Why your pay cheque will be smaller in the new year

Unquestionably there is taxation progress: The Canadian Taxpayers Federation says premium hikes for Employment Insurance (EI) and the Canada Pension Plan (CPP) will collect an additional C$306 per employee from workers and their employers in 2012.

Workers will se their EI premiums rise by five cents per $100 of insurable earnings to $1.83 on Jan. 1. The maximum insurable pay will rise to $45,900 from $44,200. In addition, the maximum pensionable earnings will rise to $50,100 from $48,300. That equates to about a $142 hit from employee paycheques that qualify for the maximum over the year. The hit on employers is slightly more, $164.

Gregory Thomas, Ontario director, the Canadian Taxpayer's Federation in Ottawa, says workers' paycheques will be smaller and employers' ability to hire will take a hit as a result.

"On an immediate basis, as people go back to work they'll notice their cheques will be smaller, starting with the first pay period," he says. "That means less disposable income in the hands of Canadian consumers."

On the subject of the EI program, Thomas thinks it's a farce.

"EI is a straight rip-off," he says. "If you take the employees' and employers' contributions, the feds are now helping themselves to over $2,000 (per working person) per year."

On the whole, Thomas says Ottawa is being unfair providing relief to businesses but not individuals. "Where we see unfairness is the very sensible relief they're offering businesses they're not offering to working families," he adds.

Meanwhile, the Mowat Centre, an independent University of Toronto think-tank, recently made 18 recommendations to drive transformative EI change. In its study on the subject, the Mowat Centre Employment Insurance Task Force states a new national framework is required for EI, one that is more transparent, effective, and equitable.

"These recommendations should be considered as a package and we recommend that all be adopted simultaneously. As a package, these measures would improve the social safety net, introduce greater equity between workers, and enhance labour market efficiency and the overall competitiveness of the Canadian economy. These recommendations represent a marked improvement over the current system."