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Reduced EI Premiums

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Canada Pension Plan (CPP), Quebec Pension Plan (QPP) and Employment Insurance (EI) - > Reduced Employment Insurance Rates

Employment Insurance Premium Reduction Program For Employers

Employment Insurance Act s. 69(1)

Employers who provide a wage-loss replacement plan for short-term disability for illness of or injury to their employees may be able to qualify for a reduction in their EI premium rate.  To be considered for the Premium Reduction Program, the wage-loss replacement plan must:

bulletprovide at least 15 weeks of benefits for short-term disability
bulletmatch or exceed the level of benefits provided under EI
bulletpay benefits to employees after 14 days of illness or injury
bulletbe accessible to employees within 3 months of hiring
bulletcover employees on a 24-hour-a-day basis

There are 4 different categories for reduced premiums, with varying rates of savings.  The employer pays a reduced multiple times the employee premiums, instead of the regular 1.4 times.

The employer premiums are reduced by reducing the factor that is applied to the employee premiums.  Normally, employers pay 1.4 times the total of employee premiums.  There are 4 different categories for reduced premiums, with varying rates of savings.

Although it is only the employer portion of the premium that is reduced, it is a requirement of the Premium Reduction Program that the employer return 5/12 of the savings to the employee.  Although a cash rebate (taxable and insurable) can be provided to the employee, other arrangements can be made to satisfy Service Canada that a portion of the savings is being returned to employees, including:

bulleta written mutual agreement between employer and employees or their representatives on the method of returning the employees' portion of the premium reduction;
bulletnew employee benefits provided as a result of the premium reduction, such as a dental plan, group life insurance; or
bulletincreased employee benefits or upgrading of existing benefits, such as more holidays, more time off work, increased life insurance.

Resources:

Government of Canada:

bulletEI Premium Reduction Program - For Employers

Canada Revenue Agency (CRA):

bulletHow to reduce the EI premium rate if you provide your employees with a short-term disability plan

 

Revised: September 15, 2016

 

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