough for Canadians regarding finances. Rising interest rates and inflation have caused the price of everyday items to rise and eat away at their take-home pay.
However, it isn’t all bad news. The rise of the minimum wage has provided some relief to those struggling. There has also been a ban on foreign property buyers to help alleviate housing pricing.
For 2023, Canada will implement even more federal and provincial regulations and laws.
There will be changes to carbon tax rates, medication access, and more. Many provinces that have yet to see an increase in minimum wage will see them implemented this year.
One of the more worrying changes is the increase in payroll deductions. There will be an increase in Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums. With these increases, there will be less take-home pay for Canadian workers.
Rapid financial changes occurring within the country have left many wary. The changes come at a time when historic inflation means Canadians require as much income as possible. With the addition of reduced take-home pay, many Canadians will surely struggle.
To help educate you about the changes, here’s an in-depth look at the laws and regulations affecting take-home pay.
What are the deduction changes?
CPP contribution rates will increase to 5.95% in 2023 from 5.70% in 2022. These changes mean that the maximum employee contribution to the CPP plan for 2023 will be $3,754.45. This is almost a $300 increase from $3,499.80 in 2022.
The total employee and employer Quebec Pension Plan (QPP) regular contribution rates will remain at 10.8% in Quebec. For an employee, the contribution rate will remain at 5.4%. However, in 2019 QPP put an enhanced QPP contribution plan in place that included implementing an “additional contribution plan.” The additional contribution plan rate is going up from 1.5% to 2%.
There will also be changes to the employment insurance rates. The changes result in workers paying a maximum annual EI premium of $1,002.45 in 2023, compared to $952.74 in 2022. These changes amount to a 6.7% increase from the same time in 2022.
With these changes, every Canadian worker will see up to $305 less in annual take-home pay this year. The amount was confirmed by Dan Kelly, President of the Canadian Federation of Independent Business (CFIB), “The maximum additional amount that an employee will pay in EI and CPP contributions is $304.71.”
Kelly went on to say, ” 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. 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, the government should be pressing pause until inflation is under control.”
Some changes already came into effect on January 1st.
Why are changes to deductions being implemented?
The reason behind the changes in deductions is the hikes in CPP and EI premiums. These increases are part of a multi-year plan to boost retirement benefits.
The boost will come through the public plan by increasing contributions over time. The seven-year plan started in 2019, which is when the increases began.
Not only are premiums rising, but the ceiling on earnings is also. Last year, those who earned more than $64,900 weren’t required to contribute more to the CPP. However, starting in 2023, that threshold will move to $66,600.
So unless employers can make up the difference, every Canadian worker will get up to $305 less in take-home pay each year. However, around half of small businesses still have pandemic-related debt. With this in mind, it’s unlikely many businesses will be able to cover the lost take-home pay.
Other new laws and regulations affecting take-home pay
Aside from the increase in deductions, there are numerous other new laws and regulations being implemented. Changes to housing purchases by foreign property buyers should help regulate housing prices. Some provinces have made changes to carbon taxes, while others’ minimum wage will increase.
Here are some other new laws that will affect take-home pay in 2023:
Minimum wage increases
In 2023, provinces that have yet to see a minimum wage increase will have the increases implemented.
Here is every province that will see minimum wage changes:
- Saskatchewan will see the provincial minimum wage increase by one dollar to $14 per hour. The change will take place on October 1st, 2023.
- Manitoba’s minimum wage is expected to increase by 65 cents to $14.15 per hour. The change will take place on April 1st, 2023. The government plans to raise the wage “to approximately $15” by October 1st, 2023.
- Nova Scotia’s minimum wage will increase by 70 cents to $14.30 per hour on April 1st, 2023. The minimum wage will rise again on October 1st, 2023, to $14.65 per hour.
- Prince Edward Island increased its minimum wage by 80 cents to $14.50 on January 1st. It will rise again on October 1st, 2024, to $15 per hour.
- Newfoundland will raise its minimum wage to $14.50 per hour on April 1st, 2023. It will increase again to $15 per hour on October 1st, 2023.
Northwest Territories to change how minimum wage is calculated
On September 1st, 2023, the minimum wage in the Northwest Territories will be adjusted annually. Adjustments are based on a new formula that considers the Consumer Price Index. Currently, the minimum wage is $15.20 per hour.
With these changes, small businesses and citizens alike will struggle to make it by. Though minimum wage increases may help, the rise in interest rates and inflation may make the increases moot.
If you are struggling financially and looking for a way out, Consolidated Credit can help. Our team of trained Credit Counsellors can help you prepare for your financial future.
