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New Laws Affecting Take-Home Pay

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Written by

Michelle Morra is a Hamilton, Ontario based freelance writer. She has written hundreds of feature articles on a range of topics, including personal finance, marketing, mental health, and industrial safety.

Michelle Morra
Take-home pay

The world will remember 2022 as a challenging year. Many businesses are still short-staffed because of COVID-19. The war in Ukraine has made it harder to buy goods. Everything is more expensive, from homes to gas to groceries. To address this, Canada’s federal and provincial governments have adjusted some laws and made new ones. These could make a dent in your take-home pay in 2023. In this article, we’re breaking down the changes to look out for.

Changes That Will Shrink Take-Home Pay

Increased CPP And EI Deductions

Starting in January 2023, paycheques will be smaller because deductions will be bigger. That’s because employers now pay up to 6.7% more to the government for the Employment Insurance Program (EI) and Canada Pension Plan (CPP). That means employers will take more off your bi-weekly or monthly cheque.

How much gets taken off? It depends on how much money you earn. The higher the pay, the higher the deduction. Canadians at the higher end of the pay scale will see up to $305 less in take-home pay this year.

“It may not seem like a lot, but $300 can cost one family a trip to the grocery store or pay for their transportation or, utility bills. Payroll tax increases will hit Canadians at a time when most are already seeing their cost of living quickly increase,” said Dan Kelly, President of the Canadian Federation of Independent Business (CFIB).

Why the higher CPP deduction? The government wants to have more funds for retirees. As for EI, the government’s account is $29 billion in debt. Minor adjustments to everybody’s paycheque will help pay down that debt.

The CPP contribution rate for 2023 is 5.95 percent. The rate for the Quebec Pension Plan (QPP) is 6.4 percent.

Self-employed individuals are required to pay both the employee and employer portions of CPP or QPP. As such, this increase is hitting them twice as hard.

Changes to Old Age Security (OAS)

Are you retired and receiving Old Age Security (OAS) cheques? As of July 2022, seniors aged 75+ get an automatic 10% increase in their Old Age Security pension.

Some Canadians will receive less OAS this year. In fact, if your 2022 taxable income was more than $81,761 you will need to repay some of your OAS. Also, anyone between 65 and 74 who makes over $134,626 will not receive OAS. For those 75 and older the maximum is $137,331.

Changes That Could Grow Your Take-Home Pay

It’s not all bad news about your hard-earned money. Canada’s federal and provincial governments have made some positive changes:

Minimum Wage Increases

Every dollar counts when you work in a minimum-wage job. In many parts of Canada, the rate is increasing in 2023.

Provincial Minimum Wage Increases

  • Saskatchewan will increase the minimum wage to $14.00 per hour as of October 1, 2023. The province will bump it up to $15.00 on October 1, 2024.
  • In Manitoba, the minimum wage goes up to $14.15 per hour on April 1, 2023. It will rise again by October 1st, to around $15.
  • In Nova Scotia, the minimum wage will be $14.30 per hour as of April 1, 2023. On October 1st it will go up slightly, to $14.65.
  • The minimum wage in P.E.I. jumped 80 cents on January 1st, 2023 to $14.50 per hour. It will increase again on October 1st to $15 per hour.
  • In Newfoundland and Labrador, the minimum wage will go up to $14.50 per hour on April 1st, 2023, and $15.00 on October 1st.
  • In the Northwest Territories, the minimum wage will be adjusted in September 2023. The rate will be adjusted every year. Each change is based on the Consumer Price Index (CPI) for Yellowknife (and other factors).
  • In Yukon, the minimum wage is $15.70 (as of April 1, 2022). It will increase yearly on April 1 based on the Consumer Price Index (CPI).

Federal Minimum Wage Increases

The federal minimum wage is also expected to increase in 2023. Generally, the rate is adjusted on April 1st of each year to keep up with inflation. The federal minimum wage applies to some federal government workers. It also applies to workers in other federally regulated sectors, such as banks, postal services, and transport industries.

Employment Insurance (EI) For Higher Income Earners

The government has increased its maximum weekly benefit in 2023. In 2022, if you qualified for the maximum benefit, your weekly EI cheque was $638. This year it’s a maximum of $650.

Adjusted Tax Brackets

Canada operates under a marginal tax rate system. The more money we earn, the more tax we pay. As income rises, so does the tax rate.

The average salary in Canada in 2022 was $1,175.37 per week or $61,119.24 per year for full-time employees. If you earn less than average, you have a lower percentage deducted from your paycheque.

Canadians are paying more for goods than last year because inflation is high. To help with those extra costs, the government has adjusted tax brackets.

The new federal tax brackets for 2023 are:

  • Zero to $53,359 (15 percent)
  • $53,360 to $106,717 (20.5 percent)
  • $106,718 to $165,430 (26 percent)
  • $165,431 to $235,675 (29 percent)
  • and anything above that is taxed at 33 percent

If you’re on the edge of a tax bracket, you might be in a lower bracket this year and pay less income tax. There are separate brackets for provincial income taxes. Most provincial income taxes adjust along with inflation.

Improved EI Sickness Benefits

In December 2022, EI sickness benefits increased from 15 weeks to 26 weeks. Eligible applicants can now receive up to 26 weeks of EI sickness benefits.

How To Survive And Thrive in 2023?

Many Canadians will feel the pinch of higher payroll deductions this year. Change is a constant. One great way to cope with change is to have a plan.

There are lots of things you can do! For example, you could negotiate a higher salary, get a side hustle, or sell items you don’t need anymore. This is also a good time to spend less and save more and set up a budget.

If you want to talk to an expert about your financial plan, reach out for help at any time.

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