Suppose you are the general manager of a company with approximately 100 employees and the government has just announced its new rates for contributions to the Canada Pension Plan and Employment Insurance. With respect to employee contributions, assume that the CPP rate is increasing from 4.95% to 5.20% and the EI rate is increasing from 1.88% to 1.98%. Assume that the company’s required contributions for CPP and EI remain the same.
Assuming that gross wages amount to $6 million per year, calculate the financial impact that these changes will have on
(a) The employees’ net pay
(b) The company’s payroll costs.