With the recent British Columbia and federal budget announcements, several key initiatives were introduced that will affect small businesses in BC. Coupled with legislative announcements that have been made over the past several months, employers will need to prepare for changes that could impact them financially or that could require a review of their existing HR policies and procedures.
Here are some of the key issues that will affect BC small businesses:
Proposed Provincial Changes
1. Minimum Wage
The current minimum wage in BC is $11.35 per hour. BC’s minimum wage will increase to $15.20 per hour by 2021. The increase will be phased in over the next few years with planned increases as follows:
- June 1, 2018 – $12.65/hr
- June 1, 2019 – $13.85/hr
- June 1, 2020 – $14.60/hr
- June 1, 2021 – $15.20/hr
What this means for employers – Employers currently paying at the minimum wage need to ensure compliance with new wage rates as they come into effect. After June 2018, this could mean an 11.45% increase to wages for your minimum wage employees, plus the corresponding contributions for EI, CPP, and other statutory requirements.
For employers currently paying in excess of minimum wage, it may become necessary to review the wage of all employees as you may encounter internal equity issues if lower paid employees will be paid the same as higher paid employees when the minimum wage increases.
Employers will need to budget appropriately for the projected wage increases and may need to review or modify future hiring intentions, pay increases, incentive compensation or benefits in order to balance off the minimum wage increase. At the same time, employers will need to re-evaluate how best to attract and retain staff during times of increasing financial constraint.
2. Employer Health Tax
The BC government will eliminate Medical Services Plan premiums by January 1, 2020. MSP premiums will be replaced by an Employer Health Tax which will come into effect January 1, 2019. This new payroll tax will have the following proposed rate structure for businesses:
|Total Payroll||Annual Tax||Tax Rate on Total Payroll|
|Over $1,500,000||$29,250 plus 1.95% of payroll over $1,500,000||1.95%|
What this means for employers – No changes will occur for employers with a payroll of under $500,000. However, for employers who employ approximately 10 or more employees (depending on salaries), this new tax will apply. We have heard that some employers will be limiting payroll to under the $500,000 threshold; however, this could put a constraint on growth opportunities for your business.
Our recommendation would be to look at the total compensation budget for your organization and determine how the current compensation is being allocated (i.e. base salary, statutory obligations, benefits, bonuses, etc.). With the added expense of the Employer Health Tax, we would recommend looking at the options that exist to re-allocate the discretionary portion of the total compensation budget, as well as ways to increase productivity, efficiency and output which could offset the increase costs.
Proposed Federal Changes
1. Parental/Maternity Leave
Effective December 3, 2017, two options for Employment Insurance parental benefits were made available to parents:
- Standard parental benefits – up to a maximum of 35 weeks to be claimed within a 52-week period after the week the child was born or placed for the purposes of adoption. The weekly benefit rate is 55% of the claimant’s average weekly insurable earnings up to the maximum amount. Parents can share these 35 weeks of standard parental benefits.
- Extended parental benefits – up to a maximum of 61 weeks to be claimed within a 78-week period after the week the child was born or placed for the purposes of adoption. The weekly benefit rate is 33% of the claimant’s average weekly insurable earnings up to the maximum amount. Parents can share these 61 weeks of standard parental benefits.
EI maternity leave benefits remain unchanged with a maximum of 15 weeks available to biological mothers who cannot work because they are pregnant or have recently given birth. Benefits can be paid as early as 12 weeks before the expected date of birth. The weekly benefit rate is 55% of the claimant’s average weekly insurable earnings up to the maximum amount.
Projected to start in June 2019, a new EI Parental Sharing Benefit is being made available to parents who agree to share parental leave. This Benefit would increase the duration of EI parental leave by up to 5 weeks in cases where the second parent agrees to take a minimum of 5 weeks of the maximum combined 40 weeks available using the standard parental option of 55% of earnings for 12 months. Alternatively, where families have opted for extended parental leave at 33% of earnings for 18 months, the second parent would be able to take up to 8 weeks of additional parental leave. In cases where the second parent opts not to take the additional weeks of benefits, standard leave durations of 35 weeks and 61 weeks will apply.
What this means for employers – With the option of taking 18 months of leave as well as sharing EI benefits, more employees may be away for longer periods of time. Communication with employees will be key to determining what affect these changes will have on your company. When employees take maternity/parental leave, ask how long they intend to take leave for so that you can plan replacements and coverage appropriately. Maintain contact with the employees at period intervals to see if their plans change for a return to work date.
2. Legalization of Cannabis
The federal government has proposed a Cannabis Act which would create a strict legal framework for controlling the production, distribution, sale and possession of cannabis in Canada. The target date for the new law to come into effect is July 1 2018, but it could be delayed.
What this means for employers – While the details of the specific legislation that will apply to the legalization of cannabis are yet to come into effect, employers would be wise to review their existing drug and alcohol policies to ensure they also cover cannabis. Even though cannabis will become legal to possess, like alcohol, it does not mean that employees are allowed to use marijuana or marijuana products whenever they like. Employers will still be within their rights to restrict use or distribution of the products while at work, as well as to prohibit drug use for safety-sensitive positions.
3. Health and Welfare Trusts
If an employer has established a Health and Welfare Trust for the purposes of providing health and welfare benefits to employees, the 2018 federal budget proposes that the CRA will no longer apply their administrative positions with respect to Health and Welfare Trusts after the end of 2020. To facilitate the conversion of existing Health and Welfare Trusts to the more explicitly legislated Employee Life and Health Trusts, transitional rules will need to be added to the Income Tax Act.
What this means for employers – We recommend that employers consult with their tax experts and benefits advisors to determine what actions may need to be taken to ensure compliance with any new regulations that come into effect. Your existing Health and Welfare Trust may need to convert to a new plan.
Our recommendation is that employers educate themselves on any new legislation that comes into effect that could impact their employment practices. Consult with your legal and accounting advisors where necessary, and feel free to contact Clear HR Consulting if you require any assistance updating your HR policies or practices.
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