Employment Insurance Premium Reduction Program
If your short-term disability plan meets certain requirements, you may be entitled to pay your Employment Insurance (EI) premiums at a rate that is lower than the standard employer rate.
In addition to regular Employment Insurance 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 gravely ill family member.
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. This way, your short-term disability plan can reduce the demands made on the EI system. 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 their employees to whom the reduction applies receive their portion of the savings (5/12 of the savings).
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 2011, the total yearly savings per employee could be as much as $177.02. This calculation is based on an employee who earned $44,200, which is the yearly maximum insurable earnings for 2011.
An Employee whose salary is $44,200 during 2011 will pay EI premiums of $786.76 (calculated at 1.78%). For the purpose of this calculation, we have used a reduced employer EI premium rate of 1.175.
A = Regular employer EI premium = $786.76×1.4 = $1,101.46
B = Reduced employer EI premium = $786.76×1.175 = $924.44
C = Amount of total EI premium reduction = A-B = $177.02