Business to Save $500 Million with New Credit

Good news for business! Starting January 1, 2015, the new Small Business Job Credit will replace the Hiring Credit for Small Business that was lost to small businesses in 2014 and only available from 2011 to 2013.

While the Hiring Credit was only available to small business where the employer EI premiums increased over the prior year, this new one will provide employers who currently pay less than $15,000 in EI premiums a reduction in premiums. That’s about 90% of all EI premium paying businesses, providing savings of more than half a billion dollars over the 2 years, according to the Department of Finance.

The new reduced small business rate will be $1.60 per $100 of insurable earnings compared to the $1.88 per $100 of insurable earnings normally required. The effective employer’s rate for small business will then be 1.60% x 1.4 = 2.24%. The small business EI premium reduction will apply in addition to the Québec Parental Insurance Plan premium reduction so the effective employer’s rate for small business in Quebec will be 1.75%.  

Eligibility: This credit will apply to Employment Insurance (EI) premiums paid by small businesses in the years 2015 and/or 2016 if all of the following conditions are met:

• The total employer EI premiums paid for all RP accounts must be equal to or less than $15,000.
• EI premiums were deducted from the remunerations paid to employees, or the employer paid the workers’ share of EI premiums for barbers, hairdressers, fishers, or drivers of taxis and other passenger carrying vehicles and these premiums were remitted along with the business share of the EI premium to the payroll program (RP) account.
• The income and deductions were reported on T4 slips and this information was filed on the business’ RP account for 2015 and/or 2016.

The Small Business Job Credit will not require any new documentation because the Canada Revenue Agency will automatically calculate the credit based on the small business RP account(s). If a small business has several RP accounts under the same business number, all accounts will be combined to determine if the annual employer premium was equal to or less than $15,000.

NEXT TIME:  Crunching the EI Premium Numbers

Reported by Jenifer Profitt, DFA-Bookkeeping Service Specialist. Jenifer is based in Pickering, ON and provides support to students of the Knowledge Bureau Advanced Payroll course.