Today’s Fall Economic Statement (FES) from the Ontario Government contains several measures of interest to Small and Medium Enterprises (SMEs).

The first is the announcement of a reduction in the small business tax rate from 4.5% to 3.5%, effective January 1, 2018.

Taken together with recently announced reductions in the federal small business tax rate (from 11 per cent today to 10 per cent in 2018, with a further reduction to 9 per cent in 2019), the combined small business tax rate in Ontario will be reduced from 15% in 2017 to 13.5% in 2018 and to 12.5% by 2019.

In addition, the Ontario Government has announced hiring and retention incentives for SMEs making new hires of employees under age 30, effective January 1, 2018. For these purposes, SMEs include independents, franchises, or dealers with fewer than 100 employees (see note below re Design Issues).

The incentive will pay the employer $1000 on hiring and a further $1000 at the employee’s six-month mark for a total of $2000. This measure is a modest response to concerns expressed by Retail Council of Canada in its campaign. The value of this program is estimated at $104 million but we anticipate that the government will continue to support the program even if demand exceeds that estimate.

While we believe and will continue to advocate that the incentive should apply more broadly than to new hires and SMEs, RCC notes that a $2000 incentive covers 40% of the first-year impact of the minimum wage increase on the cost of hiring a young full-time employee (and a greater percentage of the incremental cost of new part-time employees).

New Youth Hire Calculation

In order to be eligible for this incentive, employers will be required to make these hires through Employment Ontario, which is a service open to any interested job-seeker and employer.

Design Issues

  • RCC presumes that the measure will be limited to SME employers with fewer than 100 FTEs (full-time employees or equivalent in part-time hours) but that issue was unsettled at the time of today’s release.
  • As stated, today’s $2000 incentive measure applies to new hires whether they are full-time or part-time employees. RCC expects that the government may decide to put measures in place to stipulate a minimum number of hours for an employee’s eligibility for the program.
  • Summer students will be eligible for the first $1000 incentive but not for the retention bonus (unless they stay on as employees for six months).

RCC will work with the Ontario Government to ensure that these measures are implemented in a manner that works with the operational and staffing needs of retail merchants. RCC will provide further advice to members on how to access the program as the details are finalized.

If you have any questions or concerns, please don’t hesitate to contact: Karl Littler, Vice President, Public Affairs at: [email protected] or 416-467-3783