Payroll tax fuels ‘gig economy’ drift away from full-time jobs

New tax structure could have impact on bottom lines of small B.C. businesses

The second year of B.C.’s employer health tax to replace Medical Services Plan premiums has arrived.

For many small businesses, 2020 is when they have to write their first cheques.

article continues below

While larger business and local governments began paying the tax in instalments during 2019, small businesses that just clear the $500,000 payroll threshold have a deadline of March 31 to pay up for last year’s tax.

Larger businesses have the same deadline for paying the remainder of their 2019 employer health tax.

Small businesses are least likely to have been paying MSP premiums for their employees, so for them, it’s a new payroll cost. The Canadian Federation of Independent Business estimates more than 40 per cent of small- and medium-sized businesses must pay it.

For many, it’s on top of higher property taxes as municipalities raise rates to pass their extra payroll costs on. The final bills for MSP premiums went out in December, although individuals and businesses are still on the hook for any arrears.

The finance ministry is also reminding people who have set up bank auto-payments for MSP to cancel those or they could continue sending money to the province unnecessarily.

The employer health tax was designed to replace MSP revenue, so it’s likely to cost eligible businesses more than MSP did, says Ken Peacock, chief economist of the Business Council of B.C.

That’s because business only accounted for about half of the province’s MSP revenue, with the rest paid directly by individuals.

Payroll costs and taxes put added pressure on businesses to choose contract labour instead of full-time employment, accelerating an already strong trend to the “gig economy” where people work multiple jobs to pay their bills, Peacock said.

The employer health tax applies at a rate of 2.9 per cent on payroll costs, including salaries and benefits, totalling more than $500,000 in a year. Organizations greater than $1.5 million pay at a rate of 1.95 per cent. Businesses that owe up to $2,925 for 2019 have until March 31, 2020 to pay.

The province is paying the tax for health authorities and school districts, and has given an exemption for non-profit and charity payrolls up to $1.5 million.

© Kamloops This Week

 


KTW Daily News Alerts
KAMLOOPS WEATHER

Question of the Week POLL

Who is to blame for the shooting down of Ukrainian International Airlines Flight 752, in which 176 people were killed, including 57 Canadians?

or  view results

Popular Kamloops This Week

Events Calendar