Toronto, ON, February 23rd, 2016: The Ontario Chamber of Commerce (OCC) is calling on the Government of Ontario to support businesses’ transition to the Ontario Retirement Pension Plan (ORPP) through a series of offset measures.
“Our objective is to ensure that the ORPP does not weaken Ontario’s economic recovery,” said Allan O’Dette, President & CEO of the Ontario Chamber of Commerce. “The government projects that the ORPP will provide economic benefits to Ontario over the long-term. In the short-term, however, the plan will place new costs on employers at a time when their costs are already rising as a result of increasing electricity rates and weakened purchasing power.”

The government is timing the implementation of the ORPP to coincide with reductions in Employment Insurance (EI) and Workplace Safety and Insurance Board (WSIB) premiums, with the intention of partially offsetting the costs of new pension contributions. While the OCC supports the government’s intent, the organization’s analysis reveals that the costs of new pension contributions will still be significant.

According to the OCC’s analysis, the average employer will face significant cost increases in 2022, the year when both EI and the first wave of WSIB reductions are in full effect. For an average employee making $30,000 a year, the employer would incur $306 in new costs; a $50,000 employee would see the employer faced with a $554 cost increase; and a $90,000 employee would see the employer faced with a $1,331 cost increase (see Table 1).

The OCC’s analysis also demonstrates the impact that the ORPP will have on three different representative firms: a representative small, medium, and large business would see 31 percent of its new costs covered by EI and WSIB reductions (see Tables 2, 3, and 4). For employers that are not currently subject to WSIB premiums, these measures will offset even less of the cost of ORPP contributions.

As such, the OCC is calling on government to introduce offsets that would mitigate the impact of the ORPP through a number of targeted measures, including:

• targeted tax relief
• electricity rate reductions
• greater local economic development funding
• transition supports for small businesses (similar to those implemented in conjunction with the Harmonized Sales Tax) and modernized private sector pension solvency funding rules for employers that offer Defined Benefit plans

In making its call for offsets, the OCC points to past initiatives from this government to mitigate the impacts of major policy changes, including the successful implementation of the Comprehensive Tax Package which helped Ontarians transition to the Harmonized Sales Tax.

“I appreciate the efforts that government has made over the past months to respond to the concerns of the employer community, including the recent delay in ORPP contributions and the expansion of comparability rules,” added O’Dette. “I look forward to continuing to outline employers’ concerns as the government moves forward with the implementation of the ORPP.”

Table 1: New employer costs, per employee ($30,000, $50,000, $90,000)
	2016 total cost to employer (average WSIB and EI rate)	2022 total cost to employer (average WSIB, EI* rate, and ORPP)	Net new cost to employer in 2022
Employee making $30,000	$1,527	$1,833	$306
Employee making $50,000	$2,545	$3,099	$554
Employee making $90,000	$ 3,501	$4,832	$1,331

 

Table 2: New costs, in 2022, for an employer with 10 employees (2 of whom make $30,000 a year, 6 of whom make $50,000 a year, and 2 of whom make $90,000 a year)**
	2016 (employer rate – %)	2022 (employer rate – %)	Difference
ORPP Contributions	$0 (0)	$9,595 (1.9)	$9,595
EI contributions	$12,140 (2.63)	$10,959 (2.31)	– $1,181
WSIB contributions***	$13,186 (2.46)	$11,363 (2.12**)	– $1,822
Total costs	$25,326	$31,917	$6,592

 

Table 3: New costs in 2022, for an employer with 50 employees (10 of whom make $30,000 a year, 30 of whom make $50,000 a year, and 10 of whom make $90,000 a year)**
	2016 (employer rate – %)	2022 (employer rate – %)	Difference
ORPP Contributions	$0 (0)	$47,975 (1.9)	$47,975
EI contributions	$60,700 (2.63)	$54,795 (2.31)	– $5,905
WSIB contributions****	$65,928 (2.46)	$56,816 (2.12***)	– $9,112
Total costs	$126,628	$159,586	$32,958

 

Table 4: New costs, in 2022, for an employer with 500 employees (100 of whom make $30,000 a year, 300 of whom make $50,000 a year, and 100 of whom make $90,000 a year)**
	2016 (employer rate – %)	2022 (employer rate – %)	Difference
ORPP Contributions	$0 (0)	$479,750 (1.9)	$479,750
EI contributions	$607,004 (2.63)	$547,953 (2.31)	– $59,051
WSIB contributions****	$659,280 (2.46)	$568,160 (2.12**)	– $91,120
Total costs	$1,266,284	$1,595,863	$329,579

*Assumes a two percent yearly increase in EI maximum insurable earnings
**Based on A Cost-Benefit Analysis of the Ontario Retirement Pension Plan, available athttp://www.fin.gov.on.ca/en/pension/orpp/orpp-cb-analysis.pdf
***Average premium rate based on WSIB Ontario 2105 Economic Statement, available athttp://www.wsib.on.ca/
****Calculations assume an unchanging $88,000 WSIB insurable earnings threshold

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