Small Businesses Struggle with Red Tape

Small Businesses Face Rising Compliance Costs

Small businesses in Canada, including farming operations, are losing significant time and resources to regulatory compliance, according to a new report by the Canadian Federation of Independent Business (CFIB).  

In 2024, small businesses spent an average of 735 hours on compliance, with 256 hours directly attributed to unnecessary red tape.  In some ways, we suspect the amount of hours spent on regulatory compliance may be higher for agri-businesses. 

“Business owners lose an entire month’s worth of productivity to filling out lengthy or redundant forms, navigating mazes of government websites, and deciphering government jargon. That is crucial time that could be better spent on activities like training staff, planning business expansions, serving customers or even spending time with family,” said Marvin Cruz, CFIB director of research.  

“As governments at all levels look for solutions to Canada’s productivity problem, eliminating regulatory barriers and giving small business owners their time back needs to be a top priority.” 

Regulatory compliance also comes with high costs. Small businesses in Canada spent $51.5 billion on compliance in 2024, up 13.5% from 2020. Red tape alone accounted for $17.9 billion of this total, driven by higher wages, professional fees, and increased compliance hours. 

The impact on small businesses is disproportionately high compared to larger firms. Companies with fewer than five employees spent $10,208 per employee on compliance, while those with over 100 employees spent just $1,374.  

Smaller businesses also spent an average of 198 hours per employee on compliance compared to eight hours for larger companies. 

CFIB proposes actionable steps to reduce this burden, including using clear language in regulations, measuring the regulatory impact, and prioritizing red tape reduction as a political goal.  

Removing unnecessary regulations could free up over 200 million hours annually, allowing businesses to expand, hire more staff, and contribute to Canada’s economic growth. 

CFIB highlights that tackling red tape is key to improving productivity and competitiveness, offering small businesses a better chance to thrive. 

Photo credit: Pexels – Marcus Winkler