General information about the Employment Insurance premium reduction
Why does Service Canada offer the Employment Insurance premium reduction?
In addition to regular Employment Insurance (EI) benefits, the Government of Canada's EI program provides special benefits to employees who are not working because of:
- illness, injury, or quarantine;
- pregnancy or the need to care for a newborn or newly adopted child; or
- the need to provide care or support to a critically ill family member or to a critically ill child.
When you offer similar income-protection coverage to your employees through a short-term disability plan, they may not have to collect EI benefits, or they may collect them for a shorter time. In this way, your short-term disability plan can reduce the demands made on the EI program. For this reason, Service Canada offers the EI Premium Reduction Program to return the savings to both you and your employees.
EI premiums are paid by employers and employees at a ratio of 7/12 and 5/12 respectively of the total EI premium payable. The EI Premium Reduction Program offers savings to both the employer and the employees using these same ratios. For administrative reasons, we only reduce the employer's EI premium rate; this reduction includes both portions of the savings. For this reason, it is the employer's responsibility to ensure that all employees for whom the reduction applies receive their portion of the savings (5/12 of the savings).
What types of short-term disability plans can be considered as qualifying plans?
There are two types of short-term disability plans that could be considered as qualifying plans for an EI premium reduction:
Weekly indemnity plans
These short-term disability plans pay weekly disability benefits to employees when they are ill or injured. The disability coverage can be set up through a self-insured plan (by either the employer or a group representing the employees) or it can be set up through a third-party plan (underwritten by an insurance carrier or a plan administrator). The employer, the employees, or both the employer and the employees can pay the cost of the plan.
Cumulative paid sick leave plans
With these self-insured short-term disability plans, employees accumulate sick leave credits that they can use when they are ill or injured. Some plans may also allow employees to use paid sick leave credits while they remain at home because of pregnancy, to care for a newborn or newly adopted child, or to care for a gravely ill family member or a critically ill child.
What are the requirements that my plan must meet?
Your short-term disability plan must meet the requirements that are listed in Annex 1 of this guide.
How much can I save with the EI premium reduction?
If you are granted an EI premium reduction, you will calculate your EI premiums using a rate that is lower than the standard employer rate of 1.4 times the employees' EI premiums. The amount saved is the difference between what would have been paid at the standard rate and what is now payable at the reduced rate.
For example, in 2015, the total yearly savings per employee could be as much as $163.79. This calculation is based on an employee who earned $49,500, which is the yearly maximum insurable earnings for 2015.
An employee whose salary is $49,500 during 2015 will pay EI premiums of $930.60 (calculated at 1.88%). For the purpose of this calculation, we have used a reduced employer multiplier of 1.224.
A = Regular employer EI premium = $930.60 x 1.4 = $1,302.84
B = Reduced employer EI premium = $930.60 x 1.224 = $1,139.05
C = Amount of total EI premium reduction = A – B = $163.79
The portion of the savings returned to the employee in this example would be $68.25 (5/12 of the $163.79). As the employer, your portion of the savings would be $95.54 (7/12 of $163.79).
The amount you and your employees can save depends on the type of short-term disability plan you offer to your employees and the employees' insurable earnings.
What are the reduced employer EI premium rates?
In the legislation there are four different types of plans that may qualify for a reduction: a weekly indemnity plan, a special weekly indemnity plan, a cumulative paid sick leave plan and an enhanced cumulative paid sick leave plan. We will assign you a reduction depending on the type your short-term disability plan falls under.
Your reduced EI premium rate will be expressed as a multiple of the employee premiums payable - that is, a premium rate that is less than 1.4 times the employee premiums payable (for example, 1.224).
Your EI reduction will also be expressed in cents per $100 of insurable earnings. For example, the premium reduction could be .33 cents ($0.33) for every $100 of insured earnings.
For the reduced employer EI premium rates currently in effect, please refer to this "Rates and Multiples" page.
If you are an employer who deducts QPIP premiums from the salaries of some of your employees, and you also have other employees who are reported under the same payroll deductions account but are not subject to these premiums, your reduced rate will be calculated based on the percentage of your employees who pay QPIP premiums. The Program will determine these rates adjustments.
The legislative references relating to the Premium Reduction Program are as follows:
- Section 69 of the Employment Insurance Act
- Sections 60 to 75 of the Employment Insurance Regulations
- Date modified: