Chapter 5

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Your responsibilities once an EI premium reduction is granted

How will the EI premium reduction affect my payroll?

We will send you a notice that indicates your reduced EI premium rate and the year to which it applies. Since your reduced EI premium rate is applicable from January 1 to December 31, you will have to recalculate the EI premiums you have already paid for the year and make any necessary adjustments to your remittances.

Employees for whom the reduced rate applies are those covered by your approved plan, including employees who are serving the plan's eligibility period, provided it is not more than three months.

For more information on remittances (examples: retroactive adjustments, remittances for employees who are not covered by an approved plan), please contact the Canada Revenue Agency office serving your area.

How do I calculate my employees' portion of the savings?

There are two methods to calculate your employees’ portion of the savings, you can calculate it by using the multiple (for example 1.219) or by using the rate (%) (for example 0.34% - $.34 cent for every $100 of insurable earnings).

Method 1- using the multiple to calculate your employees' portion of the savings (5/12 of the total savings):

A = Regular employer premium = Total employee premiums multiplied by the standard rate (1.4)

B = Reduced employer premium = Total employee premiums multiplied by the reduced rate (for example, 1.219)

C = Amount of the total savings = Regular employer premiums minus reduced employer premium (A – B)

D = Employees' portion of the savings = Amount of savings from EI premium reduction to be returned to employees (C x 5/12)

Example

An employee whose salary is $40,000 during 2014 will pay a total EI premium of $752 (calculated at 1.88%). For the purpose of this calculation, we have used a reduced employer EI premium rate of 1.219.

A = Regular employer premium = $752.00 x 1.4 = $1,052.80
B = Reduced employer premium = $752.00 x 1.219 = $916.69
C = Amount of total EI premium reduction = A – B = $136.11
D = Employee's portion of reduction = C x 5/12 = $136.11 x 5/12 = $56.71

Method 2 – Using the rate (%) to calculate your employees' portion of the savings (5/12 of the total savings):

A = Employee’s amount of insured earnings (up to maximum $48,600 for the year 2014)

B = EI premium reduction specified in cents per $100 of insurable earnings

C = Amount of total EI premium reduction = Employee’s amount of insured earnings (up to maximum $48,600 for the year 2014) times the EI premium reduction (specified in cents per $100 of insurable earnings) = A X B

D = Employee’s portion of reduction = (C x 5/12)

Example

An employee whose salary is $42,000 during 2014 will pay a total EI premium of $789.60 (calculated at 1.88%). For the purpose of this calculation, we have used an EI premium reduction of $.34 cent for every $100 of insurable earnings.

A = Employee’s amount of insured earnings (up to maximum $48,600 for the year 2014) = $42,000

B = EI premium reduction specified in cents per $100 of insurable earnings = .34 cent for every $100 of insurable earnings

C = Amount of total EI premium reduction = A X B = $42,000 X .34/$100 = $142.80

D = Employee’s portion of reduction = C X 5/12 = $59.50

When do I return 5/12 of the savings to my employees?

You must return the employees' portion of the savings in the year in which you received the EI premium reduction, or within the first four months of the following year.

If you have any questions about whether the employee benefits you offer are taxable, insurable, or pensionable, please contact the Canada Revenue Agency office serving your area.

Do I have to reapply or re-qualify for an EI premium reduction every year?

No. Once you are granted an EI premium reduction, your entitlement will continue until you change or cancel your approved plan. For more information on changing or cancelling your approved plan, please refer to Chapter 6.

  • In the last quarter of each year, we will send you a Notice of Reduced EI Premium Rate for Employers that advises you of the reduced EI premium rate for the coming year.

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