Sometimes I wonder how our economy functions at all. I marvel that Canada’s entrepreneurs and business owners keep going, no matter what the government and the courts throw at them.
In employment relationships, everything is fine until it isn’t… and then the employer often faces a claim.
Based on consistent Gallup research, close to 7 out of 10 employees in North America are somewhat to completely disengaged at work. They choose to stay put for their biweekly attendance fee and get by on sugar-coated performance reviews.
Once the employer has finally had enough, formerly lethargic employees show remarkable energy as they scurry around for legal advice and, in the wake of Waksdale and Dufault, have their former employer served with inflated notice demands to “get what they’re owed.” They have nothing to lose, right? Well – what are they owed?
As employment lawyer Howard Levitt wrote in the Financial Post on May 14, “It’s an employee’s world, and employers are just living in it.”
While it may be an employee’s world, it’s very much the government’s sandbox. Reportedly, the federal workforce ballooned by nearly 100,000 employees since 2015, with salaries and bonuses far higher than the private sector can afford to pay. This forces the private sector to compete with the public sector on the labour market, the latter doing this with dollars confiscated from the former. Ironic, huh?
Let’s allow for human nature. The bulk of jobseekers, when given a choice between the uncertainty of the marketplace where they have to compete and prove their value, versus the security, profitability, and predictability of a public sector job, typically pick the latter. Tenured talking heads often seem to have a certain disdain for the working class, especially when people lose their jobs. “Told ya! Serves you right for being in the private sector – stuff happens!”
As the late talk show host Rush Limbaugh said, “Safely ensconced as they are in their impenetrable bunkers of lifetime employment, complimentary family benefits, and indexed pension plans.”
Meanwhile, there’s upward pressure on salaries and hourly rates. Emboldened by labour shortages and squeezed by inflation, employees are looking for raises. However, this has become pretty much a futile exercise, especially in recent years.
First, the impact of cost-of-living and merit increases is typically modest. A cost-of-living adjustment may be 2 or 3%, and a merit increase 5% if people really hit it out of the ballpark. Let’s say someone makes $60,000 per year and gets an increase of 5%. This works out to $3,000 annually. Spread over 26 pay periods, it probably works out to an extra $75 in net pay every two weeks. This may be welcome, but it’s not a huge difference. Within a few pay stubs, the novelty wears off.
Second, employees tend to focus on net deposits. The funny thing here is that they expect the bottom line to improve if they got a raise. So, when employees want more disposable income, they reflexively turn to their employer. However, nobody seems to give much thought to the deductions at the top.
Why don’t people send their MP a letter to ask for lower income tax rates and lower CPP and EI premiums? I looked it up: between 2020 and 2024, the federal government increased the employer and employee CPP premiums from $2,898 to $3,867 (33.4%), and the employee portion of EI from $856.36 to $1,049.12 (22.5%)… which was done during a pandemic, when large chunks of the private sector were on life support. Despite all the talk about job growth, the government tightened the screws on employers – who are expected to do the hiring.
While employer and employee both contribute to CPP and EI, the playing field is not level. Let’s say ABC Inc. is based in Kingston and hires an accountant for $120,000 per year. Let’s call her Jackie. She starts on January 2, 2024. With every paycheque, ABC withholds, matches, and remits CPP and EI. As we all know, this is done at an accelerated rate and, typically, people at this salary level are done paying CPP and EI in the spring. Suppose that Jackie, due to family circumstances, resigns and moves to Windsor on July 1. She finds a similar role at XYZ Inc. in Windsor, with the same salary, and starts on July 2. As for any new employee, XYZ starts withholding, matching, and remitting CPP and EI. (Meanwhile, ABC hires a new accountant and starts doing the same.)
When Jackie files her 2024 taxes, she can look forward to a substantial refund, as CPP and EI were withheld from her pay twice – once in the first half of 2024, and again in the second half of the year. Good for Jackie. Now, since ABC already remitted its CPP and EI match for Jackie in the first half of the year, you’d figure that XYZ would be off the hook and get a refund too, right? Wrong. The government keeps those funds. And the same goes for ABC, which pays CPP and EI twice for the same job. The impact is that it drives up the total cost of doing business.
Imagine how this country could thrive if the shackles around the economy’s neck were loosened a bit. The relentless dredging of the private sector by various governments is disheartening. As always, it’s private sector businesses footing the bill.
