As we entered into summer when many slow down and take some time off we have found that here at Cloud Bookkeeping Services we are busy with a mission.
Our mission is to educate Small Businesses and their employees on the upcoming changes to the Minimum Wage.
****Disclaimer, please note that this blog is not intended to imply that I do not want to see the Minimum Wage increase. I am simply concerned that this is too much too fast and other actions need to happen as well to make sure this truly benefits everyone. Simply raising the wage is not enough.
We have heard that employers are concerned about this because it is such a drastic change. They are concerned about whether or not they can keep the business doors open, and we know first-hand of some who say they won’t. They are concerned about how to compensate their current skilled employees to keep them at a reasonable pay-scale above those who have less experience but now have had their pay-scale dramatically increased. We all know that if we have skilled employees we want to keep them so it is important that they also see an increase with this Minimum wage hike. Employers are concerned about how this will affect training costs as we are now starting employees at a much higher level than before and cannot offer a gradual increase based on experience as we might have in past.
Now our goal is not to keep the employees at a low pay-scale. In fact most of our businesses already pay above Minimum Wage. It is important that the employees also understand how this will affect them.
Increasing the Minimum Wage will increase an employees’ level of income. This will result in some or all of the following.
It will result in them paying more income tax to the Government
It will result in their Ontario Trillium Benefit, GST rebate and Canadian Child Benefit being reduced.
It will change their level when applying for Childcare subsidy.
On top of that they will be affected by the increasing rate of inflation. Normal rate of inflation is somewhere under 2%. Already we are seeing prices increase in anticipation of the upcoming Minimum Wage increase. Tim Hortons has just made a 3% increase in its’ prices. Our local A&W has increased its’ breakfast by a whopping 34%. Another local chain has increased its’ meals by about 17 – 20% and have taken out the salads that were once included as well they have reduced some package sizes.
All of the above and below does not even begin to take into account if someone has their hours cut or even loses their job due to this change. We know of a local chain that is going to be cutting out jobs and replacing full service tills with self-serve where they can have one employee manage 8 tills at a time. Effectively cutting out 7 jobs.
We ran some basic scenarios to see how the Minimum Wage increase will affect some common households. Here is what we found.
Single Mom with Two Kids, one in Daycare, working 40 hours a week.
Starts at $11.40 hourly and moves to $15.00 an hour
Annually she earned $35,336.36 which increases to $40,397.72
However she now pays more in childcare as her subsidy level has changed.
She now pays more in Taxes as she is earning more
She now pays more in general as this has caused the rate of inflation to accelerate and everything costs her more.
At the end of the year her actual Annual Household Benefit from this increase is actually only $619.38
The Government however has collected another $2331.66 from her in Taxes over the year.
Two Parent Household with two kids, one in Daycare, both working 40 hours a week.
Parent #1 starts at $11.40 hourly and moves to $15.00 an hour
Parent #2 starts at $15.00 hourly and moves to $18.00 an hour
Annually they earned $54,327.58 which increases to $59,192.69
However they now pay more in childcare as their subsidy level has changed.
They now pay more in Taxes as they are earning more
They now pay more in general as this has caused the rate of inflation to accelerate and everything costs them more.
At the end of the year their actual Annual Household Benefit from this increase is actually only $423.13
The Government however has collected another $8085.11 from them in Taxes over the year.
If you want to learn more join us on August 14th for an evening seminar to learn more about the increase and how you can make a difference.