Tax increases will decrease take-home income next month

Decrease comes from changes to Canada Pension Plan and federal Employment Insurance

Tax increases will decrease take-home income next month

Take-home income will decrease across Canada next month, due to Canada Pension Plan and federal Employment Insurance (EI) changes. These changes were outlined by the Canada Employment Insurance Commission in its summary of the 2024 Actuarial Report on the Employment Insurance Premium Rate.

In October, the Canadian Federation of Independent Business released a statement expressing its disappointment that the federal government did not take the opportunity to reject the planned EI premium hike.

“In the spring federal budget, Ottawa projected that EI rates would not need to increase into the future because of the strength of Canada's labour market. But while the labour market remains strong, the rate will now increase at cost of $1.4 billion to businesses and employees in 2024. The EI premium increase will affect all workers, while many will also see an increase in CPP premiums due to a hike in the maximum pensionable earnings calculation,” said Dan Kelly, president and CEO, of CFIB.

“The EI premium hike will further drive up the cost of doing business for Canada’s small businesses while shrinking the paycheques of Canadian workers. CFIB is calling on Ottawa to introduce a lower rate or credit for small businesses to offset the rate increases for employers,” Kelly said in the statement. 

Employment Insurance

As of January 1, 2024, The EI premium rate will increase from $1.63 to $1.66 per $100 of insurable earnings for workers and from $2.28 to $2.32 per $100 of insurable earnings for employers.

This increase brings the maximum annual contribution for 2024 10 $1,049.12 for employees and $1,468.77 for employers – an increase from the 2023 contribution by $46.67 for employees and $65.34 for employers. These numbers differ slightly for employees and employers in Quebec, according to the Canada Employment Insurance Commission.

Contributor

Premium rate (per $100 of insurable earnings)

Maximum annual contribution 2024

Difference in maximum annual contribution from 2023

Employees

$1.66

$1,049.12

$46.67

Employers

$2.324

$1,468.77          

$65.34

Employees residing in Quebec

$1.32   

$834.24

$53.19

Employers in Quebec

$1.848

$1,167.94

$74.47

 

Canada Pension Plan

Employee and employer CPP contribution rates for 2024 remain at 5.95%, and the maximum contribution will be $3,867.50 each—up from $3,754.45 in 2023. Meanwhile, the maximum pensionable earnings under the CPP will be $68,500—up from $66,600 in 2023, and the basic exemption amount for 2024 remains at $3,500.

Starting in 2024, a higher, second earnings ceiling of $73,200 will be implemented and used to determine second additional CPP contributions (CPP2). As a result, pensionable earnings between $68,500 and $73,200 are subject to CPP2 contributions.

These new ceilings were calculated in accordance with the CPP legislation and take into account the growth in average weekly wages and salaries in Canada, according to the Canada Revenue Agency.

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