On March 27, 2018, the government of Quebec tabled its economic plan for 2018‑2019.
The budget contains several investments of interest to Quebec businesses, from tax measures intended to improve competitiveness to initiatives aimed at ensuring Quebec is attracting and retaining top talent, and ensuring that Quebec’s workforce has the skills needed to succeed in an increasingly global economy.
The March 2018 budget sets aside over $800 million over a five-year period to fund its National Workforce Strategy. The Strategy – announced in this budget, with further details to be revealed in the coming weeks – is intended to better understand the current and future workforce needs in all regions of Quebec.
Key initiatives include:
Preparing for the Workforce of the Future will be one of the key challenges facing employers, governments, and individuals. Globalization, rapid technological advances (such as artificial intelligence advanced manufacturing and digitalization) and changing work relationships will require people to develop new skills and capabilities to succeed. The investments made in this budget represent an important step towards ensuring that Quebec’s workforce will be able to adapt to these changing needs and help Quebec employers to succeed in the global economy.
While these investments are an important piece of the puzzle, employers also have important roles to play. Employers will need to understand the new skills and capabilities that will be most important for their specific industry and identify which programs and approaches will be most successful in helping their employees to gain these new skills. The measures announced in the budget should help employers by offsetting the cost of retraining and skill-building programs, as well as increasing the supply of new graduates with the skills required to meet the future needs of Quebec’s employers.
As part of an effort to reduce taxes on small and medium businesses (SMBs), the Quebec government is reducing HSF contributions for SMBs in all sectors. In addition to gradually increasing the total payroll threshold to determine whether an employer is eligible to a rate below the regular rate of 4.26 per cent from $5 million to $7 million over a four-year period as of 2019, allowing more businesses to take advantage of this rate reduction, the government is making the following changes:
Businesses with payroll less than $1 million will see their rates be reduced as follows over a five year period:
SMBs whose total payroll is over $1 million without exceeding the total payroll threshold will also see a gradual reduction in their contribution rate.
These tax changes come on the heels of the enhancement of the Quebec Pension Plan (QPP). As we wrote in November, while the expansion of the QPP was welcome news for employees, we felt there was a missed opportunity to address the gap in payroll taxation between Quebec and the rest of Canada.
These measures will now help Quebec SMBs absorb some of the upcoming costs associated with QPP expansion, and decrease the gap in payroll tax between Quebec and the rest of Canada. These changes are likely to be welcomed by employers.
In February, the Federal Government announced the end of Health and Welfare Trusts (HWTs), with the regime being discontinued by the end of 2020 and existing HWTs converted to Employee Life and Health Trusts.
This Quebec budget contained no information on how the government of Quebec plans to harmonize its own rules with the new rules announced by the federal government. Once Ottawa completes its consultations and releases its transitional rules, Quebec will likely have to act as well.
Mercer is reviewing the likely impact of the discontinuation of the HWT regime and will continue to monitor developments closely, including the position of the government of Quebec. Any change with an impact to HWTs will require swift action.
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