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Report On Business Medium-sized firms feel short-changed by Ottawa’s EI reductions

Ottawa’s exclusion of medium-sized firms is ‘appalling,’ says Peng Sang Cau, chief executive officer of Transformix Engineering, a Kingston, Ont., company that makes automation equipment.

lars hagberg The Globe and Mail

Very small companies – who will benefit from the EI premium reduction – are thrilled with the EI changes Ottawa announced Thursday, but companies too big to get any gains expressed misgivings.

"It will definitely help," said Lori Pawson, owner of the Isis Salon & Day Spa in Regina. Lower EI premiums of even a few hundred dollars might be enough to prompt her to hire a new employee, she said. The spa, which has six employees, would like to hire a dedicated receptionist rather than having a stylist answer the phones, as is now the case. "If [EI premiums] were lower, then we would have that extra income so that we could hire that extra person," she said.

But some firms that don't make the cut, because they pay more than $15,000 a year in employee premiums, are not so happy. According to Finance Department figures, companies that have more than about 14 employees with an average wage of around $40,000 a year would not qualify. Canadian Labour Congress senior economist Angella MacEwen calculated that a firm employing more than 28 full-time workers at minimum wage would not qualify.

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"It's appalling," said Peng Sang Cau, chief executive officer of Transformix Engineering, a Kingston, Ont., company that makes automation equipment. She has 51 employees and pays far more than $15,000 a year in EI premiums for her employees.

Transformix, like many other small and medium-sized businesses in Ontario, faces the prospect of paying an entirely new set of premiums for the proposed Ontario Retirement Pension Plan. The province has told employers that any increase in payments would likely be offset by a reduction in EI premiums, but it is clear that is not the case – at least in the short term – for any except the smallest firms, Ms. Cau said.

Small and medium-sized companies are often cited as the "job engine" for the Canadian economy, she said, but medium-sized firms often get lost in the shuffle when it comes to government support.

The federal government has promised that overall EI premiums will fall in 2017.

Some firms say that even if they got an EI rate reduction, it wouldn't prompt them to make any new hires.

Darren McDonald, president of Nova Doors and Windows in Dartmouth, Nova Scotia, said his company is too big, with more than 30 employees, to qualify for the new EI rebate. But this kind of incentive wouldn't likely change any hiring decisions anyway.

"We don't really consider EI at all when we are hiring somebody," Mr. McDonald said. It is the total amount of government red tape and expenses – including EI, Canada Pension contributions and Workers Compensation – that makes it challenging to do business and to expand employment, he said. "It is the cumulative amount that is an issue."

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Even the owner of the company where the EI announcement was made in Toronto on Thursday said the value of changes are modest.

The EI rebate won't alter the hiring plans at Value Wood Floors Ltd., said Nicholas Zaremba. He employs 12 people currently and already had plans to boost that to 14 by year's end.

It's demand, rather than tax credits, that most influences his business decisions. "Any time you cut an employers' tax, it is a benefit. Will it encourage me to hire more employees at this moment? I don't think it's the nail in the coffin that really inspires me to do it. But it's definitely a help."

It is the state of the economy that really makes the difference, he said.

His business, which supplies and distributes wood flooring products, has hired three full-time workers in the past month as a result of growing demand, particularly in Alberta and British Columbia. "Our business is expanding, it's growing and we need some fresh people, some people to really help, especially with growth in the West Coast," Mr. Zaremba said. "These announcements are great but in reality you need to look at where the market is, in terms of housing starts … we look at those figures more than something like this. Am I going to invest in inventory and product if I don't see the housing push? No."

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