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Hiring and employment are getting more expensive, forcing Canadian employers to make tough salary and hiring decisions with significant implications for workers.
It’s not just inflation and minimum wage increases adding to payroll costs, though compensation levels did jump 5.8 per cent last year, marking the biggest 12-month increase since March, 2021. There are also several new or higher bills that employers are paying related to staffing – and many don’t directly translate to higher salaries for workers.
For example, recent changes to government programs require employers to contribute more toward the Canada Pension Plan (CPP) and Employment Insurance (EI) per employee.
Research shows health plan premiums are expected to rise by 7.4 per cent this year, and some provinces have increased paid sick days and statutory holiday requirements for all workers in recent years, all during a period of economic uncertainty.
Though no individual line item is likely to break the bank for most companies, the rollout of multiple new or higher costs over a relatively short period is adding up for employers, especially small business owners.
In a 2023 survey by the Canadian Federation of Independent Businesses (CFIB), 71 per cent of small business owners said payroll taxes were stunting their growth. Over all, 64 per cent of small businesses ranked “taxes” as a top issue of concern, while 56 per cent said they were also concerned with “labour policies,” such as an increase in sick days, EI requirements and Worker’s Compensation Program (WCP) costs. In that same survey, 59 per cent of employers said if taxes were lower, they would use the extra cash to increase employee compensation.
“The cost for employers will be rising faster or greater than the benefits to employees because of the payroll taxes,” says Christina Santini, the CFIB’s director of national affairs.
For example, for each additional dollar offered in salary to a worker earning $50,000 in 2023, the study found that employers in Quebec also had to pay an average of 13 cents in payroll contributions; B.C. employers owed 11 cents extra and businesses in Nova Scotia and Ontario had to pay an additional 10 cents.
Ms. Santini says those extra costs are making it harder for employers to offer pay increases or hire more staff.
“For our members, costs have gone up all across their lines of business and demand [from customers] has gone down, but [employee] wage expectations are still high,” she says. “The reality is that future wage [growth] plans (how much they can afford in total payroll costs) among employers have gone down, because the cost [of employment] is going up.”
Recruiting costs are also going up. According to Vancouver-based recruiter Brent Pollington, that’s because recruiting fees are often tied to salary and, as inflation drives wages higher, the cost of filling open positions also increases. As a result, Canadian employers are being more selective and vetting candidates more carefully, according to Mr. Pollington.
“We’re seeing frustration in the market from job seekers because businesses have built far more complex and robust processes when they’re interviewing with multi-step, multi-layer assessments,” says Mr. Pollington, who owns Express Employment Professionals and Specialized Recruiting Group. “They’re asking you to jump through hoops because they have to be protective of their bottom line and they really have to make sure they’re getting the right person.”
He says these constraints are likely to pose challenges for untested candidates who have more limited experience to draw from, such as recent graduates, newcomers and those who have recently switched industries.
He advises job seekers to invest in their own training and skills development and look for ways to gain relevant experience to lower the risk factor for employers to increase their chances of getting hired or promoted.
“It’s about learning and adapting and understanding that my job in an interview is to showcase value to an employer, not try to convince them that I’m a good person they should give a chance to,” Mr. Pollington says. “We’re not in a ‘give-them-a-try’ market, and employers can’t afford to just hope that it works out.”