Yahoo Finance Opinion: Cut payroll taxes to help small businesses with mandated paid sick days
By Jasmin Guenette and Christina Santini
As of last week, federally regulated employers including, for example, small inter-provincial bus and trucking companies, will have to provide a minimum of 10 paid sick days per year to their employees. The policy is well intended but it is not free and it will have negative consequences for many businesses.
Ten paid sick days will be a challenge for many businesses — especially smaller ones, whose pockets aren’t deep and staff lists aren’t long. The Canadian Federation of Independent Business (CFIB) asked that small businesses be exempted or that a sliding-scale approach based on business size be considered. A delay in implementing these changes for small businesses would also have been welcome. But the federal government decided not to listen — basically ignoring the fact that small businesses are still struggling to recover from the pandemic. Over half are yet to return to their pre-pandemic revenues, while 58 per cent still carry pandemic-related debt averaging around $114,000. What they need is cost relief, not cost increases.
Owners of small businesses do understand how important it is for their employees not to work sick and to work in a safe environment. In fact, the work environment in a small business is often like a family. People help each other and find solutions to each other’s problems. They can show greater flexibility around leave and provide for more informal arrangements than many larger institutional structures.
But mandating 10 paid sick days presumes all small businesses have the endless resources and the capacity of large banks, for example, or governments, for that matter. They don’t. Small firms can’t pass costs on to customers without affecting their competitiveness with larger firms. Unforeseen absences can also affect productivity and service offerings and are harder to manage for small businesses. If a firm with 10 employees has an absence, that represents 10 per cent of its workforce. Replacements, if they can be found, add further to costs. If there is no one to backfill, the work will not get done. The shipment won’t make it from point A to point B on time. It will stay on the dock or in the distribution centre.
Small businesses’ financial resources are not unlimited. Having laid down the law of 10 paid sick days for employers under federal jurisdiction, the government should provide compensation or reduce the overall tax burden for small businesses.
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Costs are increasing everywhere. Wage-related costs, including Employment Insurance (EI) and Canada Pension Plan (CPP) premiums paid by employers, are going up again in 2023. Utilities, fuel, and transportation costs are rising and the carbon tax and alcohol excise tax are also set for increases. Mandated sick days have no direct cost for government, which is one reason they are appealing to politicians. But they are definitely a cost for employers. That is why it’s so important to put in place measures that will help small businesses afford implementing 10 paid days. One solution CFIB has proposed is not to increase payroll taxes, like EI and CPP, in 2023.
The government promised to take into account the realities of small businesses when implementing this new program. It did not. The least it could do now is lower costs elsewhere to compensate.
Jasmin Guenette is vice-president for national affairs at the Canadian Federation of Independent Business, where Christina Santini is a senior policy analyst.
