New Hiring Credit for Small Businesses

The 2011 Federal Budget introduced a program called the Hiring Credit for Small Businesses (HCSB) to assist small businesses by providing a credit to lighten the Employment Insurance (EI) premiums payable.

The program’s aim is to encourage hiring or to help businesses to retain staff. This program is designed to include a credit to small businesses that increase their payrolls over those paid in 2010.

This is a one-time credit of up to $1,000 available to employers whose premiums were at or below $10,000 in 2010.

The credit is calculated as the difference between the EI premiums paid for 2010 (under $10,000) and the EI premiums paid in 2011. There is no election required or special form to complete as the Canada Revenue Agency (CRA) will automatically calculate the credit when an eligible employer’s 2011 T4 information return is filed. The 2011 T4 information return(s) must be filed before January 1, 2015. No HCSB will be allowed based on a T4 information return filed after that date. The 2011 T4 information return otherwise has a filing deadline of February 29, 2012.

Once CRA has calculated your credit, they will apply it to any outstanding balance on your payroll account(s) and then transfer the remaining credit to the current year.

You are eligible for this credit if you meet all of the following conditions: 

• you deducted EI premiums from the remuneration you paid to your employees, (or paid the worker’s share of EI premiums for barbers, hairdressers, fishers, or drivers of taxis and other passenger-carrying vehicles) and you remitted these premiums (along with your share of EI premiums) to your payroll (RP) account; 
• you reported the income and deductions on a T4 slip and have filed this information on your RP account for 2010 and 2011; 
• the total of employer EI premiums you paid for 2010 was $10,000 or less; and 
• your total employer EI premiums increased in 2011.

Individuals who have chosen to pay EI premiums on their self-employed earnings are not eligible for the HCSB.

If you sold or closed your business in 2010, you will not be eligible to receive the HCSB.

If you started your business in 2011 and received a new business number, you will receive the HCSB.  CRA will use a zero value for your 2010 employer’s share of EI premiums when they calculate the credit.

Employers are not permitted to short remit their 2011 payroll remittances by the amount of the HCSB they think they will receive.

If you receive a HCSB payment, you have to claim that amount as income or reduce your EI expense when you file your business return, even is some or all of this credit paid off a debt.

The credit is available for both new hires and increases in wages for existing employees as the credit is merely determined by the change in the overall level of EI premiums from 2010 to 2011.

There does not appear to be any restriction to only commercial concerns. Providing they meet the eligibility conditions, not for profit organizations and registered charities can take advantage of the credit.