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Prime Minister-designate Justin Trudeau’s Liberal government is committed to new spending, primarily on infrastructure, designed to stimulate the economy in both the shorter and longer term.Adrian Wyld/The Canadian Press

The incoming Liberal government's promise to expand the Canada Pension Plan has small businesses worried about added costs of running their companies in an already sluggish economy.

Liberal Leader Justin Trudeau campaigned on a platform to "enhance" the CPP through consultation with the provinces as well as business and retirement organizations. While the Liberal Party has been vague on the details of its plan, the presumption is that it will include higher employee and employer contributions.

Small businesses are the likely main target, given that many do not have employee pension programs in place. In Ontario, it will mean that the recently introduced mandatory Ontario Retirement Pension Plan will probably be dropped in favour of an expanded federal plan.

"From what we know of the Liberal platform, that is the area where we are going to have to be watching the closest and is the biggest concern of our membership," says Corinne Pohlmann, senior vice-president of national affairs at the Canadian Federation of Independent Business, which represents about 109,000 small businesses across Canada.

Ms. Pohlmann says the CPP is a "fairly significant" cost for small businesses, which must factor it in when making hiring decisions. (The contribution is 9.9 per cent on earnings, split equally between the employee and the employer.)

"It's also profit-insensitive: You have to pay no matter what," she says.

A recent Ipsos Reid poll commissioned by the CFIB shows that less than 20 per cent of Canadians support putting more money into the CPP, favouring optional savings vehicles instead such as the tax-free savings account and the registered retirement savings plan.

The CFIB is opposed to higher CPP contributions, arguing that now is not the best time to burden small business with more costs, given Canada's sluggish economic growth. Small businesses make up about 98 per cent of business in the country, according to Industry Canada.

Higher employer contributions could have an impact on growth at Calgary-based Vintri Technologies, which has 25 full-time employees who help provide energy companies with pipeline data. "There's not a lot of slack right now for us to increase our costs of doing business, certainly not at $50 oil," president Phil Roberts says.

While a CPP increase alone probably will not be material to the company's operations, it could stunt growth when combined with higher corporate taxes and a hike in minimum wage recently introduced in Alberta.

"We'll have to see how the discussions with the provinces go and how they decide to enhance the CPP, but the way the economy is going, now isn't the time to increase the cost for companies to have employees on payroll," Mr. Roberts says.

He is expecting his company to grow next year, despite the current downturn in the oil sands, and will need to hire more people once the industry recovers. However, he says that "increasing our costs of hiring or retaining talent would impact our ability to compete."

Kimberley DeLeeuw, co-owner of Cornerstone Transport Ltd., a trucking company based in Carrot Creek, Alta., says higher CPP expenses could reduce the amount of money the company gives employees through bonuses and donates to charities in the community.

"If our costs keep going up, we can't take the profit we have and dish it out as far as we have been able to," Ms. DeLeeuw says.

Not all business owners are against expanding the Canada Pension Plan.

Misti Mussatto, co-founder of Toy Jungle, says higher CPP costs are not ideal, but she is not opposed if it means a better retirement for the eight employees who work at the company's two stores in Vancouver.

"If paying a bit more into CPP to ensure that seniors over all are taken care of, it would be probably something that our company would value," Ms. Mussatto says. "As small businesses, we can't come out and say no to everything that raises costs … It comes down to what we support. I probably pay more in government red tape over a year than I would to CPP."

Keith MacIntyre, national tax leader at business advisory firm Grant Thornton, believes that an expanded CPP is "prudent" for the long term, even though it may be difficult for small businesses in the short term, given that labour is one of their biggest costs.

If CPP costs rise, Mr. MacIntyre says, many employers may choose to build in the increase through smaller raises and bonuses for employees.

What he likes about an enhanced CPP proposal is that it is earned, as opposed to a government handout during retirement. "Philosophically, I don't have any issue with it," he says. "I hope that what [the Liberal government] will do in terms of small businesses is phase it in so they can adapt their compensation plans and put things in place."