2014-04-06 00:00:00TaxesEnglishhttps://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/03/Small-business-owner-at-home-office-desk-on-laptop-reviewing-tax-breaks.jpghttps://quickbooks.intuit.com/ca/resources/taxes/the-little-known-hiring-tax-break/The Little Known Hiring Tax Break

The Little Known Hiring Tax Break

4 min read


When a startup gets ready to hire for the first time, new costs tend to crop up pretty quickly. First there’s the cost of recruiting and interviewing, then there’s the fees for processing government paperwork, not to mention purchasing any equipment the new recruits will need to do their job. The list of expenses goes on.

What’s not as obvious during the hiring process, are the opportunities to save money along the way.

According to a survey Intuit Canada conducted earlier this year, a majority of entrepreneurs are in the dark about a prime tax break opportunity. Called the Hiring Credit for Small Business (HCSB), it’s a way for small businesses to save up to $1,000 on their employment insurance (EI) premiums.

The federal government created the HCSB in 2011 as a temporary tax credit to lighten the employer’s share of EI premiums. The credit was extended in 2012 and this June, as part of its 2013 Economic Action Plan, the government announced it was extending and expanding the credit for another year.

“Our Government recognizes that the success of our country’s small business community is critical to creating jobs and driving economic growth,” said the Honourable Gail Shea, Minister of National Revenue. “Our low-tax approach allows small business owners to focus more on expanding to create new jobs, and less on their tax bill.”

Great news for small businesses…..if they know about it. Of the 505 small business owners Intuit Canada polled, only 39% of them were aware the HCSB existed.

To help more business owners take advantage of this credit, here’s a quick overview of what’s being offered.

Why bother?

Employment Insurance premiums are not cheap for any business. The HCSB is an incentive for businesses to save money while helping to improve the Canadian economy and lower the unemployment rate at the same time.

An estimated 560,000 small businesses will benefit from the HCSB, allowing those employers to reinvest approximately $225 million in 2013. The credit also helps ease some of the costs of hiring new staff, making it easier for more small businesses to build out their teams.

“I’ve been working hard to expand my business to the four locations we have today, and the Hiring Credit for Small Business has made it easier for me to bring on the new staff that we need,” said Peter Nahas, owner of Mezza Lebanese Kitchen in Dartmouth, NS. “It’s great to see the government supporting small businesses like mine.”

How does it work?

The HCSB is for employers and businesses that pay the employee’s share of EI premiums to a payroll (RP) account. Under the program, the Canada Revenue Agency will credit up to $1,000 on a payroll account if an employer’s EI premiums increased from the previous year. The amount of the credit is determined by the difference between the EI premiums paid in 2012 and 2013.

For example, if your portion of EI premiums paid in 2012 was $2,300 and in 2013, you hired new employees and paid employer EI premiums of $3,000, you would be eligible for a credit of $700.

Who is eligible?

To qualify for the credit, you need to meet all of the following criteria:

  • You deducted EI premiums from your employees and remitted the premiums to your payroll (RP) account
  • Your total employer EI premiums paid in 2012 were $15,000 or less
  • Your total employer EI premiums increased in 2013
  • You reported the income and deductions on a T4 slip and filed this on your RP account for 2012 and 2013

Even businesses that just launched in 2013 can benefit from the credit. If you meet all of the conditions listed above, the CRA will use a zero value for your 2012 employer’s share of EI premiums when it calculates the amount of the credit that you are eligible to receive for 2013.

How to apply?

One of the best parts about the HCSB is that there are no applications to fill out. Simply complete your T4 slips and submit them on time, and the CRA will automatically calculate the credit for you and apply it to your payroll account.

This is where using a payroll software tool like Quickbooks is helpful. Having a software tool to help you run the numbers and calculate things like earnings, taxes and deductions not only keeps you in tune with your business costs but also keeps you on top of any cost-savings opportunities.

More information

For more information on the HCSB and the ways your small business can take advantage of this tax break,visit the CRA website. To learn more about Intuit Canada’s survey and what was uncovered as the top trends and challenges related to hiring, download the free e-book.

Have tips on other ways businesses can reduce costs when hiring? Know of any other tax break programs small businesses should tap into? Share your thoughts in the comments section below!

This article is part of a joint campaign between Startup Canada and Intuit Canada to support small business owners and entrepreneurs across Canada in accessing the knowledge and tools they need to hire new talent and grow their companies. Stay tuned to PIVOT for more conversations with key players and experts in hiring and small business human resources. Also, check out Intuit’s new Google+ Page for links to essential hiring and payroll resources and tools.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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