Program Summary

The Premium Reduction Program has been in existence since 1971. Annual reductions to employers represent about three quarters of a billion dollars. Reduced premiums are paid on approximately 60% of all insurable earnings in Canada.

The function of the Program is to reduce an employer's Employment Insurance (EI) premiums payable if that employer provides coverage to his/her employees for short-term illness or injury. The employer must demonstrate to the Program that the short-term disability plan meets certain standards, which are found in Part III of the EI Regulations, sections 60 to 76 inclusively.

If the plan meets these standards, the employer must then demonstrate that employees covered by the plan will receive their portion of the reduction. The amount to be passed on to the employees must be at least five-twelfths (5/12) of the total reduction.

Finally, the employer must use separate payroll deduction accounts (business numbers used for payroll purposes) if employer EI premiums must be remitted to the Canada Revenue Agency (CRA) at different rates. For example, if some employees are not covered by the plan, the employer must continue to remit employer EI premiums on behalf of these employees at the standard rate of 1.4 and not at a reduced rate. This would require a separate payroll deductions account.

Do I qualify for a reduction?

To qualify for a reduction, you must:

• apply for a reduction,
• provide short-term disability coverage that meets the requirements of the Program,
• demonstrate that at least five-twelfths of the reduction will be passed on to the employees covered by your approved plan, and
• remit to CRA under separate payroll deduction accounts, if necessary.

For detailed information about the Program, its requirements and how to apply for a reduction, please refer to the Program Guide.

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