As of 2017, the minimum wage in Ontario is $11.40 per hour, but by January 2019, it’s set to reach $15 an hour. If you currently work for minimum wage or if some of your clients work for minimum wage, you may be wondering how this shift will affect workers.
The first and most obvious effect of the change is that minimum-wage workers will enjoy higher wages. Some employers in the province are boosting their workers’ wages before the new law takes effect. Employees who currently earn $11.40 per hour will receive $3.60 more per hour, an increase of approximately 32%. The law takes effect incrementally, so minimum-wage workers can expect a raise to $14 in January 2018 and the remaining dollar per hour the following year.
In many businesses, workers who earn more than minimum wage may also see wage increases. For example, if a business currently pays its least experienced employees $11.40 and its intermediate workers $15 per hour, the business may decide to boost wages across the board.
The act that increases minimum wage also extends 10 personal leave days to employees each year, and two of those days are paid. On top of that, employers can no longer pay different rates to part-time and full-time workers who do the same job. The act also includes stronger provisions to prevent employers from misclassifying employees as independent contractors.
Those additional safeguards help ensure that a worker who’s actually an employee can’t be treated like a freelancer or an independent contractor. If you represent independent contractors, help to make sure they’re classified correctly. Misclassification requires employers to pay extra payroll taxes and lose protections granted to employees.
Effect on Tax Benefit
Help your clients figure out how their wage increases may affect their tax benefits. In particular, the Canada Child Benefit, the GST/HST credit, and the working income tax benefit are all based on income. As people earn more, they receive reduced benefits until the benefits are completely phased out. If your clients are used to receiving monthly or quarterly benefits through these credits, use the Canada Revenue Agency’s online benefits calculators to help your clients know what to expect so they can budget accordingly.
Potential Job Losses
According to some analysts, such as the Financial Accountability Office in Ontario, the minimum wage increase may result in some people losing their jobs. The Financial Accountability Office estimates that the province will lose over 50,000 jobs in the face of higher wages. To put that number into perspective, as of January 2017, approximately 7.1 million people are employed in Ontario. Most of the job losses are expected to be among teens, young adults, and immigrant workers.
If you do tax prep or accounting for people who earn minimum wage, be prepared to answer questions about Ontario’s minimum wage increases or about minimum wage in general. Help your clients understand how these changes will affect them so you can offer them timely, useful advice.