Report shows how saddling Canadian businesses with hundreds of rules ripples out into the broader economy
Beyond concerns about taxes and keeping in line with social-distancing rules, small-business owners’ efforts to recover are being held back by a tangled web of payroll requirements, which has serious implications for Canada’s economic recovery.
According to a new report by PwC Canada that was commissioned by the Canadian Payroll Association, the current payroll compliance regime and its hundreds of rules are causing significant harm to Canadian employers.
The report pegs the annual cost of payroll compliance paid by employers at $12.5 billion, with items such as nearly $10 billion for compliance activities, $1.2 billion spent responding to payroll audits, and just over $850 million in costs from changes to legislation. However, it said there are likely much larger costs on the Canadian economy.
“There are also significant costs to governments under the current compliance regime — not to mention the additional costs arising from the complexity of COVID-19 programs — all of which have yet to be quantified,” said Peter Tzanetakis, president of the Canadian Payroll Association.
The report also indicated that high costs and complexity of compliance have made for an inhospitable climate for businesses. Businesses are finding their efforts to innovate and expand into new Canadian markets hampered, particularly as employers operating in multiple jurisdictions contend with regulatory disharmony across provinces.
The COVID-19 pandemic has added to the weight. With more than 300 announcements on government support programs affecting businesses having been issued since March, the CPA said businesses of all sizes faced challenges in accessing much-needed assistance and keeping up with payroll’s increased complexity.
To support a “triple win outcome” that would benefit employers, individuals, and the government, the Canadian Payroll Association called for several actions including:
- Simplifying the taxation system, starting with taxable benefits;
- Harmonizing payroll policy; and
- Implementing a digital payroll system
The cost challenges facing small businesses certainly don’t end there, and are in fact increasing in many ways. One important piece of that relates to insurance premiums, which a recent report from the Canadian Federation of Independent Business (CFIB) said have risen for more than half of small-business owners over the past 12 months.
One in six small businesses surveyed by CFIB said their premiums have increased by at least 25% in the past year. These respondents included 25% that were in the hospitality industry, 23% in transportation, and 22% in agriculture.
The situation is even grimmer for 9% of all respondents who said they haven’t found an insurer willing to offer coverage for their business needs in the previous 12 months. That number is higher for hospitality (14%) and transportation businesses (12%). Overall, 40% of small businesses said that the COVID-19 pandemic has increased their risk of general liability.
“Businesses can't legally operate without insurance, but many have been priced out or are unable to find an insurer willing to cover them,” said Corinne Pohlmann, senior vice-president of National Affairs at CFIB. “It would be in everyone's interest—business owners and insurance providers—to maintain those relationships and work together rather than shutting out a large sector of the economy from this essential service.”
