A series of new surveys paints a bleak picture of clients’ payroll prospects in 2021 as upcoming hikes to Canadian Pension Plan (CPP) premiums, coupled with employer plans to reduce salary increases are both expected to put a notable amount of pressure on Canadian’s take home pay.

CPP premiums to rise by up to 9.3 per cent in 2021

The Canadian Federation of Independent Business (CFIB) says every working Canadian will see a drop in their take-home income unless their employer is able to give them a larger raise on January 1. “CPP premium rates for all workers are to rise by 3.8 per cent in 2021. The amount of income subject to premiums is also rising by 5.3 per cent,” they write. “This means for workers earning $60,000 or more, both the employer and employee will see more than a nine per cent increase in their CPP premiums.”

Raises going forward, meanwhile, are unlikely to offset the decline, as nearly half of Canadian employers surveyed by Gallagher said they plan to modify salary increases in the coming year.

Nearly half expect to reduce raises

According to Gallagher’s 2020-2021 Salary Planning Survey, Canada Edition, 62 per cent of employers implemented pay raises before the pandemic. Now, they say nearly half have modified their salary increase plans in 2021 due to COVID-19. Of those surveyed, 45 per cent say they expect to reduce raises, 35 per cent plan to suspend raises and freeze salaries, while six per cent plan to reduce salaries in the coming year.

The firm’s 2020 Benefits Strategy & Benchmarking Survey, Canadian Edition, meanwhile found that in addition to a reduction in salary increases, the economic impact of COVID-19 is forcing employers to shift their employee benefit priorities towards reducing expenses. The study found that the top benefits-related challenge this year for organizations is controlling costs.

“Employers are beginning to rebalance traditionally generous cost-sharing across multiple plan design components. While a majority of employers still pay 100 per cent of plans, downward trends abound with fewer employers offering full coverage,” they write. The number of companies providing full coverage of extended healthcare co-insurance fell three per cent, those paying full extended healthcare premiums were down six per cent, paramedical co-insurance was down six per cent and those saying they provide full coverage of drug plan premiums declined nine per cent.

Canadians having difficulty saving

The practical implications of these declines is already being felt by clients. Another survey conducted by Registered Education Savings Plan (RESP) provider, Knowledge First Financial, found that nearly half say COVID-19 has had a negative impact on their ability to save.

“Overwhelmingly, Canadian parents say that saving for their child’s post-secondary education is important, yet more than four in 10 report that COVID-19 has had a negative impact on their ability to save for their child’s post-secondary education. One in four, they add, are considering a change in plans for their children’s post-secondary education because of the pandemic.

Significant problems for those earning under $40K

Those most at risk of falling behind, finally, are those already earning under $40,000 each year. A report from national charity, Prosper Canada, found that almost all financial measures have worsened since the onset of the pandemic for those in lower income positions: In addition to deteriorating debt positions and a growing reliance on credit, 46 per cent said their employment earnings had worsened, and 43 per cent indicated that their personal savings situation had worsened since the start of the pandemic. For those earning more than $40,000, 27 per cent and 30 per cent said their employment earnings and personal savings situations have declined in 2020.