As published in the Guardian Newspaper, October 8th, 2011 - written by Blake Doyle
This past week a piece of Federal legislation caught my attention, but it seemed to have missed the radar of most media and perhaps many small businesses.
One issue we can’t avoid in the media is the state of the global economy. It is a theme of international interest, and even a refrain in the most recent provincial election. One key element of economic stability is job security and employment creation.
This past week a piece of Federal legislation caught my attention, but it seemed to have missed the radar of most media and perhaps many small businesses.
One issue we can’t avoid in the media is the state of the global economy. It is a theme of international interest, and even a refrain in the most recent provincial election. One key element of economic stability is job security and employment creation.
In Europe there is some civil unrest and protesting related to elevated unemployment. In the US the unemployment rate has hit 9.1 per cent, for three consecutive months in a row. The historical high was 10.8 per cent in 1982; but unemployment has exceeded 8 per cent since February 2009, the longest stretch of elevated joblessness since monthly records begin in 1948.
In Canada the Harper government is looking to the private sector to assist with job creation. In the 2011 budget, page 61, there is a flowery description on the need to create employment in Canada. Our unemployment rate has been faring better in Canada; the rate has been falling and now sits at 7.3 per cent. (From 1976 until 2010, Canada’s unemployment rate averaged 8.53 per cent reaching our historical high in December of 1982 peaking at 13.10 per cent).
I am generally of the opinion that government should limit interference with the private sector and the functioning’s of a free market. But the “hiring credit for small business” might be one of these rare occurrences where government is in fact providing the right stimulus to support the economy – by supporting small enterprises.
Here is how the tax credit works: the government will provide a tax credit of up to $1,000 to encourage hiring. This is not a grant to subsidize payroll or a make work action plan. This is a credit against taxes paid, an incentive to support business and employment growth by rebating the employer EI premiums for any additional investment over 2010 expenditures.
For most businesses the employers’ contribution in EI premiums is a very small amount. This is probably why the tax credit has not received a great deal of attention. But the credit is a worthwhile recovery for businesses who continue to make a commitment to growth, even in uncertain times.
The credit recovers employer EI premium contributions for a new hire with an annual salary of $40,000 (or two part-time people at $20,000 each). This is not an extravagant credit, but more a philosophical statement.
Claiming the credit couldn’t be easier. Canada Revenue Agency will automatically calculate the credit when an eligible employer fills their 2011 T4 return. It couldn’t be simpler for businesses.
While the $1,000 maximum credit is not enough to get business overly excited, it does represent a material reduction in the employer’s punitive EI contribution. This is a good initiative endorsed by the Canadian Federation of Independent Business who are “extremely pleased” by this tax cut, declaring it a “major help to small firms in growing their workforce.”
It would be great to see this program extended into 2012 and perhaps expanded to cover CPP contributions and additional hiring; as economic turbulence is sure to persist well into the coming year.
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