By Simon Kupi
As the accumulated surplus of employment insurance (EI) funds grows to $53 billion next year, Ottawa’s business owners – as well as their employees – will see less tax taken off their pay stubs and balance sheets. But for many of them, the cut will not be enough to make a difference.
The Canada Employment Insurance Commission, which the government created in 2005 to set EI contribution rates, announced Nov. 6 that it would lower the amount workers and employers pay to maintain the program. EI provides temporary relief payments to the country’s jobless.
Jeff O’Reilly, general manager at D’arcy McGee’s Irish Pub on Sparks Street, welcomes any cost savings.
“Money staying in the business is better for everyone,” he says. “In the long run you’ll be able to create more jobs because your company is more viable.”
Employers, who now pay $2.62 for every $100 each of their workers earns in EI contributions, will pay $2.52 next year. Employees, who pay the system $1.87 for every $100 they earn, will pay $1.80.
While happy to see cuts, O’Reilly says that mid-1990s EI reforms should have paved the way for deeper premium reductions.
“[The government] made it extremely difficult and impractical for people to draw from [EI],” he says. “If people stop using it, why should that premium stay high? I don’t know why it doesn’t go lower and lower.”
Yet EI, one of Canada’s largest social programs, will still run an estimated $2.5 billion surplus this year. This comes even as the Commission – now in its first year – sets rates under a government mandate to reduce that excess. The Conservatives will likely approve its suggestions Nov. 30, however.
The surplus enters the government’s general revenues rather than a fund dedicated to EI. Garth Whyte, executive vice-president of the Canadian Federation of Independent Business, calls the new rate-setting mechanism flawed.
“It’s unconscionable when people think they’re paying for an insurance program and that money goes to general revenues,” he says. “Why not call it a debt reduction tax?”
Whyte says that the new rates could have been reduced by at least five more cents. A more generous reduction would help smaller, less profitable businesses that use more labour to become more competitive, he says.
Liisa Peer, policy consultant for the Ottawa Chamber of Commerce, says that while the reduction is a welcome addition to provincial and federal business tax cuts, it is not likely to change much by itself.
“It’s way too small to do anything for the independent businessperson,” she says.
Jeremy Strong helps run Ottawa burger bistro The Works. The franchise, which has a Bank Street branch in the Glebe, is opening its fourth location in Kanata.
“Over five payrolls, it’s going to make a difference – sure,” Strong says of the reduction’s effect on business. “But does it make a huge impact on our bottom line? Probably not.”
General manager Kris Tooley of Elgin Street’s Goldstein Freshmart says she has bigger costs to worry about than employment insurance contributions.
“We have a union here, we have benefit plans, dental and so forth,” she says. “Those things tend to be more costly than unemployment insurance. It [the EI tax] has a fairly small impact.”
Many Centretown employees, like Elgin Street Diner manager Chris Wilkins, feel the reduction changes little for them.
For residents who work in the area’s pubs and restaurants, Wilkins explains, the institution of tipping often trumps the importance of the biweekly paycheque altogether.
“When you get EI, CPP and federal taxes taken off, it’s not that big of a deal – pretty much everybody in this place makes under $12,000 a year,” he says.
Grant Hooker, owner of Ottawa’s Beaver Tails chain, says that his workers are also unlikely to be too concerned with the details of their pay slips.
“Our employees are typically high school or early university students,” he says. “They don’t really have a sense of that kind of stuff. They’re new to the workforce.”
While Whyte admits the Commission’s reduction is a move in the right direction, he – like others – sees it a modest change.
“It’s better than a kick in the pants, but not much better,” he says.